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IOTA strives to be the coin for the Internet of Things. And the IoT is one of the hottest trends in the past years- now bundled up with the blockchain approach. The IOTA project strives to send information about objects freely and safely, to keep track of sensor data and other information extracted from IoT devices.

IOTA is yet another project that starts its White Paper with an example of why Bitcoin is not enough, and a new technological approach is needed. Namely, Bitcoin is too expensive and slow to make micropayments and secure a high rate of information flow.

What is the IoT (Internet of Things)

The Internet of Things is the idea and technology to track physical objects or phenomena, using tracking electronics to turn them into data. The applications of IoT technologies include urban planning, keeping inventories, home automation, and others. But currently, there is no IoT outside a few experimental projects. Objects and devices do not talk to each other, as intended. So the role of IOTA is perhaps somewhere in the future- if this future comes to pass.

How IOTA Makes Transactions

The process through which the IOTA network makes transactions is far from intuitive. The network architects conceived of a complex data structure, a Directed Acyclic Graph, that they call "the tangle." This is a system of nodes that work to distribute the already existing tokens through a network of transactions. Nodes do not contain the whole state of the network; they only approve a limited number of previous transactions.

To secure transactions, nodes also perform a hashing calculation similar to that of Bitcoin miners. But the IOTA record is not a blockchain; it is a tree or a graph. The White Paper holds the details on the exact algorithm that IOTA uses to secure transactions and solve the double-spending problem. But we will not delve into complex computer science approaches and graph theory. Suffice is to say, there are enough algorithms to secure that double spending would be astronomically improbable.

The IOTA project claims to be a third-generation cryptocurrency, considering Bitcoin a first-generation technology and Ethereum to be second-generation. IOTA also allows offline transactions to be verified. Sometimes, IOTA is called the first cryptocurrency without a blockchain.

The IOTA Token

IOTA is a pre-mined coin, with a total supply of 2779530283277761 tokens. The circulating supply is much smaller, 2,779,530,283 tokens. But this is also relatively large, placing IOTA easily within the Top 10 cryptocurrencies by market capitalization.

[caption id="attachment_331" align="alignnone" width="723"] source: coinmarketcap.com[/caption]

The IOTA token trades under the MIOTA ticker. And although the idea behind IOTA is that owning even a few tokens could allow for many cheap transactions, currently MIOTA is gaining in market value:

  Market Price (as of August 2017) Market Capitalization 24-Hour Trading Volume
MIOTA $0.85 $2.36 bln $24.4 mln

 

Note that this is a price for one million IOTA, so the native coin of the "tangle" network is still cheap and divisible, supporting the main idea for micro-transactions. But as a market asset traded on Bitfinex, MIOTA touched the $1 levels recently.

IOTA Wealth Distribution

The biggest worry around IOTA is that it is pre-mined and vast quantities reside in a few wallets.

Right now, IOTA does not trade on many exchanges, but if it expands to more platforms, there is the potential for dumping a lot of tokens and depressing the price. The silver lining is that the IOTA team seems serious to keep their tokens and continue developing the idea.

The Team Behind IOTA

As you may have guessed, the team behind IOTA is very serious about computer science and the potential of obscure theories to solve real-world problems.

At the beginning of 2017, the team formalized its presence by establishing the IOTA Foundation in Berlin, Germany. The main developer team consists of Dominik Schiener, David Sønstebø, Sergey Ivancheglo, and Sergei Popov. The team may keep adding experts to increase the presence and influence of IOTA.

The Future of IOTA

This project is curious because it dates back to 2015, which is old and venerable in the world of tokens. Back then, IOTA held an ICO and distributed the tokens, but months passed before the token traded on exchanges. Even now, trading pairs are limited and IOTA has been only tracked since June on CoinMarketCap.

That is why it is so surprising that IOTA managed to bounce up to the top 10. The highly visible position would expose IOTA to speculative attention at least in the short term, mostly due to visibility. But potential investors would have to enter the Bitfinex world to buy or trade this token.

For IOTA, there needs to pass some time, as many other tokens moved up the chart on one-off events, but then slid back as they returned to their usual trading levels without pumps or hype.

Investing in IOTA

This token is relatively underpriced, and when you buy one MIOTA, you are buying a million IOTA. If you like the project, certainly go on and support it by purchasing the token. But be aware that IOTA is running hot right now. Avoid investing funds you cannot afford to lose.