It is all about Bitcoins today
Bitcoin has become the new gold; even worse it has become more expensive than gold. In the beginning of May 2016, a bitcoin was around 1400 USD, by 20th of May it surpassed the 2000 USD barrier and in August 2017 it reached new heights, 4000 USD. Its increasing popularity makes it almost something exclusive, mining companies are investing heavily to dig up new coins fast. Don’t get it wrong here, a lot is based on pure speculation some even say it could surpass 10K, or even 100K USD.
Blockchain, the underlying technology for many cryptocurrencies proves to be a valuable and secure technology, this does not mean cryptocurrencies cannot suffer from security issues. The infrastructure around different blockchain based technologies lacks oftentimes security, combined with complexity and not always being user friendly this leads to insecurity and compromised wallets and accounts.
All the fuzz and changes introduced new disappointment, discussions between different bitcoin development groups lead to a hard fork, in other words there are now 2 types of Bitcoin. Some claimed it would speed up the network and reduce the transaction fees. But the contrary is happening, the network isn’t faster and the costs are not lowering. This makes it still good if you need to transfer big lumps of bitcoins but useless in the world of Internet of Things. SatoshiPay considers IOTA in their search for replacing blockchain to support micro payments. Due to high fees because of Bitcions’ popularity and the lack of scalability makes it unattractive and too expensive. Internet of Things is important but if you’d like to read only one newspaper article it is important the payment method cost is not more expensive than the initial bill.
Ready for IOT?
But there is something brewing beneath the surface, a new technology, very promising technology. Which has been in development for 2 years and does not need expensive mining and computing power to generate new coins. Something where all coins are available from day one. Moreover, the development team of the technology did not hold back tokens on the day of the launch to play and manipulate the market.
This new kid on the block called IOTA, makes use of something else than blockchain, it is called Directed Acyclic Graph (Tangle). There is no split in the tangle between the issuers and the approvers or in other words those using the network and making transactions and those mining and approving the transactions. You don’t need centralized miners; you do not have transaction fees and the network remains completely decentralized. When you make a transaction, you actively participate and you will reference two other transactions.
To issue a transaction, users must work to approve other transactions, therefore contributing to the network’s security. It is assumed that the nodes check if the approved transactions are not conflicting and do not approve (directly or indirectly) conflicting transactions. As a transaction gets more and more (direct or indirect) approvals, it becomes more accepted by the system; in other words, it will be more difficult (or even practically impossible) to make the system accept a double-spending transaction. (IOTA whitepaper)
(un)Tangle the Future
No doubt, it is still early days, but if you’re a business that is still exploring blockchain technology you should think twice. The possibilities of IOTA are just fabulous, a real micro payment technology, scalable, fast and secure. IOTA uses hash-based signatures instead of using ECC (Elliptic Curve Cryptography), it makes it faster and simplifies the signing and verification and more importantly, it is quantum-secure due to usage of Winternitz signatures.
No fees when doing a transaction, if you move your hard-earned tokens from and to an exchange it will cost you ZERO, nil, nothing, it is free. It is fast, the more nodes and the more transactions the more participation and the faster it will become. More importantly, it is new technology, it has all the features that many of us are missing in blockchain. And it goes even further, smart contracts are in the pipeline, Masked Authenticated Messaging, Flash Network for nano payments etc… In other words, IOTA enables the Internet of Things to communicate in a secure fashion and pay fast in a secure manner. It is the glue that we’re missing today and many of us thought it would be possible with blockchain.
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Opinions are my own and not the views of my employer, cowritten by Bjo