Fujitsu: These are the advantages of IOTA over Blockchain
Blockchain or IOTA, what’s the better technology? This question is at the moment of international industry. Blockchain is now known to most people through cryptocurrencies like Bitcoin. With the new IOTA technology, many do not yet know what’s really behind the innovation and where the benefits lie. Shortly before the Hannover Messe Industrie 2018, IOTA expert Udo Würtz, Fujitsu Distinguished Engineer, Business Development Director EMEIA and Chief Evangelist Data Center Business EMEIA at Fujitsu will answer the most important questions about IOTA. If you want to experience IOTA live, take a look at our unique Show Case at the Hannover Messe Industrie, Hall 7 – Stand E16.
IOTA is currently a hot topic in international industry. What is IOTA anyway?
IOTA is a technology that is based on Tangle, unlike Blockchain. The blockchain maps transactions in a chain, and IOTA uses a whole network – the tangle. All transactions are linked together in Tangle. This has many advantages and considerably expands the scope of application of the technology. Many customers first ask us about a blockchain solution, but then find that IOTA suits their needs much better. This is all the more true when it comes to industrial scale.
What are the advantages of IOTA over the Blockchain?
There are a number of factors that make IOTA interesting. In summary, there are 5 areas where IOTA clearly hits the Blockchain:
- The transaction rate
- The scalability
- The feasibility of micropayments
- The efficiency
- The verifiable manipulation security
The transaction rate
One problem with blockchain, as originally developed for Bitcoin, is the very low transaction rate. If the security measures are so high, as is necessary, for example, with the Bitcoin application, the transaction rates of the blockchain are in the low double-digit range. This is simply not enough for many applications.
For IOTA, the reverse is true: the transaction rate increases dramatically as more users use the system. In addition, the time until the transaction is confirmed at IOTA is much shorter. At Blockchain, there is the consensus, that is, all must have the same state and that in turn is not the case with IOTA. Consensus costs a lot of time.
As the transaction rate increases, scalability also increases. With IOTA, the system keeps scaling: the more subscribers and transactions the system has, the faster it gets. More importantly, the latency, that is, the time between placing a transaction and validating, is approaching zero as soon as you reach a certain size.
If you look at it as a payment system, IOTA is a real micropayment currency. In general, IOTA is always talking about Mega IOTA, which is 1,000,000 IOTAs. Converted into euros, therefore, corresponds to 1 IOTA assuming a price of 2 euros about 0.000002 euros. Even with an absurdly high rate of assumed 20,000 euros, it would be only 0.02 euros. That makes it so interesting: The low latency paired with the possibility to pay even small amounts transaction-free.
In the blockchain, with for example the application Bitcoin as a payment system, there is the problem of mining processes. In essence, these are basically external data centers that generate new blocks and insert pending transactions. For this they get a so-called “financial reward”, for example, the transaction fee set by the sender of the transaction. The higher this is, the more attractive is the processing of the transaction for the so-called Miner and vice versa. As a result, the smallest payment amounts are ultimately made impossible by high transaction fees. This is completely eliminated with IOTA: Everyone is part of the network and you validate others automatically. So it is possible to handle even very small amounts.
The problem with blockchain customers is that the technology is costly in terms of computing power and security assurance. If you want to use the Blockchain technology in your own house, it will be difficult or even impossible to reproduce the concept of the miners, which, for example, guarantees extreme security for Bitcoin to the same extent.
Conceptually, more and more computing power is needed. Power consumption for Bitcoin Mining is currently at full year electricity consumption for Argentina – that’s unbelievable. And that’s not what companies can imagine. IOTA is a lot smarter because you do not need the whole mining process.
If you want to use Blockchain, you always have the following problem: You can use the Blockchain only economically and with high transaction rate, if you neglect the security – that is: the computing power “down screws”. So, if you screw down the security to increase the transaction rate, the blockchain is modifiable. So you can not prove that data can not have been manipulated. Basically, the method is only designed to prevent manipulation from the outside – that is, to reassure the company that others can not change the internal data because they have no physical access to the actual systems. However, the owner of the blockchain can theoretically recalculate it with new data and thus manipulate it. This is a dilemma for companies that want to integrate the blockchain for externally auditable applications and must prove the absolute immutability of the data.
Does that mean Blockchain technology is not as safe as everyone thinks?
It is at least not suitable for every case in which manipulation must be excluded. Although I can prevent someone externally manipulating my blockchain, I can not prove myself that I have not manipulated anything. If my system is checked for any reason, I have no legal certainty.
In the future, IOTA could help companies to verify their data. The easiest way would be for a high-performance computing company, such as Fujitsu, to act as a trusted instance. The Trusted Instance keeps a copy of the Blockchain of the respective company and gets from it once the Basis Blockchain put – the so-called Genesis block. All transactions then take place both in the enterprise blockchain and in the blockchain of the trusted instance, ie at Fujitsu. In a review, the auditor only needs to compare the two blockchains. If both transaction histories are the same, no manipulation has taken place.
A very important aspect: keyword digitalization. New technologies are designed for new use cases in which the company itself can make no binding statement about the expected transaction volume. And how should one define and charge for a service and its remuneration?
IOTA helps in the practical implementation of such cooperation. Since IOTA’s latency is so low, every single transaction can be automatically paid with, say, an IOTA.
Could IOTA therefore replace accounting in the future?
Absolutely in many cases. The example of the Trusted Instance payment makes this clear: Basically, there is no need for the entire accounting, because the payment is immediate. The process would then automatically go to a Fujitsu Clearing Center. That in turn could tell other systems that the transaction has already been paid and is valid. There is no accounting, no invoicing and no dunning. You do not need that, because the money is just there.
What makes IOTA so interesting for the industry?
It is the combination of the above 5 biggest advantages of IOTA. In addition, IOTA is much more than a payment system. Companies can adapt the Tangle technology to support their IoT use cases, of course, integrate payment processes, document all transactions at the same time legally compliant and much more. It’s not just that one robot pays certain services to another robot through IOTA. The system also controls the robot when needed. It tells him: Now turn right, get this package and receive and pay a new firmware update tonight at 2 o’clock. In addition, companies can connect and control all of their products based on IOTA, a topic for Industry 4.0. This is a real alternative to cloud solutions. For this purpose, the so-called Masked Authenticated Messaging (MAM) is available under IOTA. MAM, for example, allows an encrypted data stream to be sent and accessed. In addition, MAM ensures integrity, data protection and data access management. Because of these characteristics, it is one of the drivers for IOTA adoption by the industry.
How do you imagine our future with IOTA?
I can imagine that micropayments make our everyday life easier. For example, we may soon be at the traffic light with our car and inductively recharge the energy, which is paid automatically and ad hoc via IOTA. In general, integrated IoT communication will continue to increase and it will be exciting to see what the IOTA technology is all about.