IOTA’s biggest innovation in 2021: How two lines of code turned IOTA into a stable coin

By Multi Last updated Dec 6, 2021

The limitation

With the Chrysalis transition to the new network at the beginning of 2021, the Iota Foundation released a new official wallet called Firefly and the old wallet Trinity was discarded. The new wallet cut short on features of the previous wallet like ledger support, message field, deep linking, and most prominently microtransactions. The latter limitation hinders wallet users to send any amount less than 1 Miota. While the introduced limitation doesn’t compromise both main characteristics: fast and feeless, it destroys the promise of transacting altogether.

The upside is limited

For more than eight months two lines of code in Firefly prevent wallet users to transact freely. This wouldn’t be problematic if Firefly weren’t the official and only GUI wallet. Since the limit DUST_THRESHOLD is set in Miota with every price increase IOTA would get more unusable and more restrictive – in consequence, the IOTA price does not rise.

Remember blockchain? Blockchain gets worse with more usage. Fees rise, and with that transacting gets expensive, cumbersome and confirmation times more unpredictable. With IOTA we have a slightly different situation: If IOTA’s price were to rise, it wouldn’t make transacting more cumbersome or more expensive but would prevent transactions for an increasing user base.

At $1 per Miota users are not able to buy anything for a few cents. Selling data, articles, NFTs, collecting rewards, non of this would be possible in the sub $1 region. At $2 per Miota, it got twice as bad. At $10 you can’t buy daily goods with IOTA like a coffee or send a friend a few IOTA to play around with. At $100 per Miota (still lower market cap than Bitcoin), IOTA could only be used for big purchases, for most transactions it would be completely useless.

To summarize: Due to Firefly’s 1 Mi limitation the higher the price the fewer people can use IOTA for its purpose. This drastically counteracts IOTA’s utility and promises (feeless, scalable, micropayments) which IOTA’s valuation is based on.

Looking at IOTA’s recent price action, the price doesn’t really break free upwards but it doesn’t really fall either. Since the Chrysalis upgrade, the Miota price hovers basically around $1 with crypto-usual spikes in both directions. It seems like IOTA is in a corridor around the $1.