What is IOTA Coin? | A Beginner's Guide


IOTA Coin Price

Iota is a next-generation public distributed ledger that uses something called “Tangle.” Tangle functions on a data structure called Directed Acyclic Graph leaving it with no blocks, chains or miners.

Iota is helping to create and realize the internet of things, a technologized internet intertwined with smart contracts and smart devices.


In 2015 IOTA was founded by David Sønstebø, Sergey Ivancheglo, Dominik Schiener, and Dr. Serguei Popov. In just a few months later, launched beta testing.

As Dominik Schiener (Co-founder) said:

“All of the founders of IOTA (David Sønstebø, Sergey Ivancheglo, Serguei Popov, Dominik Schiener), have been in the Blockchain space since 2010 to 2011. IOTA itself came out of a stealth hardware startup, which is working on a new trinary microprocessor with working title ‘Jinn’. One of the major differences of our origin stories vs. other projects is that IOTA came out of real necessity. It was not the drive of creating a fancy new DAG technology that initiated the project, but the apparent problem of transactional settlement for the Internet of Things, and the lack of existing solutions out there today.”

Then in June of 2017, IOTA announced a $10 million ecosystem to create partnerships, community projects, collaborations and developer acquisitions.

When IOTA was launched, it started with a bang on Bitfinex quickly moving through the ranks. And as of writing this, the team is in development for a GUI wallet release.

Currently, IOTA coin sits here:


Iota started with the mission of helping to create the Internet of Things.

Although, they saw a few problems in the blockchain being ready for something at that scale, namely:

  • Scalability
  • Fees
  • High Hardware & Resource requirements.

As their homepage says on Iota.org:

“As the Internet-of-Things keep expanding, the need for interoperability and sharing of resources become a necessity. IOTA enables companies to explore new business-2-business models by making every technological resource a potential service to be traded on an open market in real time, with no fees.”

This company aims to transform our ability to create a distributed ledger that can be built for the Internet of Things without the clunkiness of the blockchain which continually needs to be scaled and logged.

Now, in a lot of minds, this is a compromise from security as the blockchain helps to give the credibility and proof that is needed.

Which is where Tangle comes in, and we will get to that in a minute.

What’s The Internet of Things?

The internet of things is a spectacular vision and one that will be taking place shortly.

Essentially IoT is the network of physical devices, vehicles, home appliances, and other items embedded with electronics, software, sensors, actuators, and network connectivity which enable these objects to connect and exchange data. Each thing is uniquely identifiable through its embedded computing system but can inter-operate within the existing Internet infrastructure. Experts estimate that the IoT will consist of about 30 billion objects by 2020.[1]

This will be the cataloging and recording of everything in a digital ledger so that when you donate to a charity, you see where it goes, and when you buy a bag of coffee, you know where the beans came from.


I’ll be honest; this section is going to have technical areas to explain IOTA and how it differs from a normal blockchain, say Ethereum, but it is well worth the read if you are interested in IOTA Cryptocurrency.

The IOTA Tangle Ledger System

One of the proprietary features of IOTA that makes it unique is its Tangle system.

While typical blockchain is clunky to scale (as we saw with segwit2x and the hard fork presented there), IOTA uses a completely different system.

A regular blockchain like the one in Bitcoin looks like this:


Notice the certain points of verification within the block allowing people to verify and see each other's transactions.

(If you want to learn more about the blockchain check out this article from our ‘Start Here’ series: How To Harness The Power of The Blockchain)


As the blockchain scales, it needs to do so quickly, or else fees get higher, transactions slow down, and mining requires more energy to obtain the cryptocurrency people are buying.

Now, the main innovation behind Tangle is its ability to use a distributed ledger technology that is based on something called Directed Acyclic Graph (DAG).

It looks something like this:

IOTA Tangle

It’s like blockchain, but without blocks or chains, that still verifies and stores digital ledgers in a peer-to-peer fashion.

In IOTA since there are no blocks, a single transaction must reference two previous transactions making the entire network of active participants becoming involved in the approval of new transactions.

This leads to three steps:

  1. Signing - The user signs the transaction with their private keys
  2. Tip Selection - MCMC is used to randomly select two tips which your transaction references (the single transaction referencing two previous ones)
  3. Proof Of Work (POW): You will need to do proof-of-work similar to Hashcash

Although, many people then bring up the problem of double-spend and how the IOTA network can get to a consensus model.

By having completed transactions, transactions awaiting completion and then pathways between them, there becomes a multitude of paths and certainty that follow.

As such, a merchant is free to choose their percentage of confidence and pathway that they would like to accept (out of 100%)

I know this is a bit complicated, but to really dive into the mechanical structures of IOTA read the white paper to understand the mathematics behind how it truly works and can scale without blocks and chains.

IOTA Has No Transaction Fees:

When the blockchain gets backed up, fees are increased, and people end up spending more than they typically would (which is still less than normal banking).

Since new transactions are being verified by completed transactions there are no miners - instead, it is completely free to send and receive IOTA.

This allows for fractional micropayments that hold their value.

Complete Scalability on IOTA:

With parallelized consensus, IOTA can grow and scale with the network dynamically.

Tangle uses past and new transactions for verification, as more transactions come through IOTA, it becomes more stable and easier to use because the reference material becomes more certain.

Unlike the blockchain. This means that scaling is easy and not need to be in sequential batches.

MIOTA is Decentralized:

One of the main features with cryptocurrency is to decentralize just about every and anything.

Decentralization is especially important for the Internet of Things.

Since there are no miners and IOTA uses previous transactions for verification, it is completely decentralized. It’s more so than a blockchain with miners that can create consensus on their own and thus hard fork (like with Ethereum or Bitcoin.)

Offline Transactions Via Tangle:

IOTA makes it possible for different branches of the Tangle Network to separate and verify transactions, while still being on the network whether using Bluetooth, Zigbee, and more.

This is going to be incredibly important when everything is “smart,” and the internet of things is fully operational.

After these transactions happen “offline” they can then re-tangle back into the network and update the network with more verification.


While Ethereum is undergoing its quest for resisting the quantum computing crisis with Zk-Starks, IOTA has quantum immunity using something called Curl.

Curl is a trinary hash system which uses winternitz signatures to create quantum immunity. Although, it had been cracked once. As of now, the hashing algorithm is patched, and it is back to an unbroken state.

Interoperability with Other Cryptocurrencies and The Machine Economy

The last two major features of IOTA are their aim to have it be interoperable with other cryptocurrencies and blockchains, as well as interconnecting and playing a part in the machine economy.

They believe that certain cryptocurrencies, blockchains, or tangles have their respective specific technologies and for that, they are trying to develop a system to use different technologies with IOTA.

With the release of Oracle, they are beginning to test this currently.

And as for the Machine Economy - they aim to play a big role in a future where machines trade resources and services with each other without the intervention of a third-party.


IOTA is an interesting project and one that, if done correctly, could revolutionize the cryptocurrency and smart economy.

Granted, IOTA is still in beta phase, while updating and refining their hashing algorithm.

As time goes by we will see how IOTA starts to perform as a company, and with that, how the market movement plays in its favor.



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February 23rd 2018, 15:36