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Iota – explanation, pros and cons, history, buying advice, wallets, future/forecast…

IOTA is an exciting new cryptocurrency that has captured the imaginations of people all over the world. But where did it come from? How does it work? What’s so special about this one? And can you buy IOTA in India or elsewhere and store them in a wallet for safety? All these questions and more are answered below!

KEY TAKEAWAYS

  • IOTA’s Tangle is an open and scalable distributed ledger designed to support frictionless data and value transfer.
  • IOTA is the first distributed ledger built for the Internet of Everything – a network for exchanging value and data between people and machines.
  • The project began as a hardware project whose goal was to design low-cost general-purpose processors.
  • It aims to solve key scalability and performance issues with Bitcoin by replacing its blockchain with Tangle technology, a system of nodes in which each new transaction validates two previous transactions.
  • The Tangle immutably records the exchange of data and value. It ensures that the information is trustworthy and cannot be falsified or destroyed
  • In the past IOTA was vulnerable for hacks
  • It is still unclear how well Iota works in practice.
iota explanation

Iota explanation

IOTA was quietly founded in 2015 by David Sønstebø and Dominik Schiener. When they started the project, they faced a very big question: what should IOTA be? The answer to that question sparked some heated debates, but in the end they decided to go with their gut feelings. Like many other blockchain projects that day such as Ethereum and Bitcoin, the idea of ​​IOTA comes from an obsession with fungibility. By removing friction from their transactions, it aims at becoming a currency whose value is independent of its use.

The initial seed of the project was a proposal for creating a scalable cryptocurrency that would allow users to transfer assets from one place to another with very low fees.

What is Iota?

Iota is a new type of crypto that was created out of necessity to address current issues with the blockchain technology underpinning cryptocurrencies. It has zero transaction fees and can easily scale up, unlike Bitcoin which recently reached its 2GB limit. Iota also uses something called “Tangle” instead of blockchain for keeping transactions secure (more on that below). Besides this, Iota’s developers have aimed to overcome the fundamental problems of blockchain such as high fees, scaling problems and environmental issues.

The founders of IOTA have been working on the project for a long time. The very first versions of IOTA’s code was released in 2014 and since then there has been a lot of speculation about its fate. The positive news is that recently the cryptocurrency has entered a phase where investors can buy MIOTA safely with fiat money (such as USD or Euros).

How to buy IOTA?

Is there a way to buy IOTA online? Yes, you can purchase it from several websites. Among the main ones are Bitfinex or Binance and check the cheapest price on Coinmarketcap. I have used all of them and they all work fine (if not great), but Binance seems to be the best. You need to create a USD wallet before you can send money to the website and Binance is one of the safest places where you can keep your money in an exchange. It is also possible to get your hands on IOTA through several specialized exchanges such as Exmo.

Buy IOTA on Binance

eToro is not suitable if you want to invest large amounts in IOTA, possibly buy other cryptocurrencies or withdraw the IOTA )optional) to your own wallet. You should do this on the exchange with the largest trading volume and the best conditions. This is currently Binance. There you can buy IOTA with euros.

The procedure for buying on Binance is as follows:

  1. Open an account on Binance
  2. Perform verification (with ID card
  3. Deposit Dollar, Pounds, Euro or Bitcoin via bank transfer at Binance.
  4. Exchange your chosen currency for MIOTA.

Trade IOTA as quickly as possible

The advantage of this option is that it is the fastest way to “get into” IOTA, just like a stock.

  1. Open an account on eToro.
  2. Verify account using webcam in 5 minutes (with ID and mobile number).
  3. Transfer euros to eToro.
  4. “IOTA” in the eToro search and buy IOTA with a trade there.

eToro is a great trading platform on which you can also trade IOTA. When trading on eToro, it is not necessary to familiarize yourself with the complicated concepts of cryptocurrencies. Buying them is as simple as buying a stock. The disadvantage (which is an advantage for others) is that you do not actually own the IOTA token, but only speculate on the price with the help of a financial instrument (CFD).

History of IOTA

IOTA was born out of the necessity to address issues in blockchain technology. This is what makes IOTA a new type of cryptocurrency. The developers of this crypto have been trying to develop techniques and protocols that would allow the creation of a cryptocurrency that would be capable of solving real-world problems – such as machine to machine communication and payments – without sacrificing scalability or centralization.

One way they plan on doing so is by developing a system that works like this: each time a transaction is sent, rather than save it on the blockchain, it gets recorded on the Internet-of-Things (IoT) network. In this system, it is not the miners who verify transactions but rather the devices in the network.

The idea is that as more and more devices come online, this system will grow exponentially and will be capable of handling an unlimited number of transactions per second.

Iota was initially created in Germany by David Sønstebø, Sergey Ivancheglo, Dominik Schiener in 2015. The team has since grown to include developers from all over the world (Norway, Netherlands, China).

The designers of IOTA have tried to solve some of the most problematic issues blockchain networks face: scalability, participation in mining (i.e. energy consumption), development cost (i.e. network decentralization), etc.

During the launch of IOTA in 2015, there was a lot of hype related to this new crypto. This created a great deal of criticism and suspicion because the developers, specifically David Sønstebø, Sergey Ivancheglo and Dominik Schiener, have been accused in many cases of lying about the prospects and importance of this cryptocurrency. In March 2018, one developer has even shown that they had received donations from IOTA supporters for personal use to purchase houses.

By August 2016, when IOTA released its whitepaper , this cryptocurrency was already being touted as a solution to address issues in blockchain technology.

In June 2017, IOTA’s co-founder, David Sønstebø, announced that the company would be collaborating with Microsoft. At this time, it was not clear what this collaboration would entail. Later in that year, however, it emerged that they had collaborated to develop a new contract for cryptographic functions using Iota’s technology.

In April 2017, it was reported by CoinMarketCap that IOTA had increased their market capitalization by 1,000% from the start of the year. This rise in value was attributed to the announcement of the collaboration between Microsoft and IOTA.

By June 2017, the cryptocurrency had been listed on Bitfinex and it rose to USD 4.1 billion market capitalization. At this time, it became clear that IOTA was one of the most promising cryptocurrencies, especially because big corporations like Microsoft were backing it.

In November 2017, it was reported by CoinMarketCap that IOTA had managed to maintain its position as a top 10 cryptocurrency by market capitalization. At this time, there were over 100 billion MIOTA tokens in circulation with each token currently trading at USD 1.05.

From a technical point of view, IOTA has an interesting architecture, where the transactions are stored on the tangle network rather than being stored on an existing decentralised database. This means that IOTA’s protocol cannot be copied or replicated like Bitcoin’s. The Tangle is a directed acyclic graph (DAG) and it is part of the proof-of-work solution used by IOTA.

Tangle

The tangle is a directed acyclic graph and it is a more efficient way to distribute records especially when there are thousands of transactions being sent to different users. In order for this to work, each user needs to verify two previous transactions in their own transaction ledger. This is a peer-to-peer and self-regulating system that lets every single user participate in validating the transactions.

For a transaction to be validated, the two previous transactions should also be validated first. This is because transations require the consent of two other previous transactions before being validated.

Because of this, there are no miners or miners fees for IOTA users which makes it cheaper for users to transact with each other. IoT devices should also be able to operate in a distributed network without any human intervention which is impossible if there are miners involved.

How does it work?

IOTA does not use blockchain technology. Instead, it makes use of something called tangle technology to complete transactions between users. IOTA uses transaction fees which makes it cheaper to transact with IOTA than any other cryptocurrency. The transaction fee is paid in IOTA tokens instead of a separate currency. While some people are not happy about the transaction fee, it does solves the double-spending problem that could occur in blockchain-based cryptocurrencies.

IOTA transactions are also confirmed faster than most other cryptocurrencies which makes it the best cryptocurrency for IoT applications and services. With transaction times of less than a few seconds, IOTA can be used to detect and change the temperature at home or control appliances within your home using smart contracts in near real time.

Scalability

The IOTA network is not limited to one centralised server like banks and financial institutions. Instead, IOTA has a distributed ledger that is capable of performing transactions in real time even if it becomes very large – something which is impossible with blockchain technology. Unlike Bitcoin, this does not rely on miners to verify other users’ transactions. What is more, it can also handle any number of users without having any issues. The tangle allows each device to have an efficient distributed ledger without the need for consensus from a centralised server. This means that device manufacturers and developers could use IOTA’s network and transaction system for anything they want such as smart contracts and machine-to-machine communication.

Manufacturers could develop and distribute devices that use IOTA’s network to facilitate payments, provide trusted data and protect sensitive data from public access. Using IOTA as the backbone network for these devices would make them capable of communicating with each other in a peer-to-peer manner. This would be very useful when it comes to things like air pollution, traffic congestion, water quality, etc.

Advantages

  • Unlike most cryptocurrencies, IOTA has a wide range of adoption because it is directed towards the Internet of Things (IoT).
  • Due to the use of tangle technology, IOTA can process more transactions at a given time than Bitcoin and Ethereum.
  • IOTA is not limited to one centralised server or jurisdiction. It can be used anywhere in the world.
  • Moreover, there is no mining process which means that there are no mining fees for transactions.
  • IOTA is a new crypto that has no transaction fees and uses something called Tangle which allows it to scale in no time at all. This eliminates issues that other cryptocurrencies have faced in the past which include high fees, payment delays and scaling problems.
  • Using IOTA as a communication layer between devices can also make it easier to track pollution or traffic congestion in real time.
  • IOTA is a new crypto which uses something called tangle it can handle billions of transactions on the network in real time without the need for miners.

Disadvantages/ Criticism

  • The wallets are not user-friendly and not that secure. There are still a lot of undiscovered attack vectors that could make IOTA’s network vulnerable to people with malicious intent.
  • Like any new crypto, people are not sure about its future. Those who invested in IOTA early on are likely to lose a lot of money if this digital currency fails to live up to the hype.
  • IOTA only allows eight decimal points which means that there is no way for users to pay other parties in exact amounts. This means that even though virtual currencies like Bitcoin and Ethereum allow you to make payments in double precision, IOTA’s range of 100,000 gives you no choice.
  • IOTA is also not as easy to understand as other cryptocurrencies because it uses something called Tangle which could be confusing for newcomers.
  • Even though IOTA is very scalable, it also makes use of a centralised system called coordinator which is used for transaction verification.
  • Iota has a Single Point of Failure because it uses the Coordinator.
  • Iota has some centralization, it is not completely decentralized. When Iota grows, the nodes must sync with each other. If one of these nodes goes down, it will lead to the coordinator going down and Iota will not be able to recover from that point until everyone is synced up again. In a way, Iota is much less decentralized than most other Cryptocurrencies.
  • IOTA was hacked in November 2017 and $4 million worth of IOTA tokens were stolen by one user who created a malicious seed generator. This is something that could make other users worried about investing in IOTA.

What are the best wallets for IOTA?

IOTA has specific wallets that are used for each of its digital currencies. These include the Light Wallet, a desktop wallet, the IOTA Wallet app developed for Android and the IOT Tangle Explorer.

The Light Wallet is compatible with Windows, Mac & Linux operating systems. It can be downloaded from github but it requires a special procedure to install and you will need to follow this guide to ensure that you download the correct version. The IOTA Wallet app is an Android only wallet that can be downloaded from the Google Play Store. You will need to have android Gapps installed on your phone to make use of this wallet. The IOT Tangle Explorer is geared towards developers and it is also compatible with the desktop operating systems listed above. It can be downloaded from github, as well as the Light Wallet.

The Trinity Wallet is a new IOTA wallet can be downloaded from the Trinity Wallet website and it is available for Windows, Linux & Mac.

You can also use hardware wallets like Ledger Nano S to store your IOTA tokens. The Ledger Nano S is very easy to set up and use. If you are unsure how to use a hardware wallet you can check out our guide here. Ledger Nano S supports Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Ripple and many more cryptocurrencies like Omisego (OMG) and NEO (NEO).

IOTA does not have a physical wallet but you can store your IOTA in cold storage which means that you can use hardware wallets to store your digital currency safely offline. Hardware wallets include Ledger Nano S or Trezor.

Can I send IOTA back to an exchange?

IOTA allows users to create as many wallets as they want on their own device. This wallet is designed for Android, IOS and Windows 10 Mobile devices. The Trinity Wallet is being developed by IOTA themselves and it will have its own desktop version as well.

Iota vs Bitcoin vs Ethereum

The IOTA network is not limited to one centralised server or jurisdiction. It can be used anywhere in the world.

Unlike Bitcoin, which makes use of a mining process, IOTA does not make use of miners. Instead, it makes use of something called Tangle which can handle any number of transactions without any issues at all. This is what makes IOTA much more scalable than most other cryptocurrencies.

While there are still several things that are unknown about Iota and it is still a very unproven technology, there are already quite a few applications for its technology in the form of IoT devices and even some enterprises that are using it to handle sensitive data.

IOTA has been under a lot of scrutiny from investors and experts who cast doubt on its future in light of the allegations that the developers have been making about their capabilities and intentions. While the team has been trying its best to clear the air, Iota has finally been accepted by some big companies like Microsoft and Fujitsu.

IOTA is a new digital currency that aims to become the backbone of the IoT technology.

If this digital currency can live up to these expectations, then it could become the new standard in this field. Its price is also currently very low at just $1.22 per token as of 23rd September 2017 which means that it could be a good investment for people who have nothing else to invest in right now.

Forecast/ Price Prediction + Disclaimer

Disclaimer: Investing in projects like IOTA carry a high degree of risk. There is a high chance that IOTA will not live up to the hype and expectations. However, if you decide to invest in this project as an alternative to other digital currencies, you should do your own research and know what you are investing your money in.

IOTA a lot of potential. What is good about IOTA is that there are no fees to transact with your fellow users and there are also fewer transaction confirmation times which means that IOTA could be one of the most efficient cryptocurrencies for IoT devices.

The most worrying thing about this cryptocurrency is that its developers have not given any concrete details about their plans and this could be a problem in the future.

There are also changes that investors are concerned about such as exchanges closing their doors permanently, stealing coming from hackers or even getting banned from Amazon Web Services which could make it near impossible for users to access their funds.

IOTA is one of the most ambitious cryptocurrencies in the market right now. This is because it wants to become the backbone technology for all of humanity’s IoT devices.

What is more, it just started to take off a few months ago in terms of its value and market capitalisation. The coin was only valued at $0.20 per token until mid-August 2017 which means that investors could make a good return on their investment if it continues to increase in value.

However, a lot of things are still unknown about IOTA and people are worried about how scalable this technology really is.

IOTA’s continued partnership with large companies and focus on the growing Internet of Things (IoT) help differentiate it from other cryptocurrencies. Currently, the focus is primarily on turning IOTA into a decentralized network.

Another interesting development is the “Mana” reputation system. Mana technology works similarly to the so-called proof-of-stake algorithm: Every node that carries out a transaction receives Mana in return, which means that indications of trustworthiness are stored.

Conclusion – Does Iota have potential? Is it a good idea to invest in IOTA?

IOTA is a new crypto that aims to become the backbone technology for all of humanity’s IoT devices. Unlike other cryptocurrency projects, it has an actual working model that it can work with and this could make it a popular choice in the future.

A lot of people are also interested in IOTA because it gives users the ability to send money and transact at a lower cost than other centralized cryptocurrencies, as well as offering faster transactions through its tangle system which handles millions of transactions per second.

However, there are still many things that are unknown about IOTA and these could cause investors to lose money if the predictions come true.

Some of the biggest things to worry about include a possible centralized database from which transactions are recorded, hackers stealing IOTA tokens from users and exchanges closing their doors permanently or even getting banned from Amazon Web Services which could make it near impossible for users to access their funds.

IOTA is one of the most ambitious cryptocurrencies in the market right now.

Due to the use of tangle technology, IOTA can process more transactions at a given time than Bitcoin or Ethereum.

 

 

 



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