Hardly any cryptocurrency provides as much discussion material as IOTA with its Tangle technology.
Just before Christmas, Robert Bosch Venture Capital announced an investment in cryptocurrency IOTA, which specializes in transactions for the Internet of Things. According to a statement from IOTA, Bosch’s venture capital subsidiary has bought a “substantial amount” of IOTA tokens. How much has been invested, is not known.
But what is behind IOTA that it attracts the interest of investors, investors and renowned tech companies such as Microsoft or Samsung?
A blockchain that is not a blockchain and wants to make things better: It sounds almost too good to be true, but that’s exactly what IOTA wants to have developed with Tangle. Decentralized, tamper-proof, scalable and no transaction fees – these are the cornerstones of the IOTA project.
The first blockchain generation is still quite limited in its application possibilities with Bitcoin. Ethereum, the second generation so to speak, has lifted these limitations, enabling messaging and social networking applications as well as financial applications, micro-payments or smart contracts. Nevertheless, the Ethereum developers are struggling with the scalability of their open source platform, keyword sharding.
If you will, IOTA is already the third generation of Blockchain. In fact, IOTA’s Tangle technology is not a blockchain at all. “Unlike the one-dimensional blockchain, which can only grow in one direction, the mathematical concept of the Directed Acyclic Graph (DAG) enables Tangle in many different places simultaneously to grow “, explains Andreas Osowski, Core Developer at the IOTA Foundation, which the futurezone met in Berlin for an interview.
Unlike Blockchain, Tangle does not rely on miners to verify transactions. Because the Tangle technology should be so lightweight that even smaller computers, such as in cars, smartphones, drones, laptops or other networked devices can handle the transactions. “Transaction fees do not go that way, so any network participant pays for the transaction with his own computing power,” says Osowski.
In order for the indirectly interconnected transactions in the IOTA network to be securely, decentrally and quickly verified, a certain size of the network is necessary, Osowski explains: “At present we have a so-called coordinator with several implementations who support the necessary strength of the network The fact that a part of the graph structure can currently be verified requires a certain degree of centralization due to the coordinator, but as more and more participants in the network increase their robustness, beyond a certain size, we can track down the individual implementations of the coordinator to take out. ”
Proof of Concept projects
When building a robust network, IOTA works with more than 30 well-known tech companies such as Microsoft, Bosch, Fujitsu or Samsung. As part of a pilot project, a data marketplace will be set up with the Tangle. In the exchange of IOTA tokens, companies can trade with each other, for example, weather data or air quality information. “For the proof-of-concept, we work together with a total of 30 companies from the industry,” says Osowski.
Similar to the blockchain, the application scenarios at Tangle are as diverse as they are trend-setting, with IOTA focusing initially on the Internet of Things and the accompanying machine-to-machine communication. “Whenever something has to be cryptographically verified and logged, the tangle could be used,” explains Osowski.
Examples would be, for example, logbooks for freight forwarders or automated manufacturing in Industry 4.0. “If data centers or companies need to update regularly, this could also be logged using the Tangle, and the hardware manufacturer can check at any time whether the devices have been updated,” says Osowski. One could also imagine that the graphene structure of the Tangle region is very different. So networks that are very local, but because of that can muster the necessary computing power right there.
In the cryptocurrency scene and among Blockchain enthusiasts, IOTA is providing a lot of discussion with its Tangle concept. On the one hand, IOTA is praised to have found in faith an alternative to the classic Blockchain, whose limitations are increasingly becoming a problem. On the other hand, IOTA is heavily criticized for the Tangle: not feasible, not decentralized and safety-wise patchy, here are the main allegations.
As is customary in the crypto scene, here too untruths and strong exaggerations are used. So some believe that the Tangle without coordinators does not work and therefore can not be a decentralized network. In addition, the address management and the temporal allocation of the individual transactions should have gaps.
Also, the ratio of IOTA to Microsoft in recent days caused a stir. The point at issue was the exact description of the relationship between the two companies. The fact is: “We work with Microsoft, sometimes they are participants in the Data Marketplace,” says Osowski.
Ternary instead of binary
For frowning also ensures that the IOTA technology does not rely on a binary system, but use a ternary system. If a device wants to communicate with the tangle, then it is necessary that the data be converted, which requires additional computing power. Especially for IoT devices, which are equipped with small computing units, this could become a bottleneck, the critics said.
IOTA is also under pressure because of its unusual wallets, which critics consider insufficiently secured. However, this is being worked at full speed: “A wallet designed for security and user-friendliness will appear at the beginning of the year,” explains Osowski.
Whether and how Smart Contracts can be implemented in the IOTA network is not yet clear. The IOTA developer did not want to comment on that in detail, just so much: “There will be news about smart contracts in mid-2018.”
Acts instead of words
Whether IOTA can face the critics and doubters will depend on the progress that the project can make in the coming weeks and months. “We do not want to be the next gold, Keyword Bitcoin.” We want to create a standard that is used proactively by the industry, “says IOTA developer Osowski:” We do not want to be a pure speculative object, we want more and more companies in the near future and get players on board and show that tangle is what we promise. ”