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IOTA (Distributed Ledger Technology)

IOTA (Distributed Ledger Technology)

IOTA is an open-source distributed ledger (cryptocurrency) focused on providing secure communications and payments between machines on the Internet of Things. Using directed acyclic graph (DAG) technology instead of the traditional blockchain, IOTA's transactions are free regardless of the size of the transaction, confirmations times are fast, the number of transactions the system can handle simultaneously is unlimited, and the system can easily scale. [50] [7] IOTA was founded in 2015 by David Sønstebø, Sergey Ivancheglo, Dominik Schiener, and Dr. Serguei Popov. [9]

IOTA is overseen by the IOTA Foundation, a non-profit dedicated to developing the technology and maintaining it license-free for all developers to work with.

[11] The Foundation has established a collaboration with Volkswagen and Innogy to develop CarPass, an IOTA based technology that enables secure audit trails, digital identities, and charging networks for cars. [13] With Deutsche Telekom, Microsoft, Fujitsu,and Samsung, [15] the Foundation opened up a data marketplace using IOTA technology. [24] The IOTA Foundation is also a founding member of the Trusted IOT Alliance, which includes the companies Bosch, Consensys, USbank, and Cisco. [26]

As of December 2017, the market capitalization of IOTA is $12 billion, making it the 4th largest cryptocurrency in circulation.


103KiloIota (Ki)
106MegaIota (Mi)
109GigaIota (Gi)
1012TeraIota (Ti)
1015PetaIota (Pi)
SymbolIOTA, MIOTA[46]
Date of introduction11 June 2016(2016-06-11)
SourceInitial Coin Offering
Supply growthFixed supply of 2 779 530 283 277 761 units


The smallest unit of account on IOTA is an Iota, after the smallest letter in the Greek alphabet.

Larger unit names are created by adding metric system-like prefixes to the word Iota.

Hence one million Iota are called a MegaIota or Miota (Mi), which is the base unit of Iota used for trading on cryptocurrency exchanges.

In order of size, unit names [48] are:

KiloIota (Ki) = 1,000 Iota MegaIota (Mi) = 1,000,000 Iota GigaIota (Gi) = 1,000,000,000 Iota TeraIota (Ti) = 1,000,000,000,000 Iota PetaIota (Pi) = 1,000,000,000,000,000 Iota

Note that this is not to be confused with the Binary Prefix notation where 1 KiB is 1024 Bytes.



IOTA founded by David Sønstebø, Sergey Ivancheglo, Dominik Schiener, and Dr. Serguei Popov.

The fixed supply of 2,779,530,283,277,761 Iota were created.

As there is no mining, no more Iota will be created.

A few months later, IOTA began open beta testing.


While beta testing continued, trading began over-the-counter between users for then next 11 months.


In May, IOTA announced a $10 million ecosystem fund to promote larger corporate collaborations, community projects, and developer acquisition initiatives.

[28] By June, IOTA was listed by its first exchange: Bitfinex [55] Outlier Ventures, a venture capital firm, invested 7 figures into IOTA, their first direct investment into a distributed ledger technology. [29] SatoshiPay announced a transition from use bitcoin to use IOTA as the transactions costs of bitcoin increased. [31]

By August, the IOTA Foundation forged a partnership with REFUNITE, the world's largest missing persons database, in order to use IOTA technology to help reunite families during and after conflicts. [33] Additionally, IOTA's Flash Network (supporting extreme high speed, instantaneous nano payments) became active, ahead of Bitcoin and Ethereum's versions. [35] Monster Cleaning Services, a London UK based company, announced that they are accepting IOTA as a payment. [37] Sopra Steria announced a partnership with IOTA to create a framework to optimize security between devices on the Internet of Things. [39]

In November, the IOTA Foundation was officially announced as a registered not-for-profit entity under German law.

[11] Shortly after, the Data Marketplace is announced and brought online [42] LATTICE80, a Singapore based Fintech hub and largest of its kind, cemented an agreement to open an IOTA innovation lab for the Internet of Things. [43] Additionally, IOTA hired Cybercrypt ApS to develop IOTA's encryption technology (Curl), to its next maturation phase. [44]


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For an IOTA user to send out a transaction, the user must validate two other, randomly selected transactions.

A sent transaction must accumulate a sufficient level of verification (i.e. must be validated a sufficient number of times by other users) in order to be accepted as “confirmed” by its recipient.

IOTA works with a single administrator called the Coordinator which confirms all transactions in a set of released milestones.

Without the Coordinator, the IOTA DAG is not considered sufficiently secured in its early stages.

The Coordinator is meant to be removed when network is sufficiently large.


The Tangle

Instead of using a blockchain, IOTA uses a directed acyclic graph (DAG).

IOTA’s DAG is colloquially referred to as the "tangle”, and is a generalization of the block chain protocol (a blockchain is a special case of a DAG [48]).


IOTA uses Winternitz hash-based cryptography signatures instead of elliptic curve cryptography (ECC). [58] [61] Not only are hash-based signatures much faster than ECC, Grover's algorithm dictates that a quantum computer would be very efficient at conducting brute force attacks. [62] The process of finding a cryptographic nonce in order to generate a Bitcoin block is particularly vulnerable to such brute-force attacks. As of today, an average of around 2 68 nonces must be checked to find a suitable hash, and this trends up over time. In this regard, IOTA is less susceptible to brute force attacks following implementation of quantum computing.

IOTA Foundation

The IOTA Foundation was incorporated in Germany as a non-profit corporation that coordinates and funds development in the IOTA ecosystem.

The Foundation is dedicated to building sustainable ecosystems around IOTA to accelerate its development and commercial adoption as an open source technology.

As of November 2017, the Foundation has a $100 million fund to promote IOTA use.

The funds are distributed as IOTA tokens to companies building technology with IOTA.

The development fund does not fund start ups.

[45] [47]

The Foundation is the first regulated, non-profit in Germany ("gemeinnützige Stiftung") funded exclusively by crypto currencies.

It's divided into a Board of Directors, Supervisory Board, and Advisory Board.

Beneath them, the Foundation will organized into working groups focused on promoting and enabling IOTA's use in: Identity and MyDate; Social Causes; Supply Chain; Mobility; E-Health; Fintech; Smart Cities and Infrastructure; R&D; Interoperability; Energy; Industry 4.0; and Others.


Data Marketplace

IOTA launched a public marketplace () for data generated by 3rd party sensors.

The objective is to monetize the exploding market for 2.5 quintillion bytes of data being generated daily and growing exponentially.

The project gathered participation of over twenty global organizations, including Deutsche Telekom, Bosch, Microsoft, PricewaterhouseCooper, Airbus, Cisco, Samsung, Orange S.A., Fujitsu, and China's Huawei Group. [15] The marketplace allows connected devices to securely transfer, buy and sell fine-granular and diverse data across the global to any buyer. The fee-less micro-transactions are handled by the IOTA protocol. Initial data sets available on the marketplace include location-specific environmental measurements, African agricultural data, and anonymized healthcare data from wearables. [59] [7] Ordinary netizens will also be able to sell their data on the marketplace. [7]


In September 2017, a distributed machine learning service was announced using IOTA as the payment system.

CognIOTA goal is to allow users to rent their idle CPU's for others to use in real time.

David Sonstebo commented, “The goal is indeed to get mining pools to switch over to providing a useful service (Machine Learning) while paid in iotas.

A lot of mining farms are struggling these days, so this is a very win-win situation”[7] [7]

Masked Authenticated Messaging

Masked Authenticated Messaging (MAM) is a second layer data communication protocol which enables encrypted data streams, like RSS, to be sent securely over IOTA's distributed ledger.

To transmit, a user needs to conduct a small amount of proof of work to prevent spamming of the network.

Nodes listening for the channel ID (= address), will receive the message.

MAM messages contribute to the security of the network by increasing total hashing power and benefit from the data integrity properties of the network.

The Bosch XDK IoT developer kit and the RuuviTag, an open source sensor beacon from Ruuvi Labs, already use IOTA's MAM.

Example uses for XDK and RuuviTags are portable weather stations, Eddystone proximity beacons, vehicle locators and similar applications which securely report telemetry or receive commands.

Another use case are the announced EV charging station from the Dutch energy giant Elaad.


Flash Channels

IOTA allows instantaneous, high throughput payment channels that are bi-directional and off-Tangle.

This allows parties to transact at high speed without waiting for normal confirmation times.

When a channel is created, each party deposits an equal amount of IOTA into a multi-signature address controlled by all parties.

Once initial deposits are confirmed, the channel does not need to interact with the network until the channel is closed.

When the parties finish transacting, final balances are published to the network.

This approach reduce thousands of transactions down to two.

A sample use is paying for wirelessly charging your phone at a cafe.

If your phone and cafe open an IOTA Flash Channel, payments are made by the second from your phone to the cafe.

Once the charge is terminated, the channel is closed and one payment is recorded on the Tangle as being conducted between your phone and the cafe.

As of December 2017, neither Bitcoin nor Ethereum have been able to launch their Flash Channels.



The official wallet is version 2.5.4, downloadable from GitHub: [7] The current wallet requires independently generating your own seed (private key). Instructions how to do that are located here: [7] IOTA-help.com is to be avoided as it is a scam site used to steal seeds and IOTA. [7]


IOTA trades for fiat currencies, bitcoin and ether, on the following online exchanges: Bitfinex [7], (does not allow access by US citizens) Binance [9], CoinSpot [9], CoinFalcon [9], Bit520 [38], Exrates [38], OKex [9] (does not allow access by US citizens) CoinOne [9]


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