The Tangle vs Blockchain

Lesson 1: How To Make a Wallet

Lesson 2: How To Make an IOTA Seed

IOTA is a cryptocurrency designed especially for the internet of things. Development began in 2015, and it has since stood the test of time. Its innovative systems, industrial partnerships, and practical applications set IOTA apart as a novel, sustainable cryptocurrency.

Before we dive into the details that make IOTA unique, we’ll recap what cryptocurrency is and why a digital currency designed for the internet of things is important.

A cryptocurrency is a digital asset used to exchange. To put it simply, crypto is a form of money that exists without a regulating central bank.

The management of the currency comes from encryption techniques. The encryption and transfer codes protect the value and users of the coin. Most forms of crypto use a blockchain architecture to organise and protect the information.

What is the Internet of Things (IoT)?

The Internet of Things is the network of objects that connect to both the internet and each other. It describes the connection between your smartwatch, iPhone, and the cloud. The IoT is how Alexa can access your music streaming and home security system.

As the IoT becomes more powerful and expansive, all digital applications must work well within the system. Products and digital services that slow down the IoT or related devices will quickly become obsolete.

What makes IOTA special?

IOTA is a digital currency designed specifically for the Internet of Things. While other cryptocurrencies struggle to keep up with the developing technological world, IOTA functions smoothly within the IoT. 

The biggest challenges faced by most cryptocurrencies are the growth management and transfer process.

IOTA uses a new technology called Tangle to alleviate the problems of other digital currencies. Tangle is a Directed Acyclic Graph or DAG. This unique architecture is the key to keeping IOTA fast, relevant, and free.

When it’s time to transfer IOTA from one user to another, the sender has the responsibility to both initiate and validate the transaction. The sender completes a proof of work to approve the transference. Other cryptocurrencies keep these steps separate and involve a third party for validation. IOTA combines the acts of making a transaction and validating it into one straightforward action. 

Tangle also allows IOTA to grow exponentially without slowing down. With other cryptocurrencies, each transaction increases the length of the ledger entry. This ever-expanding naming system makes it more complex and, therefore, slower and more confusing.

IOTA’s structure removes the need for an extensive, complicated naming system. Transfer tracking happens on a graph instead of with a linear name. Tangle increases IOTA’s transaction speeds as more users participate.

What sets IOTA apart from other cryptocurrencies?

The unique features of IOTA are the lack of transaction fees and the increasing transfer speeds. For clarity, each of these is explained in relation to Bitcoin, a well-known blockchain cryptocurrency.

With IOTA, there are no transaction fees when transferring the asset from one user to another. In contrast, every transfer of Bitcoin comes at a price. The fees that accompany Bitcoin transactions come from the need to pay miners. Bitcoin miners validate transactions or create a proof of transfer. Without miners, the Bitcoin system cannot exist, and they must receive compensation for their time and effort.

IOTA does not need any outside actors to keep the systems in motion. The IOTA system operates entirely on its own. The decentralisation of IOTA keeps everything happening quickly and without a transaction fee. 

Where other currencies slow down, IOTA experiences increased transfer speeds as more users participate in the system. Blockchain cryptocurrencies use a blockchain architecture that slows down as the user base grows. With Blockchain, a record is added to the digital asset every time it transfers from one user to another. This method means that, as time goes on, the system inherently gets slower as the files become larger.

Tangle doesn’t continuously increase the length of the currency. Instead, it uses a system of vertices and edges to track transfers. This architecture prevents the eventual slog faced by Blockchain and other cryptocurrencies.