Last Updated: 1st November 2018
IOTA is an open-source distributed ledger that aims to usher in the age of the machine economy, by serving as the foundation to the growing technology known as the Internet-of-Things (IoT). IOTA does this through the use of its new and innovative protocol known as the Tangle.
In the same way Bitcoin and Ethereum utilise blockchain technology to function, IOTA uses the Tangle. The Direct Acyclic Graph or, DAG, employed by the Tangle differs from the blockchain in a few key ways. The Tangle uses a ledger for storing transactions, or sites, in the Tangle protocol. These transactions are connected via, what are called, edges. These edges serve as a representation of validated transactions on the Tangle network. The rule is, a new transaction that occurs on the network must validate at least two previous transactions before it itself can become validated.
The process in which transactions are validated on the Tangle network also differ to the methods employed on a blockchain-based network. On the Tangle network, there are no miners in the same sense that you have Bitcoin miners. Instead, every user that transacts on the Tangle network, is a miner. When Alice sends 5 IOTAs to Bob on her mobile phone, her phone performs a proof-of-work calculation in-order to validate two previous transactions. IOTA uses Hashcash as the proof-of-work algorithm but at a much lower difficulty. This is to allow regular devices such as Alice’s mobile phone, internet routers and laptops to join the Tangle network. With a much lower hashing power required to join the Tangle network, the machine economy that IOTA is trying to foster becomes much more of a reality. Through use of the Tangle network, machines would be able to transact with one another. Cars could pay for their own parking, houses could pay their own electricity bill, the use cases are endless.
There are numerous advantages of the Tangle network. These advantages include:
- Masked Authenticated Messaging (MAM)
Due to how the Tangle protocol is set up and implemented, its scalability is near infinite. In contrast to blockchain-based networks, which slow as more users are added, the Tangle actually becomes much faster. This is because, an increasing number of users results in faster validation times. The lower hashing power required to transacts over the Tangle network is also an added incentive for new users to use the Tangle.
Due to the fact that users that transact over the Tangle network also validate previous transactions, this results in zero transactions fees. Therefore, the possibility of micro-transactions becomes more of a reality. Micro-transactions were previously not possible on blockchain-based networks due to transactions fees. However, with the Tangle, because there are no transaction fees when transacting across the network, micro and even nano-transactions become possible.
In contrast to other blockchain based networks, the Tangle is quantum-resistant. With the advancement of technology, it becomes likely that systems once thought to be secure, may in fact be comprised by quantum computers. Due the superior computing power offered by quantum computers, some blockchain-based technologies may be susceptible to attack at some point in the future. However, due to the Tangle’s use of Winternitz One-Time signatures, it can be claimed that the Tangle protocol is quantum-resistant.
Masked Authenticated Messaging (MAM)
The Tangle protocol also allows for nodes to exchange authenticated and encrypted data between themselves. The quantum-resistant nature of the Tangle protocol ensures data sent of the Tangle network is also resistant to any attacks by quantum computers. MAM also makes it possible to share data with specific parties.
Another key feature of the Tangle protocol is the transmission of data through the network. IOTA allows users to establish communication channels between devices. Data sent through these communication channels are fully authenticated and tamper proof.