Understanding IOTA And Tangle
An upgrade from the traditional blockchain, with no mining hassles and zero fees. It’s an ambitious idea, but Iota could be the coin to make it happen.
TANGLE: THE FUTURE OF BLOCKCHAIN?
An upgrade from the traditional blockchain, with no mining hassles and zero fees. It’s an ambitious idea, but Iota could be the coin to make it happen. Even in the banner year cryptocurrency has had in 2017, IOTA is a big winner. The price has rocketed up from $0.63 in June to a high of $5.69 just days ago. A healthy 900% increase will draw some eyes, and IOTA is worth understanding.
The IOTA team took a good hard look at blockchains when they were cooking up a coin. The growth of blockchain-based projects has been fantastic, and opened up a new world of innovation. But blockchains aren’t perfect. Bitcoin, the first and most prominent blockchain-based crypto has come to exemplify many of the limits of a blockchain.
Bitcoin is mineable, making it a proof-of-work system. Bitcoin transactions are rubber stamped by miners, who receive Bitcoin in exchange. The problems arise as a blockchain scales up. Bitcoin transactions have slowed to a snail’s pace, and transaction fees have shot up as high as $20 per transaction. The Bitcoin network is sputtering to a halt, and these problems are what led to the Bitcoin Cash hard fork. IOTA aims to tackle these issues.
TANGLE: THE EVOLUTION OF BLOCKCHAIN TECH?
IOTA presents the evolution of the blockchain: Tangle. Conceptually similar to a blockchain but with technological tweaks, Tangle is a quantum-resistant Directed Acyclic Graph, or DAG. Tangle records every transaction on the Iota network. Every new transaction is required to approve two prior ones. IOTA preaches transactions have zero fees and that the Tangle has no cap on transactions; the more users on it, the faster transactions are approved.
One of the advantages of the Tangle is it removes the separation between miners and regular users. It’s easy to run a node on Tangle, as opposed to many cryptocurrencies where it’s an expensive process. Bitcoin mining has become a slanted process, that favors large pools in nations with cheap electricity. As mining has gotten more difficult, Bitcoin transaction fees have ramped up. Iota doesn’t have this issue.
IOTA’s Tangle is a potentially huge improvement to the blockchain. Giant companies like Microsoft and Fujistu have signed on for a pilot program. IOTA is currently the 6th largest cryptocurrency by market cap. But it’s not all smooth sailing.
IOTA has been criticized as technically flawed and centralized. For a blockchain to be hacked, someone would need to have 51% of the network. With the nature of IOTA’s Tangle, it would only need to be 33%. Because hashing only occurs when new transactions are added, which happens instantly, the Tangle is conceivably vulnerable to an attack. The IOTA team has indicated the network is protected by a “coordinator” node, which is fine and dandy. But that ties into another IOTA issue: centralization.
One of the most common criticisms of cryptocurrencies is centralization. Satoshi Nakamoto’s vision was a decentralized currency, not defined by the whims, vision, or mistakes of a single man or team. If the coordinator node and project are overseen by a few individuals, it’s understandable people could question the decentralization.
IOTA is technologically ambitious. The Tangle could be the future of cryptocurrency. But it’s grappled with problems blockchains haven’t. Users found security flaws and other holes in Curl, Tangle’s hash function. The network as a whole slowed to a halt for 3 days in October. Users couldn’t send transactions or access their wallets. Bitcoin may be slowing down, but it hasn’t frozen outright yet.
IOTA is an ambitious project, with a solid team and some promising technology. There are questions investors will have to weight; if the Tangle can replace blockchain, and if Iota will be adapted. One concern some investors have is that companies will simply build their own blockchains, rather than adopting IOTA. Still, keep an eye on the Tangle – if the team keeps improving it, the project could be the future of blockchain.
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