This article is a translation of the German IOTA Beginner’s Guide by .
What are the advantages of IOTA technology over the classic Bitcoin blockchain?
The IOTA technology and the classic blockchain have a completely different approach and are not comparable. BTC is a blockchain-based alternative electronic currency for human-to-human (H2H) transfers, whereas IOTA is primarily a transfer protocol for data and value between machines or things. Human-to-human (H2H) transfers are of course also possible. However, since people keep asking about it, I’ll summarize a few points here.
Tangle properties
- Transmission of data and values: IOTA is not an ordinary cryptocurrency, but a communication protocol including tokens and is usable for all applications. The protocol allows a fast, tamper-proof and decentralized transfer of values and data over many nodes. Thereby value and data transactions are handled fundamentally different. While value transactions must be validated by full nodes, data transactions are confirmed directly and are notarized. Now, some may ask, why do I need the IOTA distributed ledger technology for a pure data transaction? I could simply encrypt the data, sign it and send it via TCP/IP. Well, aside from the fact that “Man in the Middle” attacks would be possible, signed data only proves that the data came from you. It does not allow me to prove when you sent it, nor whether you sent the same data to everyone. You could send a certain piece of information to one person and another piece of information to another person. Signatures alone will not protect anyone from such things. “Notarization” can be used to prove that an electronic document existed in a certain form at a certain time and has not been changed since it was created. When a notarization is created, a unique hash (fingerprint) of a document is calculated and stored together with a timestamp in the IOTA ledger (Tangle) in an unalterable way. If at a later point in time it is to be verified that the document in question existed at the time claimed and / or has not been modified, the data is retrieved from the Tangle and compared with the available information.
- Governance: IOTA is a non-profit foundation from Germany. This optimizes the acceptance and future development of the network. The lack of miners allows for new features and updates to the protocol to be implemented during the development phase without conflicts of interest. Once the protocol is fully decentralized with the removal of the coordinator, node operators will decide which rules to follow.
- No energy guzzling mining, no blocks, no PoW difficulty adjustment, the Tangle is not a blockchain but a directed acyclic graph (DAG).
- Modularity: A modular structure makes it possible to develop the components of the protocol independently of each other. The multi-layered approach enables further extension of the basic protocol in the future in a similar way to the Internet protocol itself. A protocol that cannot be updated is not a protocol.
- Lean system: Designed for devices, such as sensors, that participate in a low-energy network.
- Local snapshots allow nodes to store only a subset of the ledger’s history, allowing nodes with limited hardware resources to participate in the network.
- Fairness: As long as the network is not congested, all transactions are treated equally. There is no way to pay a premium (e.g., through increased fees) to receive a higher priority in processing by the network. If the network reaches its processing capacity, the amount of Mana will determine who gets to send many transactions in a short period of time.
- Feeless transactions: The lack of miners makes IOTA transactions completely feeless. Send 1 cent, receive 1 cent. This enables true micropayments for the machine-to-machine economy to usefully implement payment for micro-quantities or consumption-based payments.
- Micro-payments, micro-insurance and micro-derivatives are possible due to the lack of fees.
- Less documentation: companies do not have to document feeless transactions for the tax office or store them for years.
- The communication protocol created is open source. So everyone is allowed to contribute their ideas or collaborate on the code if necessary (many IF members originally come from the community). A large number of companies meet in the Tangle EE Working Group and work together with the IF on solutions for commercial use.
- Finality within seconds: The reconciliation process allows the network to make and finalize decisions on transactions very quickly without having to wait for multiple additional approval processes to increase security. In addition, the network can achieve “true finality” (deterministic rather than probabilistic), as an attacker with unlimited hashing power could not “reverse” the ledger state.
- Reliable timestamp: The issuer (node / user) of the transaction sets a timestamp at the time of issuance. Agreeing on the credibility of timestamps allows us to establish a fully ordered tangle – a big step towards Smart Contracts.
- Scalability: increased network activity reduces transaction settlement times. There are no protocol-related bottlenecks. Scalability is limited only by hardware and the laws of physics. Eliminating the coordinator as a single entity that processes and verifies all transactions lays the foundation for a dynamic sharding process that enables “true” unlimited scalability.
- Partition tolerant: A production-ready tangle is partition tolerant, which means that a part of the tangle can be disconnected from the main tangle for a period of time and continue to run without an Internet connection. These parts can be reconnected to the main Tangle when the Internet connection is restored.
- Permissionless: Any company or private person can use the infrastructure without permission, license or any cost to run their own applications. This is a very big advantage over private blockchains.
- Machine economy, machines or things of any kind can hire themselves and pay for services completely autonomously without any human intervention with the ready interoperability protocol.
- Digital twins to improve a process, product or service. A digital twin is a virtual model of the manufactured product based on trusted data to analyze and simulate real-world conditions, respond to changes, improve operations and add value.
- Digitization of logistics and supply chains or product identity including traceability will become standard in the coming years.
- Data and / or physical goods can be traded on different marketplaces using IOTA technology without having to trust a third party.
IOTA Products
IOTA Access
Access is about enabling services and security at scale. If there is a device that can provide a service, then Access can be integrated into that device to automate that service through embedded access control policies. In this way, device users and owners can grant or request access to their device or data stream in a remote, permissionless, contactless, and auditable manner. Without decentralizing access control in an efficient peer-to-peer manner, we will continue to have our data, our devices, and our daily lives controlled by centralized institutions.
IOTA Digital Identity
Decentralized digital identities are essential in our future digital economy. This includes machine, human and organizational identities. It is an enabling technology for DLT as it enables the establishment of trust through identification in an online environment. This is critical for both the Internet and DLT, as identifying who you interact with online can prevent many instances of fraud, disinformation, and mistrust.
IOTA Digital Assets
IOTA Digital Assets (Colored Coins) for tokenization of assets, Fungible or not, Token or Smart-Contract based. Digital Assets are purpose-built tokens that can represent real-world assets, based on IOTA, on the Tangle in a tamper-proof way. For example, the token could be used to redeem something or settle ownership. The IOTA digital asset framework creates the foundation for tokenized, scalable and secure digital assets that exist on the IOTA Tangle. All tokenized assets under the IOTA Digital Assets framework benefit from the same level of security, scalability, and (no) fees as native IOTA tokens. This makes digital assets on IOTA one of the most robust and scalable in the industry, and it will lead to explosive growth in the economic value secured and traded on the IOTA network.
IOTA Streams
This is a data transfer protocol that allows sensors and other devices to encrypt entire data streams and anchor them to the IOTA Tangle. IOTA’s consensus protocol adds integrity to these message streams. Data can thus be exchanged specifically and globally with selected partners. Payment at an e-charging station could proceed using IOTA streams. To do this, a private IOTA Streams channel is opened between the vehicle and the e-charging point to establish a data stream, now payment is made per data point in microtransactions, and payment stops as soon as nothing is received. These data points can be transported and stored in a tamper-proof, multi-vendor, fast way. Keyword: digital twin, supply chain.
IOTA Oracles
These were designed to build a secure trusted bridge between the digital and physical worlds in a decentralized, permissionless manner. Oracles bring off-chain data to decentralized applications and Smart Contracts on the IOTA network.
IOTA Smart Contracts
IOTA Smart Contracts are a flexible and straightforward implementation of smart contract capabilities in a distributed, DAG-based UTXO ledger. For this purpose, committees are established to verify Smart Contracts and ensure their consistency and immutability in the distributed IOTA ledger. Due to their feeless and flexible design, IOTA Smart Contracts are ideal for enterprise applications and real-world use cases of companies around the world – a big step forward for the industry and the IF for the development of a rich ecosystem, with a variety of extensions and modules.
IOTA Stronghold
This is a secure software implementation (multi-purpose libraries) with the sole purpose of insulating digital secrets such as passwords, personal data and private keys from exposure to hackers and accidental leaks. It uses versioned, file-based snapshots with double encryption that can be easily backed up and securely shared between devices. The high-level developer-friendly libraries integrate the IOTA protocol and serve as a reference implementation for anyone looking for inspiration or best-in-class tools. No cryptocurrency is included in the low-level libraries, and they can be used entirely without the high-level libraries. In other words, anyone from any industry can use them.
Original source
Last Updated on 15. April 2021