IOTA: a Cryptoplatform for the Internet of Things

IOTA: the Money of IoT

“IOTA is a decentralized, very lightweight micro-transaction token that is optimized for the Internet-of-Things. It is essentially a blockless ledger without any sort of fees on transactions. ‘Money of IoT.’”

— David Sønstebø, Co-founder of IOTA

With the introduction of virtual money, the disadvantages of centralized payment systems became more evident. The risk of hacking attacks, fraudulent activities, costly maintenance or sudden service interruptions are among the drawbacks of these systems.

After the launch of blockchain back in 2009, the benefits of decentralised payment systems were quickly realised. There is no need for an intermediary and the payments are secure.

However there are a couple of drawbacks to blockchain which are stumbling blocks when it comes to large-scale adoption for IoT. Firstly, there is a scalability issue. The bitcoin network is currently limited to roughly 7 transactions per second, while the credit card giant Visa processes 2000 transactions per second. Secondly, micro-payments are impossible. Current systems charge a fee per transaction, but these fees become relatively large when dealing with small payments.

Over the last two years, IOTA developers have been working on a totally new distributed ledger architecture that would solve inherent blockchain issues like its scalability limits. 

IOTA uses an open source permissionless distributed ledger architecture called Tangle.

According to the Tangle white paper, the project, which was first introduced in 2015, is targeted at the IoT and machine-to-machine payments. The platform is set to become the standard layer for data integrity and real time transaction settlement.

To issue a transaction on the ledger, users must approve other transactions, therefore contributing to the network’s security. As a transaction gets more approvals, it becomes more accepted by the system and it will be almost impossible for the system to accept a double-spending transaction.

It is important that the algorithms used in IOTA are quantum-resistant. There are breakthroughs that bring us ever closer to scalable quantum computers weekly. In academia and security, this has been an ongoing concern for quite some time. The NSA has begun their transition over to quantum-resistant crypto.

In short, the timeline for when a scalable quantum computer can cause havoc is impossible to predict, but most experts agree that it’s not far away. If you want to learn more about this, read this article by Anastasia Marchenkova.

What will this enable?

IoT micro-transactions will make technological resources and applications more ubiquitous and available to more and more people, which will greatly improve our world.

As more IoT devices come online, the amount of data available in the world will become immense. People can be incentivised to share their data in real-time, which will allow companies to get tailored information of individuals, rather than having to predict with analytics from metadata. Obviously this information sharing would have to be voluntary, but this type of data trade currently exists in the form of companies offering incentives to complete surveys via online forms or telephone.

The growth of Micro-Generation is another area where this technology could be very useful. With more people having solar panels and maybe also energy-storage capability such as the Tesla Powerwall, they could be compensated in real-time via micro-transactions for supplying electricity back into the grid.

The same goes for distributed computational power. As the IoT expansion continues, every neighbourhood will essentially become a distributed supercomputer with a massive amount of CPU power sitting idle. This computational power could also be sold in real-time via micro-transactions.

If these types of payments are adopted, pricing will become more transparent and you will pay directly for exactly the amount of a resource you use, nothing more. 

This technology could enable the IoT ecosystem, making real-time payments possible in a secure and scalable way.



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