With advancements in virtual reality and personal technology entering production at a rapid pace, people today find themselves living an increasingly digital-integrated life. From smart homes to artificial intelligence-based personal assistants, the average consumer’s interactions with technology are becoming more widespread. At the forefront of this revolution is the Internet of Things, or IoT, the idea that even non-network devices can and should be connected to the internet. This results in ease of use, remote monitoring capabilities, and regulation or control from afar, allowing users to interact with items like their thermostat or oven with the convenience of a mobile device.
As companies like IBM and Qualcomm, among others, heavily research and test IoT-based solutions, the technology is beginning to gain momentum. However, there are challenges to adopting a fully-connected life: data security, and cross-functionality.
Distributed ledger organization IOTA and founder David Sønstebø looked at these challenges and recognized that both are addressed, quite effectively, by blockchain. As David explained, “IoT is all about data, and data needs to be secured. The distributed ledger is perfect for that (except you have fees on every data transmission). The other big problem is interoperability. Even though we’ve painted this picture of IoT as something where every device connects to each other and leverages each other, that will never happen unless there is incentive for different stakeholders to share.”
IOTA is a completely open source, non-profit organization focused on building an IoT solution inspired by, but not based on, blockchain technology. David, who had been in the cryptocoin space since 2012, met up with Sergey Ivancheglo in 2013 shortly after Sergey created the first Proof of Stake consensus mechanism. After connecting, the two began work on the first blockchain 2.0, NXT, a spiritual precursor to entities such as Patrick Byrne’s T Zero. The NXT experiment established, at least to David, that blockchain could be reformed into a more elegant solution. In 2014, as David’s attentions shifted to the internet of things, he met with Serguei Popov, a mathematician and professor, who had been exploring the possibility of a direct acyclic graph as opposed to the blockchain ‘block’ method.
IOTA aims to simply provide an IoT solution that leverages blockchain’s security and incentive mechanisms without the drawbacks of fees and transaction scaling. “We need to get rid of the fees,” says David, “and we need to get rid of the bottleneck that causes the scalability limit.” These challenges, however, were easier said than overcome. “It wasn’t as easy as ‘hey, let’s go with a DAG,’ you had to work out how many transactions need to be confirmed under each issued transaction. We worked on that for 3 months before we typed a single line of code. But when we had that architecture, we knew we got rid of the fees and the scalability [issue].”
When we contemplated this, we realized blockchain cannot do this because IoT is billions of devices. It’s more than there are people transacting.
The Big Two Solutions
IOTA’s network, called the Tangle, can achieve this by using the DAG architecture to create a self-reinforcing system. When a user sends a transaction, that user intrinsically validates two previous transactions and is unable to create a transaction without doing so. This means validation is no longer decoupled from transacting, so the Tangle is a one-party system as opposed to the two-party systems inherent to blockchain (the users/transactors and the miners/validators).
David continues, “Since everyone is doing the same, you don’t have to compensate anyone; there is no bidding war and no fees involved. The incentive to validate is to use the network, so it’s an intrinsic property.” The absence of fees means that true micro and even nano transactions are viable use cases. One example David provided is that of a sensor gathering data out in the field. For a connected device like a sensor, which reports data back several times per day if not more frequently, the fees add up and the volume of transactions adds up as well. “Blockchain doesn’t scale, like, at all,” David lamented, adding, “Even today when these projects are valued north of 10-20-even 30 billion dollars, they still cannot scale. Bitcoin is nine years old, and it still doesn’t scale. Ethereum doesn’t scale either. They do 1.3 transactions per second- Visa can do 50,000 transactions per second.”
All Tangled Up
IOTA’s Tangle utilizes the underlying philosophy of blockchain, the distributed ledger methodology, but replaces the block structure with the direct acyclic graph. This means there are no blocks, which in turn means there is no limit to how many transactions can pass through the network. “The more people that use the network, the more validation that occurs,” David explained, “it gets more efficient the more people use it. It grows in proportion to the network.”
David, Serguei, and the IOTA team have come up with a unique and highly innovative method of applying the concepts of blockchain technology to a specific domain. With their deep understanding of how the internet of things functions and their history in blockchain space, it’s clear this team is well positioned to attempt the marrying of these two technologies. In light of the recent announcement of the Decentralized Identity Foundation and IOTA’s membership with other giants such as Civic and IBM, David and the IOTA team are signaling to be key players in the advancement and adoption of distributed ledger technology worldwide.
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