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IOTA (MIOTA) 101 - Complete Guide

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Author: Benson Toti Updated: January 28, 2022

IOTA is a project under the wings of the IOTA Foundation. The developers of IOTA modelled it against blockchain but left out a lot of the things that have made the blockchain difficult to scale. The creators of Tangle, the proprietary technology that runs IOTA, claim that it offers speeds far greater than what traditional blockchain can achieve.

The IOTA Foundation is fronting its technology as the key that will unlock the full potential of the Internet of Things (IoT) economy. Given the growing network of IoT devices and applications, one is left to wonder what a great business it will become in the future.

What Is IOTA and Why Was (MIOTA) Created?

IOTA is a distributed ledger technology like no other. The traditional blockchains have miners who facilitate the operation of the networks but at a cost. The mining activity increases congestion and racks up transaction costs. IOTA claims otherwise, where the nodes in its network are not involved in any kind of mining activities. 

In September 2014, Dominik Schiener, David Sønstebø, Serguei Popov, and Sergey Ivancheglo floated a token sale for a cryptocurrency project called Jinn. According to the whitepaper, Jinn was to curtain raise a new generation of distributed ledger technology (DLT), one which does not have blocks and miners.

Popov and fellow co-founders launched Jinn officially in 2016 but with a new name, IOTA. The creators think of it as the backbone of IoT, where the IOTA protocol enables economic relationships between machines, as well as bridging machines and human economies. Primarily, it is a network over which the users exchange data and value with the help of (MIOTA) token, which is the native cryptocurrency of the network. 

Since it avoids miners and blocks, transactions are fast and feeless. Conventional blockchain networks such as Ethereum and Bitcoin have seen transaction costs expand over time due to intensified congestion. It aims to avoid this pitfall by making use of a network of nodes as transaction validators. At its core, the network is not a traditional blockchain technology.

How Does IOTA Work?

No doubt, you have been waiting for this section because you are dying to know how a distributed ledger technology (DLT) cannot be a blockchain. Well, let us dive right in. We begin by understanding how a DLT works.

The World Bank defines a distributed ledger as a network of independent computers (often called nodes) where each node records, shares and synchronises transactions in their respective ledgers. Unlike traditional ledgers that store data at a central location, the distributed ledgers keep a piece of information related to a transaction such that no single node can have the full details. Now, blockchain technology organises these disparate ledgers into blocks and chains them together, hence blockchain.

Instead of blockchain technology, IOTA uses a proprietary technology called the Tangle to confirm transactions. But how does the Tangle work, you might ask? Let's use an illustration for better understanding.

Jenifer wants to transfer a certain amount of IOTA to her friend Mary. Before verification of her transaction, she is given two other pending transactions that were awaiting verification (these are called tips). Jenifer needs to check the transactions for issues such as double-spending. She goes ahead and authorises her computer to verify the two transactions. The effort the computer uses in the process is called Proof of Work, which entitles Jenifer to have her own transaction appended to the IOTA network for verification by the next user. Once a coordinator (or clerk) verifies the transactions, he/she shares the confirmation with the network.

Another name for Tangle is the Directed Acyclic Graph (DAG). According to Sønstebø, one of IOTA’s founders, DAG avoids compiling transactions into blocks but retains “blockchain’s ability to execute secure transactions”. Thus, he argues that MIOTA digital currency is not an altcoin but an extension of the conventional blockchain technologies.

Key 3 Selling Points of IOTA (MIOTA)


Designed entirely without fees

IOTA’s Tangle technology avoids bundling transactions into blocks, and mining activity is also not present. The result is the execution of more transactions per second and a lower load on the electrical grid because of the low computing power required to accomplish the transaction confirmation process. For this reason, users can make as many micro-transactions as possible without paying any fee.


Highly scalable

The Tangle’s most unique quality is that its data structure allows for transactions to run parallel to each other, meaning as many transactions as possible can be added without overwhelming the network. On the contrary, conventional blockchains do not allow transactions to be added in parallel, which denies them the capability for scaling.


Low resource requirement

Bitcoin and other blockchains have remained on the margins because of high resource requirements. For example, an entrepreneur in Russia purchased two power plants just to support a Bitcoin mining farm he had set up. In comparison, IOTA’s avoidance of blocks and miners has made the network light enough to run on devices with low computing power. A personal computer can run an IOTA node without coughing.

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Is IOTA Worth the Investment?

Analysis by Statista predicts the IoT market to grow to about $1.6 trillion by 2025. As of 2017, technology companies in the IoT sector generated $100 billion in revenues. Can you imagine the possibilities for the cryptocurrency if it achieves its goal of becoming the backbone of IoT? 

Already, it has shown that its claim is not empty talk. In the automotive industry, cryptocurrency is used to pay for smart charging services without transaction fees. Also, smartwatches use IOTA technology to reduce the cost of insurance by keeping people fit. In the energy sector, it is helping to decentralise power grids to avoid total network failure. In the supply chain sector, companies are using IOTA to enable optimum value creation by ensuring transparency.

From this perspective, buying IOTA could be a great investment for the future. Nonetheless, it remains volatile, and it might take more than just reading about the project here to decide if investing in IOTA is right for you.

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Frequently Asked Questions

  1. IOTA refers both to the distributed ledger technology that underlies the IOTA network and the digital currency that facilitates intra-network transactions. MIOTA, on the other hand, is the ticker name. This is how the token is known in cryptocurrency exchanges.
  2. Yes. The IOTA Foundation fixed MIOTA’s supply to around 2.8 billion tokens.
  3. Yes. This would have been a major concern, especially now that the network is not a blockchain. Nevertheless, the network uses a Proof of Work puzzle that nodes must solve before completing the process of transaction validation.
  4. Purchasing MIOTA is as easy as buying Bitcoin or any other cryptocurrency. Many crypto exchanges list MIOTA, including Bitfinex, Binance, Bittrex, OKEx, Bitpanda, and others from where you can buy MIOTA.
  5. Yes. Other than availing MIOTA for purchase, crypto exchanges such as Binance, Bitpanda, and many others provide cryptocurrency trading pairs that include MIOTA.
  6. Demand. The more people want to own MIOTA, the more difficult it becomes accessing the token, which encourages those in possession of the MIOTA to bump up its price. The demand is also influenced by various factors, but the most significant is the success of the IOTA project.
  7. As a digital currency, there is not much that we can say in terms of differences other than that MIOTA is being hosted on a non-blockchain DLT. Nevertheless, MIOTA differs from BTC in that it does not attract transaction fees, and supports about 250 transactions per second (TPS) against BTC’s 7. Also, transactions involving MIOTA are energy efficient, unlike BTC.
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