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Cryptocurrencies, blockchain and the Internet of Things (IoT) are going to be the future. The IOTA tokens combine the goodness of all the three into one. However, unlike Bitcoin and other cryptocurrencies, the IOTA micro-transaction token is based on Tangle ledger specifically designed for the Internet of Things related applications, way back in 2015.
According to publications, the IOTA powered Tangle ledger is ideal for machine-to-machine payment transactions, with particular attention towards data integrity and accuracy. The IOTA tokens overcome the challenges of mining fee and slow transactions posed by popular cryptocurrencies like Bitcoin, rendering microtransactions inefficient.
The rapidly developing IoT segment and the potential uses of distributed ledger technology in the sector make IOTA an ideal solution. The Directed Acyclic Graph (DAG) employed by IOTA’s underlying ledger eliminates the most common problems otherwise presented by conventional blockchain system.
A recent article on one of the tech resource platforms differentiates between DAG and regular blockchains. The author explains that the DAG considers both users and validators to be the same, whereas blockchain distinguishes between individual users and block validators after creating a chain of consecutive blocks that contains both. On Tangle, users participating in the transactions are recognized and confirmed only after they authorize and approve two previous transactions. These operations will be monitored by Network nodes to prevent any conflict. The structure also eliminates the risk of double spending without clogging the system.
Making it much better is the flexibility of DAG, which allows the IoT network devices to continue using any previously established cryptocurrencies. Few altcoins like Byteball are already utilizing the DAG protocol. The very structure of DAG also eliminates possible centralization of the network (referring to the recent debate on centralization of Bitcoin network due to increased hashing power from Chinese mining pools). Also, the absence of a blockchain removes the necessity of expensive mining hardware like ASIC miners.
The applications of IOTA are not confined to IoT devices alone, and that has been established by other DAG-based platforms supporting the creation and implementation of smart contracts with real-world applications. At the same time, it can make IoT-based autonomous devices and vehicles that can earn and pay for their upkeep a reality.
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