IOTA | $MIOTA | The Machine Economy


I’ve been asking people
on Twitter and Slack to give me the video
recommendations and something that keeps coming
up and I couldn’t avoid was IOTA. I’ve been running from
it for a little while because I was afraid of the fact
that it was really tech-heavy, and I wanted to make sure that
I was going to do it justice and be accurate. So after much research
and some avoidance, I am here today to
talk about IOTA. IOTA is one of the
coins I don’t hold, but I know a lot of people
that are very bullish on it. IOTA was launched in June 2016, and it stands for the Internet
of Things Application. It’s focused on providing
secure communication and payments between machines, or what’s referred to as, which
you’ve probably guessed already, the Internet of Things. IOTA has a really passionate
following of people who believe that it’s going to be
the future of cryptocurrencies. And they feel this way
because of a few things. One, it doesn’t
have a blockchain. Two, it claimes no
transaction fees. Yep, you heard it. No transaction fees. And three, it’s scalable, and that scalability increases
the network speed and security. IOTA’s goal is to create ease between
machine to machine transactions. And that sounds like a pretty
vague concept right now, and it probably is. But in the future,
it might not be. The economy in our lives are
moving toward more automation, and IOTA wants to be
the backbone for that. Let’s start with the
biggest difference between IOTA and every
other cryptocurrency, which is the existence
of the Tangle. The Tangle is just a nickname
given to it, though. The real more intimidating
name is called a DAG, which is Directed Acyclic Graph. To imagine what this might look
like think of a spider web. That’s really the closest comparison
I could make to the design. Let’s break the name down. Directed refers to the fact that new transactions validate
pre-existing ones, but only in one direction. Acyclic means that
it’s not a circle. And Graph means that the Tangle
itself is also the ledger. The Tangle is designed
to be lightweight. Transactions will be able
to be sent and approved in just about any
technological gadget. For example, laptops,
cars, cell phones, hey, and maybe even one
day your smart fridge. However, in order for this
Internet of Things to take place, a chip is going to have
to be put in place to these technological gadgets. And the chip will be, as I
see it, a financial barrier. The Blockchain has blocks,
and the Tangle has sites, and each site is connected to the other
with a unidirectional validation, and those are called edges. The Tangle works by requiring
a sender in a transaction to do sort of a Proof of Work. This Proof of Work
approved two transactions while sending the one and then
ultimately creating more sites. Thus, the act of
making transactions and validating transactions
becomes coupled, and this removes the need
for dedicated miners. An interesting fact about IOTA is the network speed and
the security increase as people send and receive
more transactions. That’s because people
sending transactions are essentially working
for the network. This sounds pretty awesome considering the
fact that right now it’s exceptionally
expensive to send Bitcoin, and with the Crypto Kitties
thing going on in Ethereum it takes hours to validate
a transaction there. This also eliminates the
need to pay miners a fee, because you are doing your own
work when you send a transaction. The IOTA community is
really, really big on telling everybody
that there are no fees, and in their defensive really
aren’t traditional fees. The users, you or I, have to validate
transactions doing a Proof of Work, and that requires
computational power. And to power those computers,
that requires electricity. And unfortunately,
electricity is not free. I’ve explained the Tangle, and I’ve explained
some pros of IOTA, but I haven’t really
brought up any use cases. So imagine going to
a parking garage, parking your car, getting
out and leaving, and the car paying for itself. The car would interact with the garage
in sort of this Internet of Things, and all this would be autonomous. Another use case would
be a smart fridge. You pull something out that
you’re running low on, you scan the UPC, the funds get taken out
of your IOTA account, and then, hey who knows, if it’s Amazon maybe it’s
getting delivered by drone in less than a half an hour. And you have to think of the
grand scheme of things. Neither of those use cases would be
even remotely possible with Bitcoin because of the sheer
transaction fees. On to scaleability. So scalability is a big
selling point for the Tangle. The Tangle has yet to prove that it
can maintain eventual consistency within a certain amount of time. For example, with Bitcoin, you know that ideally the transactions
will be sent within 10 minutes. But with IOTA, there is really
no benchmark number there. And currently, the network has something
of like training wheels on it, and that’s called the Coordinator,
and I’ll get to that second. The Tangle uses a Proof
of Work algorithm that’s supposed to be sort
of like a light version. And it’s simpler. But because it’s simpler, it
can also cause some problems. In my Blockchain 101 video, I explained on the blockchain
what a 51% attack means. And IOTA has something similar, but it’s referred
to as a 34% attack meaning because the
Tangle is simple, if someone had a lot
of computing power and they focused it
on the IOTA network, they could possibly manipulate the
network and use it to their advantage. Let me explain that
a little bit more. IOTA is protected and strengthened
by constant transactions. And right now the IOTA network is
in a bit of an infantile state, so the team created something
called the Coordinator or the Coo. And this is supposed to
help support the network until it can run strong
and safely on its own. The Coo is validating the transactions
on the network right now. It’s preventing a 34% attack and is the driving force behind
preventing double spending. The IOTA team states that
they’ll turn the Coo off when the network is strong enough to
maintain its own checks and balances. But in the meantime, one thing is validating
all those transactions, which means that essentially right
now IOTA is centralized currency. In the process of doing research, I kept reading all these
people complaining about it, and it’s been causing
a lot of controversy. On to quantum resistance. Quantum resistance means
that a quantum computer would not have an unbalanced
or unfair advantage of computational power
on the network. This isn’t a huge deal because quantum resistant
signatures can be easily integrated into current cryptocurrencies. That being said, it’s still a good thing that out of
the gate IOTA is quantum resistant. A lot of technology experts have questioned the
viability of the platform. This is happening because IOTA’s been using so
many new technologies at once it’s really hard to believe that there’s not going to be
some kind of error or fault. The technology behind IOTA simply hasn’t been tested enough to know how it’s really going
to hold up in an attack, what happens when
the Coo turns off, and how it’s going to work
once it gets to scale. The MIT team found a flaw in
IOTA and reported it to them. IOTA patch it,
resolved the issue, but then they tried to say that
they put it there on purpose so that somebody would find it. That’s another thing that’s
also causing some controversy. Time for some downsides. So the first thing that I
saw really consistently was issues with the wallet. I haven’t looked into it because it was a little bit denser
than I wanted to add to this video, but there have been some issues
with coins disappearing, I guess, and people needing to
reset their wallets. I’m going to put a link
in the description that will explain the wallets in a little bit more detail
if you’re interested. IOTA not using the
blockchain is a Pro, but it’s also a
little bit of a Con. Because the technology
is so complex, it’s a little bit harder for exchanges
to pick it up and put it on there. As I mentioned before, there’s also a bit of
a financial hurdle of needing to create an
Internet of Things chip or an IoT chip to implement
it into things to use IOTA. I would like to add, however, that recently a Japanese
tech company called Fujitsu just came out with a battery-free,
very, very small IoT sensor. That’s pretty cool news and definitely a good step in
the right direction for IOTA. Again, I’ll put that link
in the description too if you’d like to read the article. Something I’ve seen come up a
lot that people don’t like is the fact that
IOTA was a pre-mine. This means the coin was fully mined
before it was available to the public. Pre-mines are not
popular in crypto because they can be seen
as a little bit dishonest. There are around 2.7
billion coins for IOTA, and they were pre-mined, so there are no new ones being
created that I s a static number. Another downside to IOTA is that it
can’t implement smart contracts. Well, I should say it can’t
implement smart contracts as we know them right now. Because of the nature
of the Tangle, it doesn’t verify transactions
in any specific order, and that would be a
really big hurdle. Contracts that don’t
require a specific order, like maybe something for voting, could possibly be
implemented on the Tangle, although there is little incentive
to do something like that because it would require more
computational power to be validated. In conclusion, IOTA uses technology that could
really be a viable competitor for blockchain transactions. It has a great
amount of potential and looking to the future and
what tech companies are doing, the Internet of Things application
really only has room to grow. That being said, IOTA has a lot of
hurdles to jump through before it can deliver
on what it’s promising. The tech is really new, and in order for it to
work and be efficient mass adoption is
extremely necessary. And the entire concept of the
tech and the Coo and the Tangle I just don’t think it’s
been tested enough. However, if they are successful
and I truly hope that they are the use cases for
IOTA are limitless. I think the project is extremely
ambitious and extremely interesting. This is a very tech-heavy project, and the information
was really dense, so I hope I was able to inform you
guys in a way that was helpful, but also not overload
you too much. I’m going to put a lot of the links
in the description for you guys if you want to go into more
depth on the white paper, the wallet, whatever it might be. Thank you for watching you again,
and I will see you guys soon.

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