How IOTA’s Qubic is Enabling the Machine Economy

DLT is disrupting our Society

Distributed Ledger Technology (DLT) – IOTA/Ethereum/Hyperledger – is poised to change the way our society functions on a fundamental level, by providing a means for “trustless” relationships – without the need for an intermediary. A trusted system requires checks and balances to ensure that the trust we place in it remains secure, while a trustless system does not.

A good example of a trusted system is modern fiat currency. The money we hold in our bank accounts and wallets is backed only by the promise of the government printing it. It’s up to the government to ensure that the currency stays stable and that goods and services can reliably be exchanged for it. The government is the intermediary guaranteeing the value of the currency and has to be trusted for any exchange to take place.

Image result for trustless
Trust is no longer mandatory

DLT removes the need for intermediaries by anchoring the trustability of the system on the algorithms that it is composed of. It is mathematically incapable of duplicity and requires no mediation. By providing a trustless system without intermediaries, DLT opens up possibilities for people to interact in ways that has never existed before. This behavioral change will initiate the end for many industries that have long dominated society and signal the beginning for new ones based on a decentralized future.

IOTA is disrupting the DLT Space

IOTA is a DLT built specifically for the Internet of Things (IoT) industry. The team behind IOTA realized that in the IoT machine-economy of the future, millions of computers and sensors would need to interact and pay each other, often in micro and nano-payments. They also realized that blockchain networks wouldn’t be able to handle such transactions because of ever increasing transaction fees and scalability limits. Moreover, the energy-intensive mining and consensus mechanisms of traditional blockchains would not be a good fit with low cost IoT devices and intermittent networks.

This meant that if the Internet of Things and DLT were ever going to merge, a new kind of “blockchain” would need to be developed, which is exactly what the IOTA team created – the Tangle network. To be precise, the IOTA Tangle is not a blockchain. Instead it uses a data structure called Directed Acyclic Graph (DAG), and in doing so, the Tangle doesn’t just maintain the original benefits of blockchain, it can improve on them exponentially.

Solving the blockchain’s bottleneck

The core innovation behind using a DAG is its ability to conduct zero-fee transactions and therefore, the ability to conduct nano-payments. This is achieved by cutting out miners and miner fees, which the Tangle in particular does by making validation of transactions an intrinsic part of the ledger — making miners (people validating transactions) and stakers (people sending transactions) one and the same.

Qubic: the missing puzzle

IOTA presented a novel DLT implementation: a blockchainless approach built specifically for the Internet of Things (IoT) and the machine-to-machine (M2M) economy. IOTA has the potential to bring virtually unlimited scalability and fee-less nano-transactions to the world. However, important features such as smart contracts were missing.

Last week, the IOTA Foundation has brought an end to months of speculation surrounding the Qubic project. Being touted as the most eagerly awaited development in the history of IOTA, the new project seeks to create a protocol that “specifies IOTA’s solution for oracle machines, smart contracts, outsourced computations, and more.”

Qubic introduces not only oracles and smart contracts, but quorum-based computations, a form of distributed computing. In short, Qubic makes the IOTA Tangle programmable and introduces a distributed computing environment where machines can establish trust, share data and pay each other for any resources using fee-less nano-transactions.


Quorum consensus of an oracle assembly

A DLT like the Tangle cannot access data outside its network. Oracles are third party services that find and verify real-world data and feed this data to a DLT to be used for computations (e.g. smart contracts…). Such data could be any data like weather temperature, successful payment, price fluctuations, etc.

The incentive for oracles to stay honest is a reward system maintained by the qubic owners. Note that Qubic does not naïvely “trust” the third-party oracles. It ensures a high degree of certainty about the correctness of the data in question via a quorum consensus.

Smart Contracts

A smart contract is a computer protocol designed to emulate, and improve upon, the performance of a real-world contract. Its function is to define conditions which when met, execute a contract by the computers in a given network. Smart contracts are considered an innovative way of enhancing operational efficiencies and cutting costs for businesses, merchants and artisans alike.

A self-executing, trustless contract

Smart contracts can automate many different kinds of processes and operations, such as payment and actions conditional on payment, giving rise to previously unimaginable levels of efficiency and precision. They are transforming how deals and transactions are executed and managed in business life-cycles. Some of the potential use cases for smart contracts include:

  • Digital Identity and Financial Data Recording;
  • Trade Finance, Derivatives and Securities;
  • Mortgages and Land Title Recording;
  • Supply Chain;
  • Auto Insurance;
  • Clinical Trials

Using IOTA as the backbone, Qubic’s smart contracts go beyond these kinds of traditional smart contracts. The combination of fee-free transactions together with general-purpose quorum-based computation opens the door to entirely new possibilities. For example, a smart contract could be used to aggregate temperature data from different oracles into an average temperature, which gets published to the Tangle periodically. The smart contract has now become an oracle in and of itself — that is, the contract itself has become a source of external data, available for an oracle machine to pick up and send back to some other qubic.

These types of smart contracts are also just iterations on the more general capacity for quorum-based computations. Qubic therefore also provides a standardized way to define, validate, and enforce the results of a smart contract to a high degree of certainty.

Implications of the Qubic project

Qubic leverages the IOTA protocol for secure, decentralized communication between the various participants. Additionally, since IOTA has its own built-in payment system, IOTA tokens are used to provide an incentive system for qubic operators. Anyone can decide for themselves at what threshold a reward becomes interesting enough to participate.

Qubic offers a great incentive for people to run nodes: let others use spare computational power or storage capacity, thus providing a useful service, and get paid to do so. Q-nodes can give new life to old, abandoned PCs, and they can provide traditional cryptocurrency miners with a way of monetizing equipment by doing useful computations instead of solving meaningless (and wasteful) cryptographic puzzles.

Leveraging otherwise-wasteful resources

Qubic is optimized for the IoT – low energy consumption and a small memory footprint – but that does not preclude large-scale computations, especially for computations that may be parallelized and distributed over a large number of processors. In the future, Qubic will leverage the world-wide available, unused computation capacity to solve all kinds of computational problems, all while helping to secure the Tangle: an IOTA-based world supercomputer.

The Machine Economy

The Machine Economy — Powered by IOTA

With Qubic, IOTA Tangle will overcome the limitations of blockchain, to offer a complete technology stack of financial management, distributed computing, distributed artificial intelligence and swarm intelligence, leveraging trustable and immutable data stored in the Tangle as well as gathered from the real world. Let’s imagine an economy where: everything will be smart, efficient, autonomous and connected, economically independent and most likely managed by a secure, decentralized technical backbone – IOTA.

In the near future, as a consequence, we can expect that a machine will be able to pay its assembly, its maintenance, its energy and also for its liability insurance by giving data, computing power, storage or physical services to other machines. For the first time in history a device will be in a position to earn and spend money on its own. Such is a Machine Economy made possible by Qubic.

(For more information regarding Qubic, visit:

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How IOTA’s Qubic is Enabling the Machine Economy was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.

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