The IOTA Coin is a cryptocurrency known as the secure communication and payment medium for the Internet of Things (IOT). The name IOTA Coin stands for the abbreviation for Internet of Things Alliance. Instead of a classic blockchain, the system uses a related mathematical structure that is purely transaction-based. The IOTA Coin is being developed in collaboration with consortia and companies, which places a strong emphasis on economic viability.
The IOTA Coin was introduced in 2016 after a short design phase. It is a system that is primarily to enable transactions between devices in the Internet of Things (Read the IOTA Whitepaper). From the beginning there was great interest in the IOTA Coin, especially from the private sector. Thus, the development of the system takes place in close cooperation with banks, companies and interest groups, who hope for a cryptographically secure infrastructure of transactions between devices of the Internet of Things.
The most striking feature of the IOTA Coin´s design is the fact that no blockchain, such as Bitcoin, is used, but a different, albeit related, structure. This is called directed acyclic graph (DAG) and can be simplified as follows: A set of nodes is connected by paths, this is a graph. Each of these paths has a clearly defined direction, so it can be understood as an “arrow”. So it’s a directed graph. If you can never find a way out of arrows that returns to its starting point, the graph is acyclic, so it has no cyclical paths running in a circle. Directed acyclic graphs are a generalization of the chain structure of a blockchain, so each blockchain is a very simple, chain-like DAG.
In the case of the IOTA Coin, this graph is called tangle. But the key point is that Tangle’s nodes are not nodes in the network or blocks of a blockchain, but individual transactions. The functionality that is inherited from other systems by the blockchain comes here to the tangle of mutual transaction certifications. To do this, a user must authenticate at least two other transactions. If a transaction collects a minimum of credentials in this manner, it is considered verified and can be executed. In cryptographic terms, hash functions continue to form the basis for the authentication process.
The IOTA Coin is still at the beginning of its development, but at least in theory, the design of the system brings significant benefits. The tangle is arbitrarily scalable and can, theoretically at least, execute any number of transactions simultaneously. In fact, it is theoretically that the system gets faster and faster with an increasing number of users. For people, this speed increase may not be directly observable, but in the intended scope of the Internet of Things, it should make itself felt by low latency in the communication of terminals with each other.
The developers of the IOTA Coin are very cautious when it comes to the IOTA Coin as an investment. In fact, the focus seems to be primarily on the development of an industry standard for Internet of Things transactions. Given the rapid development and capitalization of the IOTA Coin and the great backing that the system receives in business circles (possibly similar to Ripple), it is repeatedly brought up as a heir to the legacy of Bitcoin.