When it comes to crypto, constant debates about fees, hash power, and finding the right mix of efficiency and decentralization are inescapable. In this context, IOTA is a revelation as it eliminates the concepts of network hash power and transaction fees. A targetted goal of creating a mutually beneficial value transaction layer has led to some incredibly interest technological and economic trade-offs, November 11, 2019.
A Fresh Take on Decentralized Networks
IOTA is one of the most innovative ideas in the cryptocurrency space. Not just because of the way they approach problems, but because of the stupendous divergence in their tech stack relative to most projects. The network uses a type of distributed ledger called a ‘directed acyclic graph’ or ‘DAG‘, that they call ‘the tangle’. Think of a DAG as a brother to the blockchain; both of them are subsets of distributed ledgers, but they don’t function in the same way.
Using a DAG to transport data, IOTA confirms transactions by connecting them to one another. Blockchains group a batch of transactions into a block and this is propagated to nodes on the network. DAG’s simply list out every transaction and create a linkage between one another.
[Image Source: Jumpstart Blockchain]
What makes this structure so special is the minimal computing costs. And because it is so easy to compute, the network doesn’t need dedicated miners – people can transact with lightweight devices such as phones, tablets, etc.
The icing on the cake? No miners and low costs equal no transaction fees, transacting on IOTA is virtually free.
Running a network in this structure is extremely tricky to execute, but really easy to game for malicious actors. That’s why IOTA employed a centralized validator node named the ‘coordinator’ to create special transactions called ‘milestones’. Milestones are periodically issued list of transactions that are confirmed over the network. If a transaction is not on the milestone it doesn’t mean it isn’t confirmed. All you need to do is see if a particular transaction is connected to any of the milestone transactions, either directly or indirectly.
Yes, centralization is a dirty word in this space. That’s precisely why the team has been working to remove the coordinator; it’s a tricky process as it opens up the network to vulnerabilities.
Bashing Heads with the Industry
IOTA is a cryptocurrency that people love to hate, as said by cryptographer Aviv Zohar. The project drew criticism from cryptographers when they revealed they are implementing their own proprietary hashing algorithm, Curl P. As per best practices, cryptographic algorithms that have been tried, tested, and refined are the ones that are ideal for implementation. Naturally, researchers from various institutions told the IOTA Foundation this isn’t optimal and heavily criticized this move.
The real issue began when Sergei Ivancheglo, co-founder of IOTA, threatened to sue a researcher who publicized the flaws in Curl P. Some argued that this kind of behavior was detrimental to IOTA, and the broader industry, as it would discourage people from disclosing vulnerabilities.
Ever since, IOTA has been in the bad books of many people in the crypto space, but they also have an enthusiastic community and growing institutional and retail adoption from behemoths such as Bosch and STMicroelectronics.
Stay tuned for part two where we dive into the intricacies of IOTA’s tokenomic framework.