What is IOTA?
IOTA is a platform designed for enabling fast communication and transactions for IoT platforms. As more household items, cars and other products become connected devices, the need for a reliant protocol to mediate between them is on the rise. For example, in the near future, a smart fridge could “sense” that you are running low on orange juice and autonomously order more from your grocery store. This scenario requires a platform that could both relay the messages between the machines and take care of the financial aspect of the transaction.
And that is what IOTA is trying to do. Its Tangle technology enables multiple devices to communicate on a vast network that actually becomes stronger as it grows. Unlike traditional blockchain platforms, IOTA does not have miners, or specific nodes that verify transactions, but rather, each device that processes a new transaction is first required to verify a previous one and register it in a public ledger. The network’s overall processing power actually grows as more devices join it, while in most other blockchains, more network members could lead to latency and growing transaction processing times.
The creators of IOTA set out to make a network that has no transaction fees and is extremely scalable. Its unique architecture is designed to do just that, using the process described above. Moreover, since to buy a single IOTA token would cost fractions of a cent, it is quite easy to process even the smallest of payments (microtransactions) – another important feature for an IoT platform.
IOTA vs Bitcoin: Main differences
IOTA is quite different than other cryptos. To highlight these differences, here are a few key factors that separate it from the world’s first cryptocurrency, Bitcoin:
- Scalability: Bitcoin relies on a blockchain network, which requires miners to process transactions. These miners compete amongst themselves to be the first to make the calculations necessary to approve the transaction and the winner earns a small fee in return. With its Tangle architecture, IOTA eliminated the need for miners by making each device responsible for processing its own transaction and the one requested by the device before it. This minimises transaction times and accelerates the network’s speed as it grows.
- Microtransactions: Each Bitcoin is worth quite a bit, with its value reaching thousands of dollars. Therefore, it is counterproductive to use it for transactions which require a small amount of money, as the transaction fees could outweigh the price of the services or goods exchanged. In contrast, a single IOTA is valued at fractions of a cent, so it is easy to use it to make small transactions (such as the orange juice example used earlier). In fact, those wondering how to buy IOTA will find that the IOTA coin price is so insignificant, that exchanges trade it in units of millions (MIOTA).
- Quantum computing resistance: While there are still no functional quantum computers in existence, the scientific community is mostly in agreement that they will eventually be introduced, with computing power that is massively greater than that of current computers. While, to this day, no blockchain network has ever been hacked, it is presumed that a quantum computer used by malicious entities could theoretically do so. However, IOTA founders claim that they designed their network in such a way that is much more resilient to such an attack.
What drives IOTA’s price?
Being both a cryptocurrency and an IoT platform, the IOTA chart is subject to various factors that can move it in any direction. For example, if the entire crypto market is on an upward trend, it could lift the IOTA price as well – and vice versa. In contrast, if the market is on a downtrend due to a negative perception of blockchain platforms, that could potentially be beneficial for IOTA, since it is not a blockchain platform per se.
On the IoT front, developments relating to the industry, its adoption by a popular sector, or events relating specifically to IOTA, such as a partnership with a high-profile company, could also influence its price. In addition, IOTA’s infrastructure is entirely original, not relying on any previous blockchain/cryptocurrency code. While this could be perceived as an advantage, there have been times when criticism of the platform impacted IOTA’s price.
Since being launched in 2015, the IOTA cryptocurrency has gathered a following and established itself as one of a handful of cryptos whose market caps are in the billions. Making its way into the top 10 ranking, IOTA is popular among many traders and investors. Now, IOTA is also part of eToro’s cryptocurrency selection, and traders and investors of the eToro community can add it to their portfolios.