Pros and Cons of IOTA
A next generation DLT or vaporware?
• No transaction fees
Makes micro- and even nano-payments feasible
• No centralized mining
Transactions are verified by the users. Every transaction verifies two other transactions. This new concept is called the Tangle and is an advanced version of a blockchain, namely a Directed Acyclic Graph (DAG).
• Highly scalable & fast
In contrast to a blockchain, the more network participants help validating transactions, the faster the IOTA network gets, fixing the scalability issue of older distributed ledger technologies.
Quantum computers don’t exist yet, but it is said they will be able to break today’s ECC (Elliptic Curve Cryptography) systems by its fast computing performance. The “Winternitz Signatures” used by IOTA are resistant to quantum computers, as security does not rely on the pure one-wayness of its hash-functions but also on the network topology.
• Internet of Things (IoT)
IOTA is perfectly designed for the IoT as it enables new business models and encrypted machine to machine (m2m) communication by exchanging data. No transaction fees make it the perfect fit for e.g. sensors selling data to other machines automatically that rely on those data
• No competitors
The IoT market is huge and IOTA has so far no direct competitor.
• IOTA Foundation & Team
The IOTA Foundation (IF) is registered in Germany, Berlin as a non-profit organisation. It gathers about 60 experts from several sectors working on IOTA. Each team member has been selected wisely. Performance of team members gets reviewed and if necessary members get dismissed.
• Ecosystem Fund
The IF has an immense ecosystem fund. Initially it was sponsored by the community. Due to the rise in price the fund has several hundred millions of USD to push the project forward and to attract new developers into the space.
• Strong Community
The Discord and Twitter community for IOTA is huge. Especially in mid-Europe. There are many believers and people working on projects surrounding it. Sometimes the community might be too obsessed by IOTA, they are great hodlers and advocates of this innovative technology.
IOTA has strong co-operations. Among others, the Volkswagen CDO Johann Jungwirth joined the IOTA advisory- and supervisory board. Furthermore Fujitsu’s Head of Central Europe Rolf Werner joined the IOTA foundation and the Bosch Venture Capital arm invested a “significant amount” in the IOTA technology. In Q2 2018 the first big proof-of-concepts (PoC) of those co-operations have been shown at one of the biggest IoT fairs (Hannover Messe) in Europe. One of them is Elaadnl. The Dutch company just released the first working car charging station where charging and paying can be done with IOTA fully automatically.
• Offline Capability
It is possible to create sub-Tangles that run offline with the possibility to integrate it back to the main online Tangle.
This topic caused a lot of controversy around IOTA. The Coordinator is a node that signs a new milestone every X seconds. All nodes will see the transactions under the milestone as confirmed. You could see this as a blockchain system with only one block issuer (the coordinator), which obviously draws a few centralization related questions. If this coordinator would not be here right now, it would be feasible to attack IOTA with a 34% attack (due to the low tps). The shut down of the coordinator will come effectively into place once the network has enough participants to exclude this attack vector.
• No smart contracts
IOTA cannot do generalized smart contacts (SC) as they don’t have strongly ordered transactions, thus it is not really a competitor to SC platform projects like Ethereum. However, what IOTA is, it’s a competitor to State Channel networks such as Lightning (BTC) or Raiding (ETH). IOTA already has a working Flash channel module which is a 2nd layer equivalent to the above mentioned state channel projects.
• Hard to grasp
The technological is such innovative and cutting edge that just a dozens of people actually understand the technology entirely. It may be that some fields of the technology are not yet fully explored. Due to those circumstances several university run supercomputers to simulate the Tangle under different scenarios.
As the DAG technology is not comparable to other Blockchains, also the way how to handle the seed and wallet is different and users need to be extra cautious to not give away private information. In summer 2018 IOTA plans to release a new wallet called “Trinitiy” which is supposed to mitigate the usability of the wallet tremendously.
IOTA, developed since 2015, has a strong unique selling proposition. It is a top 10 coin to its market cap respectively. The IoT market is huge and IOTA could fulfill the gap that machines communicate between each other on a secure and scalable layer. It could emerge to the standard protocol for IoT. The young team, technology and community still faces some hurdles to take. It is a highly interesting project to follow.
If you want to buy IOTA we can recommend you two exchanges to do so. On the one hand side Binance, and the other hand side Bitfinex. Those are the biggest exchanges to acquire your part of the IOTA vision.
The BitcoinCashback team is invested in several cryptocurrencies that may eventually be discussed in our articles. Nonetheless, our reviews stay objective and are written with the only purpose to inform about topics where we have a good base of knowledge. This is not meant to be a trading advice.