A beginner to cryptocurrency may assume Bitcoin is the only currency in existence. However, there are many varieties other than Bitcoin, all improving on security features and transaction time. One of these currencies is IOTA.
What is IOTA?
This is an open source ledger/cryptocurrency. All cryptocurrencies rely on cryptography technology to regulate their supply and management instead of financial institutions for regulation. The IOTA currency in particular focuses on securing payments as well as connections between different machines using directed acyclic graphs instead of blockchain technology.
Founded in 2015 and incorporated in Germany as a non-profit organization, the IOTA foundation provides funds for the improvement of the ecosystem. Its purpose is helping the machine economical systems through provision of M2M (Machine to machine) payment costs.
The founders of the currency are four: Dr. Serguei Popov, David Sønstebø, Dominik Schiener, and Sergey Ivancheglo. The IOTA system has collaborative projects with several operating systems – Microsoft, Deutsche Telekom and Fujitsu.
How IOTA works
The currency divides into smaller units, with the smallest unit being an Iota (after the Greek alphabet). You denote larger units of the currency by addition of prefixes to the word Iota. This will therefore result in Kiota (1000 iota), Miota (a million iota), Giota (a billion iota), and so on.
You cannot mine iota, so there is no creation of the coins. As a result, it is only through trading at exchanges that you will acquire the currency. The design relies on users confirming two random transactions for them to send out a transaction, so a numbers of users must validate a transaction before it goes through. For each transaction, an administrator (the Coordinator) validates all transactions within a set of milestones. If the network is large, the system removes the Coordinator.
What makes IOTA different?
The IOTA foundation happens to be the first non-profit organization that receives funds exclusively from cryptocurrencies. The board managing the currency is in several levels – the BoD (Board of Directors), the Advisory Board and the Supervisory Board. There are several levels below them, all dealing with different aspects of IOTA use.
Several features make this currency stand out from the competition, which include:
The system does not use blockchain technology. Instead, it relies on DAG (Directed Acyclic Graphs), common among users as the ‘Tangle’.
Internet of Things (IoT) – this is a network of devices that are electronic based, as well as those that have software, network connections, actuators and sensors; all allowing for data exchange. IOTA relies heavily on the IoT to verify transactions and make secure payments, all while enhancing unlimited number of transactions and easy scaling of the system.
Cryptography type – the currency system uses hash algorithms instead of ECC (elliptic curve cryptography). This means that the time transactions take is faster and more secure than currencies such as Bitcoin.
Alternative coins to use
The future of cryptocurrency may not involve blockchain technology, and IOTA is among the few that have alternative ways of approving transactions. It has great potential to succeed greatly among cryptocurrencies, even Bitcoin. However, there are currencies that have bigger potential and work equally as well if not better.
ETH (Ethereum) – the main rival to Bitcoin, aside from Ripple. Started in 2013, it allows equalized distribution and running of contracts without third party views. It has a fast rate of processing transactions because it uses programming codes of decentralized applications, unlike Bitcoin and Monero that focus on blockchain technology.
XRP (Ripple) – another blockchain user. It is among the largest in the market, and it gives you friction-less, and prompt international payment. The coins do not require mining (only trading) therefore, it reduces computing power. It is also gaining popularity among financial institutions because it allows them to process their customers’ payments immediately.
Verge (XVG) – this currency is also a recent one, improving on the Bitcoin and Monero blockchains. Its main aim is to provide both businesses and individuals with a faster and decentralized method of direct transactions while they maintain their privacy. Among its features is an anonymity-centric network including 12P and Tor, and results in transactions becoming untraceable.
Zcash/ZEC – a coin from 2016, it offers users additional privacy and voluntary transparency during transactions. The blockchain design is unique because it only shows you that transactions occurred without revealing the identities of the individuals or the cash involved. It is open source in nature – because of this; the Zcash Company has no control over it.
Bitcoin – the most famous out of this list, it is a P2P (peer-to-peer) currency, which is also open source. You can operate it on the internet easily without using intermediaries, and transactions cannot reverse once completed (due to their design).
Technology behind IOTA
The difference between IOTA and other currencies that are Bitcoin derivatives lies in the architecture. IOTA uses hash-based algorithms. It does not rely on blockchain technology, and therefore the processing of transactions is faster and allows it to handle multiple ones at a time.
The currency is open source and lightweight, built specifically for Internet of Things. It therefore gives an ecosystem that is very flexible and ready for scaling events.
Trading IOTA currency
You cannot mine IOTA coins using the usual software despite it being among the largest in share capital. There are also very few options of purchasing the currency, though there are some popular choices.
Two exchange services offer the IOTA currency, although they do not deal with fiat currency (like US Dollars). You will have to buy another currency like Ripple first, since you cannot trade directly in IOTA. The exchange services that are for IOTA are Binance (very new to the scene), and Bitfinex (based in Hong Kong). Here is a guide to using each of the exchanges.
Register an account with Binance and login after the process is complete.
Set up the account. A pro-tip – use two factor authentication to enhance security of the account, especially using Google Authenticator.
Deposit your currency to Binance. The currency is in terms of cryptocurrency, and it mostly accepts Bitcoin, USD Tether and Ethereum.
Purchase an IOTA with the currency you have by clicking the ‘Exchange’ button and locating IOTA in the market you want.
Place a buy IOTA order using market or limit orders. Note that Binance charges 0.1% fee. The market order will inform you the maximum amounts of IOTA that are available for your currency amount, and you can withdraw the IOTA from Binance into your electronic wallet.
Buying through Bitfinex
Sign up and set up your Bitfinex account.
Deposit your cryptocurrency to Bitfinex. It is similar to Binance because it trades in Ethereum and Bitcoin currencies.
Buy IOTA using the currency you have, and confirm the transaction.
IOTA prices and trading history
The currency is newer than most, so it does not have an extensive history of data in price changes. Though IOTA has the potential to grow into a leading currency, it is important to remember that all cryptocurrencies are volatile in nature, and price changes may be very significant within short periods.
IOTA has had its share of volatile prices, mostly through fluctuations in demand and supply. Since its founding, it currently has a market value of $3.91, with market caps reaching $10 billion. This may prove attractive to investors because of the opportunity to speculate prices and get very good returns. There is not much information regarding its previous prices as it is still new.
Is it worth trading in the coin?
This question has a complicated answer, because some authorities and analysts do not approve of investing in cryptocurrency in general. The reasons they usually give range from the highly volatile nature of these currencies, and the fact that their value is unpredictable. Another issue with IOTA is the current low trading volume.
Other voices point out the potential increasing value of IOTA coins – and that if you do not take an opportunity now, you will regret missed opportunities in the future. We have compiled a list of various facts that make this currency so exciting in potential:
It does not have a finite supply, unlike Bitcoin.
It has a high potential for scaling at indefinite levels since it does not use blockchain technology to approve transactions
You can carry out transactions offline.
The Internet of Things ecosystem enables the currency to do many things that other currencies cannot, such as faster transactions.
These benefits do not negate the high risks of investing in cryptocurrencies like IOTA. However, if you can shoulder the probability of losses, you can put your money in it.
The rise of IOTA is synonymous with the increase in internet transactions. There is advanced development of Internet security features and reduction of blockchain technology, and this makes IOTA a top choice for the future. Considering all these factors, the potential advantages are many if you invest wisely.