IOTA does not use the conventional blockchain technology but works with the innovative concept of a “tangle”. In a tangle, the user has to confirm at least two other transactions before a transaction can be made. If a transaction receives a minimum number of confirmations in this way it is considered verified and executed. This results in a chaotic order in which all transactions are executed in parallel. This functionality will allow an upwardly open scaling since with an increasing number of transactions the confirmation rates increase in contrast to conventional blockchains.
IOTA transactions are encrypted and based on ternary logic. In terms of cryptography, the hash functions continue to form the basis for the confirmation process. Within the tangle, two types of transmissions can be performed: The value transaction using the Iota token and the messages (zero value, only data/information).
The tangle is the data structure created by the connections between transactions in the distributed ledger on all IRI nodes. In technical terms, the tangle is a directed acyclic graph – DAG.
- A set of transactions is connected by paths. This is a graph
- Each of these paths has a clearly defined direction of travel, so it is a directed graph
- If there is no path that returns to its starting point, the graph is acyclic (circular paths would be cyclic)
Simplified, the transaction process runs in five steps:
- Create transaction: With recipient address, sender, value and message.
- Sign: Using the private key (seed) the transaction is signed. This confirms that you are the owner of the input you have made.
- Tip selection: A node selects two random unconfirmed transactions (tips) that are referenced in the new transaction.
- Proof of Work: This is only required for spam protection and not for consensus. In any case, some work has to be done now and a small arithmetic task (nonce) has to be solved. A normal PC needs about 20-30 seconds for this calculation. In addition, the two tips assigned to you are checked whether the account is sufficiently covered and whether there are conflicting transactions.
- Execution: The completed transaction is finally sent to a node, which then distributes it in the network to all neighbors (other nodes). Someone else will then come and again get your transaction assigned in the “Tip Selection”, check it and thus confirm your transaction.
Additional features of the Tangle compared to conventional distributed ledger technologies
Partition-tolerant – Offline transactions are possible
A production-ready tangle will be partition-tolerant, which means that if communication is interrupted the network will still function with only a part of the nodes. It also means that systems accessing the Tangle can perform offline transactions without direct connection to the Tangle. Once the systems are reconnected to the tangle these transactions are entered into the Main Tangle.
Feeless – charge-free transactions
The transaction costs only consist of the electricity consumed by the node for the calculation of the transactions. A transaction in a tangle does not cost any fees. If 100 IOTA tokens are sent, then exactly these 100 IOTA tokens arrive at the recipient. This is also a basic requirement for the so-called micropayments,
Permissionless – Permissionless access to the network
The permissionless character of the Tangle, allows every user to access a universally available and universally deployable infrastructure, which is provided as a service for the provision of new applications. This eliminates the need for new projects that want to use this infrastructure to first define complicated governance rules and stakeholder agreements in contracts before an infrastructure can be used. In short, anyone can use the IOTA infrastructure without asking permission.
Messages – Transmission of information/data
The IOTA technology enables not only the value transaction by means of the token, but also so-called messages, which are pure data transfers without value.
IOTA Streams – data streams in a tangle
The IOTA Streams data transmission protocol allows sensors and other devices to encrypt entire data streams and anchor them in the IOTA tangle. IOTA’s consensus protocol adds integrity to these messages.
Last Updated on 16. February 2021