IOTA ($MIOTA) Analysis

  • Market Cap : $819,687,801 USD
  • Circulating Supply : 2,779,530,283 MIOTA
  • Total Supply : 2,779,530,283 MIOTA
  • Price : $0.294902 USD; 0.00005357 BTC

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This research paper should not be reproduced, or used, in any manner without the expressed written consent of its writers. Scholarly use of this document is permitted so long as quotations and proper citations are used. The information and the links provided in this paper are meant to be used as general pointers and, therefore, should not be considered financial advice. The authors of this document are not financial advisors, nor are they liable for any loss caused by negligence or misuse of this research paper. Readers should consult with financial professionals for further information on legal, financial, and taxation advice.

Fundamentals

Background & Information

Ernst and Young (EY) dene Internet-of-Things (IoT) as the following:

“The Internet of Things (IoT) describes the connection of devices — any devices — to the internet using embedded software and sensors to communicate, collect, and exchange data with one another.”

Unlike other industries that might seemingly try to fit blockchain technology into their space because of its popularity and potential upside, often following the misguided notion “Solution in search of a problem”, Internet-of-Things (IoT) is legitimately one of the few industries that need blockchain technology to success in order to scale and properly connect 125 billion IoT devices by 2030.

The current IoT system relies on a centralized architecture to receive, process, and send information back to the devices. Although the system is arguably working well right now, a massive increase in the number of IoT devices will hinder a centralized architecture capability to scale due to cost, network security, and communication speed. Thus, the very nature of blockchain technology itself as a distributed and cryptographically secured ledger, bolster the adoption of IoT by providing it with a better foundation to handle the ow information.

IOTA Tangle

One of the first and most prominent blockchain projects in the IoT space is IOTA. It was founded in December 2015 by raising $500,000 through a cryptocurrency crowdsale without any tokens allocation for the founders, developers, and advisors. The community then decided to support the project by donating approximately 5% of the MIOTA token supply to the IOTA Foundation (non-profit).

At its core, IOTA utilizes a completely different form of data structure to build the decentralized ledger that powers its MIOTA token called Tangle. Fundamentally, the algorithm behind Tangle is derived from the Directed Acyclic Graph (DAG), a topological ordering concept often used in graph theory, mathematics, and computer science. A DAG data structure can only move in one direction without the ability to loop back to previous nodes. By utilizing this technology, IOTA aims to achieve machine-to-machine communication (for IoT purposes) with zero transaction fee.

What Makes It Unique?

● No Miners

In the IOTA ecosystem, the process of achieving consensus is intrinsic (part of the system), without the need for utilizing external factor such as miners. As a result, participants of the Tangle ecosystem must confirm 2 previous transactions to conduct a transaction, allowing the network participants to self regulate between their peers.

● Zero Transactions Fees

The computing power necessary to help confirm 2 previous transactions will replace the need for miners, and as such, resulting in zero transaction fees. When the network eventually becomes larger, the number of participants will also scale exponentially, ensuring that the network will be able to function by itself.

● Scalable

Contrary to the typical scalability problem that traditional blockchain based cryptocurrency faces, IOTA requires more transactions within its ecosystem to scale, due to the Tangle algorithm. Moreover, IOTA also utilizes the cumulative weight of the initial transactions to ensure immutability and security. For instance, as transaction A receives confirmations, transaction B that confirmed transaction A will also receive confirmations from other transactions, eventually building the cumulative weight of transaction A.

● Quantum Resistance

The discussion revolving Quantum Computer and its effect on cryptocurrency is a topic that requires its own write-up. Simply put, traditional cryptographic implementation in most of the existing cryptocurrencies utilizes the elliptic curve cryptography (ECC), which is vulnerable to the power of quantum computing, whereas IOTA utilizes hash-based signatures and Winternitz signatures.

Criticism

The Coordinator

In its earlier phase, Tangle is vulnerable against external attacks because of its small number of nodes. A malicious actor can easily create more nodes to overtake the network because hashing in the IOTA ecosystem happens instantaneously with new transactions. To prevent this, the IOTA foundation instilled a special node called “The Coordinator” that will be responsible to create a special type of transaction called “Milestones”, which is used by network participants to securely transact with one another without the possibility of confirming malicious nodes. The IOTA team states that the Coordinator will be removed once IOTA’s adoption has increased and a certain threshold of transactions is being met. As expected, the criticism revolves around IOTA’s future plan to remove the Coordinator, its time-frame, and how it is going to be effectively executed.

Use-Cases

As the name implies and the explanation provided above, IOTA primary use-case is to help the IoT industry scale. Presented below are some practical examples that are just right around the corner:

The DXC lab is exploring IOTA’s zero transaction fee for IoT devices by showcasing how an electric vehicle that can securely and quickly transact with charging stations, smartphones, and insurance companies automatically by using its own wallet and the MIOTA token.

2. Fujitsu Germany IOTA implementation is being looked into to ensure the use of original parts within Fujitsu’s manufacturing plant and to increase the efficiency of its supply chain management, verifying the trail of an industrial production process.

3. PASS A company working on reliable biometric authentication based on an individual’s palm vein pattern powered by IOTA. The end goal is to ensure higher security for data privacy and security in a world where private data are being sold without an individual’s consent.

4. eHealth IOTA partners with numerous Norwegian research, academic, and healthcare entities such to form an initiative that explores IOTA implementation for eHealth opportunities.

5. Smart Drains EYEfi, a company based in Australia is testing the integration of its smart waste technology with IOTA to reduce the risk of flooding via smart drains.

Team

The IOTA team comprises of individuals with extensive backgrounds in IoT, entrepreneurship, and software. Further, they also have multiple academics and researchers working on the project either as advisors or simply as contributors.

Roadmap

IOTA’s roadmap provided by its website separates the projects based on Research and Engineering without a fixed time frame.

Conclusion

IOTA started early in the blockchain-IoT space with multiple partnerships without a significant number of competitors. If its technology can deliver the promised transactions per second while successfully removing the coordinator, then it is without a doubt will be a major force in the cryptocurrency/IoT world as one of the few projects that have practical use-cases in the near future.

References

https://assets.ctfassets.net/r1dr6vzfxhev/2t4uxvsIqk0EUau6g2sw0g/45eae33637ca92f85dd 9f4a3a218e1ec/iota1_4_3.pdf

SWOT Analysis

Strength:

As one of the earliest player in the blockchain-IoT space, IOTA is among the most promising projects that could bolster the adoption of IoT devices in the future. Its strong partnerships with traditional large corporations also provide an edge as IOTA can conduct practical trials and experimentations on a larger scale.

Weakness:

It is uncertain if IOTA could scale while keeping its “decentralization” component as promised. The concern is primarily derived from IOTA’s unique technological approach such as using DAG and a different type of cryptographic algorithm. Most of IOTA’s technology has never been tested at scale, let alone being decentralized.

Opportunity:

IOTA has always been known to have strong partnerships, such as its relationship with Jaguar Land Rover. If the team behind IOTA can deliver on their promise, it could be a great opportunity for investors, especially in the long-term. Moreover, its unique DAG structure also categorizes it as an uncorrelated asset with Bitcoin, ensuring portfolio diversification for investors.

Threats:

The only significant threat that can happen to IOTA is the involvement of traditional big tech players in the IoT space that can compete with IOTA’s decentralized model. Other than that, IoT Chain (IOTC) is the only notable direct competitor in the space.

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