Over the last week, a once obscure cryptocurrency called IOTA has risen to prominence, becoming the fourth largest cryptocurrency (at the time of writing this article) with a market capitalization of over $10 billion. Combining the leading concepts of distributed ledger technology and the Internet of Things (IoT), IOTA has captured the imagination of the technology and investment sectors alike.
IOTA was launched through a crowdsale in December 2015 by a group of business, technology and programming experts – David Sonstebo, Sergey Ivancheglo, Dominik Schiener, and Serguei Popov. The group has a long and successful experience in the cryptocurrency space. Their aim is to bring about a paradigm shift in cryptocurrencies.
Tackling Bitcoin’s Issues
It is well known that Bitcoin is plagued by issues such as scalability, long confirmation time, centralization, and waste of energy in mining. IOTA resolves these problems with its ground-breaking quantum-proof protocol, known as the Tangle. The key innovation here is that every device that sends an IOTA transaction must also confirm two other transactions on the Tangle network.
Such requirement removes the need to consume a large amount of energy doing computationally intensive mining, which is what is currently happening on the Bitcoin network. It also avoids centralization as the user and validator are now aligned. The issue of scalability is therefore resolved as the capacity to confirm transactions grows with the number of users. This also means that transaction time will decrease as the network expands.
With the crowdsale in 2015, 1,337 bitcoins were raised for project development. Since then, the IOTA Foundation, based in Germany, was set up to further grow the community, fund promising projects, and establish collaborations with large corporations. The IOTA Foundation now boasts a large team of dedicated experts to grow the IOTA ecosystem sustainably and organically.
Made for an Internet of Things World
While most cryptocurrencies focus on transactions between human beings, IOTA sets its eye on those between machines, a major theme captured by the industry as the Internet of Things (IoT). In an IoT network, devices that are connected to the Internet can exchange information and payment between each other. For example, your refrigerator, connected to the grocery store, can automatically send an order for milk when it falls below a certain level. Or a self-driving car can get paid for performing a task of delivery. Many other applications exist beyond our imagination.
Growth in Internet of Things (IoT) is happening quickly and the tech industry is bullish about where things will be just three years from now in 2020. Cisco predicts that there will be 50 billion devices connected to the Internet. For perspective, the world’s population is predicted to hit 7.7 billion people that same year. And according to Gartner, by 2020 more than half of new business processes and systems will incorporate some elements of the Internet of Things.
If transactions were to occur between these connected devices, the tokens used would have to be scalable and fast given the huge size of the network. IOTA would be ideally placed to assume that role due to its improvements over Bitcoin and other cryptocurrencies.
Partnerships and Bright Future Ahead
With this background, IOTA announced a number of important partnerships. In November 2017, it launched a data marketplace with some 20 prominent firms in the IoT and information field, including Cisco, Samsung, Microsoft, Volkswagen, Fujitsu, Huawei, and Accenture. The connected devices managed by these firms create huge amount of data. The IOTA platform provides a way for partner firms to provide data within their sector and monetize them. IOTA hopes to create a very diverse and open marketplace which incentivizes the free flow of information between entities.
This is the reason behind IOTA’s dramatic appreciation in price over the past week. However, this is still early days. The IoT sector is expected to become a multi-trillion-dollar market. With the growth of IoT, the potential for IOTA is very promising.