IOTA (Internet of Things Application) is a blockchain designed to support machine-to-machine payments within the Internet of Things (IoT) economy. It enables all computing devices embedded in homes, businesses, and factories to communicate, exchange data, and conduct transactions without fees. For instance, people can order drinking water through a decentralized drone delivery service, and vehicles on highways can interact with one another.

IOTA makes these interactions possible. It stands out in the IoT and cryptocurrency spaces due to its unique consensus mechanism, which was developed directly on the blockchain.

This article will provide a detailed exploration of IOTA’s fundamental concepts, operational mechanics, native token MIOTA, and current market trends.

IOTA Ecosystem

To build and maintain a reputable network that securely stores users’ digital assets in the digital realm, the IOTA Foundation has created a comprehensive ecosystem, forming partnerships with private and public sectors and academic institutions. The IOTA ecosystem includes several key components:

• Software Nodes: IOTA nodes are essential for ensuring the IOTA “Tangle” runs smoothly. They facilitate the transfer, storage, and verification of data within the IOTA ecosystem. The types of nodes include full nodes (Hornet and Bee), permanent nodes (Chronicle), and smart contract nodes (Wasp).
• Tangle: This is considered the “brain” of the IOTA network. In the Tangle system, multiple nodes connect quickly and continuously to validate transactions. We will discuss this in more detail in the next section.
• IOTA Framework: This is the latest offering from the IOTA Foundation, designed to provide various features that address users’ needs for distributed ledger technology (DLT). These features include digital identities, tokenized assets, data streams, smart contracts, access systems, and Stronghold security.
• Partnerships: IOTA has been one of the most active projects in the cryptocurrency industry, forming several significant partnerships, including:
• Collaborating with the Taipei City Government to achieve smart city initiatives.
• Currently working with a group of Dutch investors to develop smart car charging stations.
• Partnering with Volkswagen in 2019 to enhance smart car technology and improve food safety.
• Other notable partners include Microsoft, Bosch, Fujitsu, and Accenture.

IOTA Tangle System and How It Works

IOTA Tangle represents an innovative approach to distributed ledger technology. It differs from traditional blockchain systems and is specifically designed for the Internet of Things (IoT). Unlike cryptocurrencies like Bitcoin, which impose transaction fees, IOTA allows for free transactions because it does not rely on miners.

In traditional blockchains, blocks are linked together using cryptographic methods to maintain a historical ledger. A decentralized network of computers, known as nodes, is responsible for mining new blocks and validating transactions. The computers that validate these transactions are called miners, and they create new tokens while maintaining the blockchain, earning transaction fees as their reward.

In contrast, the Tangle system connects multiple nodes rapidly and continuously to validate transactions. It does not utilize a proof-of-work (PoW) algorithm that requires miners to reach consensus. Instead, participants must confirm two prior transactions before their own can be validated. This structure allows Tangle to support a decentralized and self-regulating network.

The lack of miners in the IOTA Tangle system means that users do not need to pay fees to anyone on the network. Essentially, in the IOTA ecosystem, increased network activity leads to more transactions that need validation.

Coordinator (IOTA Coo) and Coordicide (IOTA v2)

Coordinator (IOTA Coo)

A key element of the IOTA network is the “Coordinator,” or Coo. This was created early on to safeguard the Tangle distributed network and acts as a centralized main node controlled by the IOTA Foundation. The Coo regularly issues zero-value transactions that help verify the integrity of the IOTA Tangle.

The role of IOTA Coo is to validate transactions on the Tangle. A transaction is only confirmed when the IOTA Coo verifies and declares it valid, which gives the Coo significant authority and plays a crucial role in the decentralization of the IOTA network.

Coordicide (IOTA V2)

To provide an alternative to Coo, the IOTA network has introduced Coordicide, a solution that operates without a Coordinator. In the cryptocurrency world, the powers granted to Coo are seen as excessive and can result in some transactions being invalid, which often draws criticism. Furthermore, the Coo is susceptible to network attacks that could seriously harm the Tangle. This is why Coordicide was developed—to eliminate the centralized model of IOTA and shift it toward a decentralized network.

Coordicide introduces a voting system to resolve conflicting transactions. Nodes will vote and discuss themselves to determine which conflicting transactions are valid. Each node can request or express opinions on these conflicting transactions. When one node requests another random node, it triggers a voting round. After a predetermined number of voting rounds and reaching a consensus, the nodes will identify the legitimate transactions.

How IOTA Operates: The Fast Probabilistic Consensus Mechanism

IOTA distinguishes itself from other blockchains by utilizing a modified proof-of-work consensus mechanism called Fast Probabilistic Consensus. This approach distributes the workload of transactions across all nodes in the network, allowing users to collectively share the responsibility.

To keep the network active, every user who makes a transaction is required to confirm two transactions from other users. This means that IOTA does not rely on traditional blockchain technology; instead, it operates using a Tangle system. IOTA’s vision is to connect all Internet of Things (IoT) devices, and to facilitate this growth, it aims to improve device efficiency without increasing manufacturing costs.

As a result, a wide array of connected devices can utilize IOTA, including traffic lights, water heaters, agricultural equipment, medical devices, and financial systems like banks and ATMs that adhere to the ISO 20022 standard.

IOTA seeks to enable seamless collaboration between algorithms and machines. As the number of connected devices continues to rise, the extent of this collaboration expands, significantly advancing the manufacturing sector while lowering product prices. Since the network operates without transaction fees, it is designed to be scalable. To realize this vision, IOTA is focused on assigning unique IDs to every connected device.

IOTA 2.0

IOTA 2.0 is the next-generation protocol developed by the IOTA Foundation, designed to tackle important issues present in IOTA 1.0, including decentralization, scalability, and smart contract support. It has been completely redesigned, featuring a leaderless and parallel voting mechanism allowing all validators to participate in the consensus process. IOTA 2.0 employs a unique Directed Acyclic Graph (DAG) data structure, which seamlessly integrates a memory pool, enabling transactions to undergo continuous parallel voting throughout the network. This results in a more dynamic and efficient consensus mechanism compared to traditional blockchain approaches.

Key Features of IOTA 2.0

1. Decentralization: The latest version of IOTA has removed the Coordinator, the central authority that previously oversaw network consensus. This change signifies IOTA’s move toward a fully decentralized system, alleviating concerns about the influence of centralized entities and establishing a foundation for genuine decentralization.
2. Scalability and Efficiency: By eliminating Proof of Work (PoW), IOTA 2.0 minimizes the network’s environmental footprint and resource usage, catering to the increasing demand for sustainable and eco-friendly digital solutions. This enhancement makes IOTA a more appealing option for developers and businesses dedicated to green technology.
3. Enhanced Security: The new consensus mechanism aims to improve network security, making it better equipped to withstand attacks and system failures. This is vital for building trust and promoting adoption in critical sectors such as finance, healthcare, and smart cities.

Key Features

1. Complete Decentralization: IOTA 2.0 is fully decentralized, eliminating the need for a Coordinator.
2. Support for Smart Contracts and Digital Assets: Unlike IOTA 1.0, IOTA 2.0 supports the creation and management of smart contracts and digital assets.
3. Smaller Transaction Size: The size of transactions has been significantly reduced from 1700 bytes to just 100 bytes, making processing more efficient.
4. Protection Against Sybil Attacks: A reputation system called Mana has been introduced to safeguard the network from Sybil attacks.
5. Spam Transaction Prevention: IOTA 2.0 implements adaptive Proof of Work (PoW) to effectively prevent spam transactions.
6. Reusable Addresses: The protocol now uses reusable addresses, improving user experience compared to IOTA 1.0’s disposable addresses.
7. Consensus Mechanism: IOTA 2.0 utilizes the FPC (Fast Probabilistic Consensus) binary voting protocol, which is more efficient than the weighted random walk consensus used in IOTA 1.0.
8. Strong Scalability: IOTA 2.0 is designed for strong scalability; as the network expands, its transaction processing capacity (TPS) will also increase accordingly.

Testnet

The public testnet for IOTA 2.0 was launched on May 15, 2024, marking a significant milestone after years of efforts to improve the IOTA network infrastructure. This launch introduced an innovative congestion control mechanism. It replaced the previous decentralized Coordinator with a decentralized Proof of Stake (PoS) consensus, moving away from the traditional Proof of Work (PoW) system.

With the new decentralized Proof of Stake mechanism, the old Coordinator-driven system has been eliminated, enhancing scalability and reducing the environmental impact. IOTA 2.0 is designed to create a more secure, scalable, and eco-friendly network, inviting community participation to test and refine its processes.

IOTA EVM

IOTA EVM is a layer 2 solution for the IOTA network fully compatible with the Ethereum Virtual Machine (EVM). This version has undergone extensive improvements, testing, and auditing. Its release significantly advances integration of decentralized finance (DeFi) with real-world assets. Users can connect through MetaMask, utilize the provided JSON-RPC endpoints, and explore the network using the Firefly wallet. IOTA EVM offers complete EVM compatibility and introduces innovative features by leveraging our unique native asset framework on layer 1.

Features of IOTA EVM

1. Parallel Processing: The unique layer 1 protocol architecture allows for parallel transaction processing, enabling cross-chain horizontal scaling and deployment. This approach decouples traditional chain anchoring and enhances processing capacity.
2. Seamless Interoperability: The straightforward deployment of Solidity smart contracts promotes smooth interactions between EVM and non-EVM chains.
3. Fairness and Security: IOTA EVM incorporates native randomness and resistance to Maximum Extractable Value (MEV), which helps reduce front-running and value extraction by ensuring unpredictable transaction ordering. This enhances fairness and aligns with regulatory requirements for market integrity and equitable access.

These features create a robust environment for fully compatible EVM smart contracts, empowering the next generation of entrepreneurs and innovators to build better, fairer, and more accessible ecosystems. Additionally, they foster the exploration of new opportunities at the intersection of DeFi and tangible real-world assets.

Goldsky Integrates IOTA EVM

Goldsky has integrated IOTA EVM to streamline data access, support real-time analytics, and enhance application capabilities. This integration removes the need for a manual indexing infrastructure based on subgraphs, allowing developers to concentrate on building rather than managing blockchain data infrastructure. Goldsky’s suite of products improves data accessibility, facilitating efficient and cost-effective development on IOTA EVM.

Goldsky offers builders an intuitive platform for creating subgraphs and real-time data replication pipelines. Its self-service products can be utilized independently or in combination to power data stacks:

1. Goldsky Subgraphs enable builders to easily and intelligently extract blockchain data. The platform automatically manages issues like reorganization, RPC provider failures, and other complexities. Goldsky provides a high-performance hosted subgraph product that is fully compatible with open-source graph node specifications, featuring an enhanced developer experience with tools such as Webhooks and advanced analytics.
2. Goldsky Mirror allows developers to directly replicate subgraph data or chain-level streams into their preferred data storage solutions, providing flexibility for both front-end and back-end applications. This mirroring capability offers high throughput, low latency, and parallel indexing, enabling chain-level data use cases that would otherwise be unfeasible.

Stargate V2

Stargate V2 has integrated IOTA EVM to improve cross-chain transactions, liquidity management, and operational efficiency. Leveraging LayerZero’s full-chain framework introduces advanced features like multiple transaction models and AI planning modules, significantly lowering bridging transaction costs and enhancing interoperability. This integration broadens IOTA’s DeFi functionalities, creating new opportunities for decentralized applications (dApps) and developers.

• Stargate is a fully composable liquidity transfer protocol that allows users and decentralized applications (dApps) to transfer native assets across different blockchains and access a unified liquidity pool.
• Stargate V2 introduces several new features and improvements, including a multi-transaction model. This model allows users to either pay the full cost for an immediate transaction or pay a part of the total cost by batching their transaction with others, allowing them to trade off execution time for lower costs. This results in a 95% reduction in costs for large transactions compared to Stargate V1.
• The AI planning module in Stargate automatically adjusts fees and rewards to maintain balance within the Stargate Pool across all chains, without requiring control over any funds or assets.
• With the new Hydra-enhanced interoperability, users can freely transfer WETH, USDC, and USDT between all chains that support Hydra. This enables these assets to be exchanged globally for native assets on the core Stargate chain where such assets are available.

As a bridge, Stargate enables the movement of assets, facilitating liquidity between previously isolated blockchains. The integration of IOTA EVM with Stargate paves the way for seamless cross-chain transactions, improved operational capabilities, and unified liquidity pools. It aggregates liquidity from multiple sources into a single asset to enhance transaction efficiency and reduce the asset fragmentation often seen in other bridging solutions.

What is the IOTA token (MIOTA)?

MIOTA is the native token of the IOTA network and serves as the utility token within the IOTA ecosystem. It primarily facilitates microtransactions between Internet of Things (IoT) devices.

The total supply of MIOTA in the network exceeds 2 billion tokens and is fixed, meaning no new tokens will be created. This design eliminates the need for miners to secure the network or validate transactions.

In 2015, IOTA held its initial coin offering (ICO), raising 1,337 bitcoins, approximately $500,000. While this amount may seem small, public sales and ICOs were relatively rare in 2015. During the public sale, all IOTA tokens were made available at once, and the founders did not keep any for themselves; they had to buy tokens from the market using their funds. Like many other cryptocurrencies, the price of MIOTA surged during the 2017 bull market, reaching an all-time high of over $5, but it began to decline after the market cooled down.

In 2023, IOTA implemented a significant increase in its token supply through a protocol upgrade, raising the total from its previous amount to 460 million tokens. This increase aims to support the ongoing growth of the IOTA ecosystem and improve its competitiveness in the IoT sector. With this initiative, IOTA hopes to attract more developers and users to engage with its network, fostering technological innovation and practical applications.

Furthermore, IOTA has established a new foundation in Abu Dhabi to promote the advancement of blockchain and IoT technologies in the region. This foundation will focus on supporting projects within the IOTA ecosystem by providing funding, resources, and technical assistance to help developers bring their ideas and solutions to life. By setting up a foundation in Abu Dhabi, IOTA aims to strengthen partnerships with local businesses and governments, encouraging the use of blockchain technology across various industries.

MIOTA Market

MIOTA is available on major exchanges like Gate.io, which means that its trading volume and liquidity are spread across several platforms. MIOTA is used for executing smart contracts and transactions within the IOTA network, offering various products and services through tools like Firefly Wallet, IOTA Tech, and IOTA Streams. As a distributed ledger, MIOTA also provides solutions for electronic health records, supply chain management, automotive applications, and more.

Token Economics

One of the main factors that sets the value of IOTA tokens (MIOTA) apart from other cryptocurrencies is that MIOTA holders can access a range of resources within the ecosystem. A significant aspect that contributes to MIOTA’s value is the presence of Mana in the IOTA network. Mana is a limited resource responsible for various functions, including protection against Sybil attacks. MIOTA token holders accumulate Mana, which allows active nodes to have priority over new nodes, potentially giving them preferential treatment in transaction processing. Additionally, MIOTA holders can rent out their Mana in exchange for IOTA tokens or cash.

It’s important to note that IOTA has not yet fully launched its mainnet and is undergoing gradual upgrades and testing. The upcoming IOTA 2.0 aims to introduce an account system that will make it easier for users to manage their Mana and MIOTA tokens. This system will allow users to stake their MIOTA tokens, helping to validate the network and earn rewards.

Mana and Its Role in the IOTA Network

IOTA’s consensus model resolves transaction disputes through node voting. With the introduction of IOTA 2.0, a limited resource called Mana will be implemented. Mana allows nodes to influence different components of the IOTA protocol and is considered a core part of the consensus model. Mana serves several purposes within the IOTA network, including:

• Rate Control: This mechanism helps prevent Sybil attacks by determining how messages or transactions are processed based on the amount of Mana a user possesses.
• Fast Probabilistic Consensus (FPC) Voting: The consideration of a user’s opinion largely depends on their Mana holdings. The status of Mana for each node can be viewed in the public ledger (Tangle), allowing for its consideration when selecting nodes to resolve conflicting transactions. In FPC voting, a node will randomly select others to receive its opinion based on the amount of Mana it holds.
• Protection Against Eclipse Attacks via Auto-Peering.

Mana can be seen as a reputation token equivalent to MIOTA. It is owned by users within the IOTA network and has various use cases related to IOTA tokens.

Governance

The IOTA ecosystem encourages community involvement, which has led to the creation of the IOTA Governance Forum. This platform allows community members to share their opinions, insights, and proposed solutions.

Advantages of IOTA

• One of IOTA’s main advantages is its Tangle system, which offers a different approach compared to traditional blockchains. The introduction of Coordicide has effectively addressed the vulnerabilities associated with the Coordinator (Coo).
• The IOTA team has remained dedicated to the project’s vision, having not retained any tokens during the public sale. They actively work on code upgrades and have established strong business partnerships, paving the way for the advancement of distributed ledger technology in a connected future.
• Unlike Ethereum, IOTA can function optimally without needing a merge upgrade.

Disadvantages of IOTA

• Phishing attacks targeting wallet seed phrases and theft associated with IoT devices have been ongoing concerns. In 2019, a research paper identified a “hash” collision in the IOTA algorithm, which resulted in various system vulnerabilities.
• Additionally, the falling price of MIOTA has caused worry among investors.

How to Own IOTA (MIOTA)?

Users can buy MIOTA through centralized cryptocurrency exchanges. For instance, on Gate.io, users need to create and verify an account first. After depositing funds, they can purchase MIOTA through options like flash swaps, the spot market, or leveraged trading.

Useful References

For the latest updates on IOTA, you can visit:

• 官网
• 推特
• Discord
• Reddit
• GitHub

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