Today, there are more than 20,000 cryptocurrencies on the market. Many of these have been added in the last two to three years. A much older crypto project is Iota (MIOTA).
In this article, we explain what Iota is, what MIOTA is, and the pros and cons of the crypto project.
What is IOTA?
IOTA is a smart contract platform developed in 2015 to process payments and other transactions between internet-enabled physical entities. MIOTA is the coin of the IOTA network.
The Iota network is primarily aimed at the Internet of Things (IoT) or in German: Internet of Things. This means, above all, the communication between units. Machines and vehicles should be able to communicate better with each other thanks to the Iota network.
Even if you’ve never heard of the Internet of Things (IoT), chances are you already have IoT devices in your home, car, or office. It could be the sensors in your car that indicate low tire pressure, your smart fridge or your Nest thermostat.
IoT devices are connected to the Internet, typically via Wi-Fi or a cellular network. Nevertheless, enabling transactions or payments between IoT devices is difficult. This is where the Iota network comes in. The Iota protocol was developed to enable microtransactions between IoT devices.
“We see the IOTA token as a link between the human and machine economy, creating interoperability between the two,” explains Dan Simerman, Chief Financial Officer at the IOTA Foundation.
IOTA can also be described as a network that helps investors and companies monetize data from IoT. MIOTA is the coin used to process transactions on the IOTA network.
How does IOTA work?
Unlike other cryptocurrencies like Bitcoin, IOTA is based on a distributed ledger technology that is somewhat different from blockchain. Distributed Ledger technology is a system of distributed ledgers. Transactions are not stored centrally, but decentralized.
IOTA uses a technology called Tangle. This is a consensus algorithm that requires users to confirm two transactions in order to complete their own IOTA transactions.
Technically, Tangle is a Direct Acyclic Graph (DAG). With this method, there are no miners or validators, no blocks, and no transaction fees. This allows the cryptocurrency to “overcome blockchain cost and scalability issues,” according to the IOTA website.
The DAG structure was designed to eliminate the scalability issues and costs of blockchain. To do this, it enables fee-free payments with lower computational costs and the ability to connect to IoT devices.
The structure of IOTA is therefore so important to the IoT economy, as so many processes can be automated much easier and more securely. It is then no longer necessary to monitor certain processes further.
This smart contract platform is currently redesigning its ledger technology and consensus protocol: it works on the so-called IOTA 2.0. IOTA version 2.0 is fully decentralized.
Pros and cons of IOTA at a glance
So IOTA is a communication protocol for internet enabled devices. But what suggests that the Iota protocol could prevail against blockchain-based competition like Ethereum? And what are the disadvantages of the Tangle technology?
Iota offers the following benefits:
- No transaction fees. With IOTA there are no transaction fees like Ethereum. Because there are no miners or validators, IOTA is a fee-free data and value transfer protocol.
- Faster transactions. Traditional blockchains often experience bottlenecks because it takes too long to create new blocks. The Bitcoin blockchain can handle about five to seven transactions per second (TPS). Ethereum is typically around 15 TPS. The Iota network, on the other hand, can handle up to 1,000 TPS.
- energy efficient. IOTA is designed for devices such as sensors that require little energy. Even IoT devices with minimal computing power, like toasters, can write data to IOTA’s Tangle.
- Can be adapted to different use cases. Large companies can adapt IOTA to individual use cases. For example, with IOTA Access, an open source framework, a car owner can remotely give someone access to their vehicle.
- roadmap for decentralization. IOTA version 2.0 is fully decentralized.
So while Iota’s advantages are primarily its efficiency, there are also some disadvantages.
- security vulnerabilities. In February 2020, hackers stole MIOTA worth more than $1.5 million. According to reports, the hackers appeared to be targeting some wealthy accounts. IOTA founder David Sønstebø agreed to compensate victims of the hack with the network’s tokens. IOTA’s new and improved version 2.0 aims to improve security.
- The network is still too small. The IOTA system is still in its infancy. As with many cryptocurrencies, success depends on wider network adoption and higher participation.
In addition, the above advantages have not yet all been put into practice. The Iota network strives to operate completely decentralized, but most other crypto projects also pursue this goal. Furthermore, today there are also smart contract platforms such as Solana, which also achieve more than 1,000 TPS with blockchain.
How to buy IOTA
It is important to understand that IOTA is the entire platform while MIOTA represents the cryptocurrency on the IOTA network. IOTA’s coin goes by the acronym MIOTA and is available on a number of crypto exchanges, including Binance and Bitvavo. Coinbase or Kraken, on the other hand, do not carry Iota. Here you can find out how to buy IOTA, step by step:
1. Register with a crypto exchange that offers Iota and verify your identity
If you do not yet have an account with the crypto exchange you want, you must first register. For this, it is necessary that you enter some basic information about yourself and confirm your identity. While this may seem tedious, this is an important intermediate step that crypto exchanges must adhere to for regulatory reasons. In order to buy cryptocurrencies such as Iota from a provider regulated in Germany, you must also verify yourself using the video identification process. The whole process only takes a few minutes.
You can find a suitable trading venue to invest in MIOTA in our comparison of crypto exchanges.
2. Deposit cryptocurrencies or euros
Once verified, you can buy, deposit and sell cryptocurrencies.
Depending on the crypto exchange, you can trade iota with different currencies. Some exchanges allow you to buy iota directly with other cryptocurrencies like bitcoin. However, with other providers such as Bitvavo, you can only buy Iota with euros.
So, to buy Iota, the next step is to decide on a supported payment method. You can then deposit any amount you feel comfortable with. However, note the minimum deposit limits, which vary depending on the trading platform.
3. Buy your tokens
Now you are ready to buy Iota. Just find the pair that matches your cryptocurrency – e.g. IOTA/BTC if you buy with Bitcoin – and enter the desired IOTA amount. Click “Buy” to complete the transaction.
4. Store your MIOTA coins safely
The most important step comes after you purchase your MIOTA coins. You can store your coins on the exchange, but we don’t recommend it. This is how you risk losing your coins if the provider goes bankrupt. Instead, you should always store your purchased coins on a hardware wallet.
Should you buy IOTA?
Although IOTA and the explosive development of IoT technology looks promising, there is no guarantee that MIOTA will rise. Many unpredictable external events can affect the development of IOTA, from a huge cryptocurrency sell-off to a recession and subsequent market crash.
Although the long-term outlook for IOTA seems positive, you should not invest on the hype. MIOTA had already reached its all-time high of $5.69 on December 19, 2017. The price then fell more than 90 and never broke through $2.50 again. Cryptocurrencies are a volatile asset and Iota (MIOTA) is no different. So you have to keep in mind that you can lose your entire bet. If you haven’t had much investment experience yet, we recommend our five steps to investing.
However, if you are passionate about IoT technology and understand the risks involved, investing in IOTA may be an option.
Frequently asked questions about Iota
Is Iota a blockchain?
No, the Iota network works without a blockchain. Instead, it relies on a direct acyclic graph that, like blockchain technology, is also based on what is called distributed ledger technology.
How many jotas are there?