What is IOTA and how does the Tangle works ?

What is Iota  ?

Bitcoin started a whole new revolution in the world of digital value and digital payment systems. Mainly through the blockchain network. This triggered a lot of others think in this direction and come up with own solutions. This has triggered Iota to to develop their own system.

Iota stands for the Greek letter IOTA (ἰῶτα).ἰῶτα is the smallest letter in the Greek alphabet.

It’s meant as a metaphor for the capability of the tangle network to send true micro-transactions.

Iota is just like Bitcoin a decentralized currency only they have one massive difference. Iota is not using a blockchain. For an explanation about how a blockchain works please check out this video.

The blockchain is not scaling that well. Bitcoin now can only handle 7 transactions per second and the developers of Bitcoin are working on implementations of new technology like bitcoins Lightning network.

The developers of Iota found a solution for this problem. Instead of using a Blockchain, IOTA’s uses something called a “DAG” of a “Tangle”.

What is a tangle (or DAG) ? 

DAG is shorted for Directed Acyclic Graph and its a storage system where individual items are linked to each other. Directed means that the links between this items always have a direction. Acyclic is to disable loops inside the structure. So you can’t spend IOTA’s twice.

Simple tangle of IOTA

This image shows a simple tangle. Each block represent a transaction (site). That site contains all the details of a transaction such as the sender, receiver and the amount of IOTA being send.

How does the tangle works ?

Every block has also at least connection to two other transactions. These are called Edges. Edges validate the transactions.

There are always blocks without two connections those we call the tips of the tangle. When there is a new transaction a new block is coming from the side of the tangle and an algorithm selects 2 of the tips to connect with and make sure that the transactions don’t conflict with each other. If one of the tips is a fake transaction it is ignored and a new tip is selected.

New transaction
Tangle new transaction

This proves adds the transaction to the tangle and verifies two other transactions in the tangle. Now the transactions becomes a new tip of the tangle.

This technology makes IOTA very scalable, for every transaction that is added up to the tangle there are 2 confirmed. This means that the speed of the network actually increases when there are more transactions.

To trust the transaction people in the blockchain are using the amount of confirmations of the blocks. To check wether or not a block should be trusted. IOTA has a similar solution, each transaction has its weight. The weight is the amount of work done for a transaction.

A higher number means that the node spend more time doing the proof of work for that transaction.

Next to that each transaction has a cumulative weight. This is a sum of it’s own weight and the weight of every transaction who approved this transaction.

Tangle with weight
Tangle with weight

This is how the tangle looks with weight. The small number 1 represents the weight of each block and the big number represent the cumulative weight of each block. Let’s take block with the cumulative weight of number 6. The cumulative weight here are the sum of all the blocks weight who verified the transaction + the weight of the block itself. When you count them up you will get to the number 6.

The tangle versus the blockchain

The tangle actually solves two problems. One is scalability and one is having miners.

Scalability because IOTA’s network is getting faster as more transactions are happening. IOTA can handle almost an unlimited amount of transactions per second while traditional blockchains can only handle a view.

An other aspect of the pro’s of scalability of the tangle is storage. In a blockchain you need a full copy of the chain before you can add new transactions. Right now the bitcoin blockchain is almost a 150 GB in size and still growing quite fast. Storing all this data is not easy for every device or even possible. And it will be more difficult over time.

IOTA’s tangle solves this problem. You don’t need a full copy of the tangle to add new transactions. You only need a small part of the tangle to create and verify transactions.

Finally, IOTA has no miners.
In traditional blockchains there need to be miners to create blocks and verify transactions. For this work, miners take a fee from each transaction. In IOTA there are no miners and therefor no fees.

You can send as much as IOTA as you want to wherever you want completely for free.


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