One of the worst things that can happen to a cryptocurrency is a wallet hack. This and a few other mishaps have happened to IOTA since 2017. As a result, IOTA lost momentum and market capitalization: from fourth place overall with a market capitalization of USD 13.2 billion in 2017 to 25th place with a market capitalization of USD 4 billion today.
Today IOTA is launching the beta version of its new wallet. But that’s really just the tip of the iceberg in a massive rollout of new technologies, which this time will help, Dominik Schiener, co-founder and CEO of the IOTA Foundation, told ZDNet.
Blockchain for nothing and transactions for free?
A lot of water has flowed under the bridge since 2017. Crypto was just getting into the mainstream and ICOs (Initial Coin Offerings) were all the rage. Fast forward to today and the whole world is still trying to figure out crypto, most ICOs have gone wrong and non-fungible tokens (NFTs) are all the rage.
The real question, however, is how much the technology and the people behind it and behind it have matured. A lot has changed for the IOTA Foundation, including the core team. As Schiener put it:
“The IOTA project in 2021 is a completely new project compared to 2017 because, as you can probably understand, if you don’t start from anything IOTA has really done and if you build something you will make a lot of mistakes along the way . “
Sometimes these errors are technical, sometimes they are communication errors – getting into public fights, for example. Schiener noted that it is important to acknowledge these mistakes, own them, and move forward.
IOTA is reinventing itself with what it calls “A New Dawn” for the project
For the past 1.5 years, IOTA has been working on a network upgrade that Schiener says will fix the problems. This upgrade, codenamed Chrysalis, marks a new beginning for IOTA, Schiener said. However, before we get to Chrysalis, what it is and how it solves IOTA’s problems, let’s start with IOTA’s new wallet that has been introduced.
Schiener said the vulnerability in the previous version of the IOTA wallet was due to third-party integration. The new wallet has no third-party integration and has been rewritten, modularized and thoroughly tested several times, he added.
Perhaps that could be seen as a metaphor for the new IOTA. The main premise, namely the solution of the problems related to the blockchain by introducing a different data structure, remains. Like blockchains like Bitcoin or Ethereum, IOTA is a distributed ledger. In contrast to these, however, the data structure used is a directed acyclic graph (DAG), which is referred to as a tangle:
“A new distributed ledger that doesn’t need the miners or the electricity or the transaction fees to really have a log, a technology that will be production-ready and that billions of users, including machines and people, can use and benefit from,” summarized The vision shone together.
The bugs that the new IOTA is supposed to fix
Then what went wrong and how will IOTA fix the problem – aside from introducing a new wallet? Schiener focused on some important technical decisions that have been proven wrong and are being withdrawn.
IOTA wanted to be quantum secure and therefore used “special cryptography”, as Schiener put it. For example, IOTA’s cryptography only allowed one address to be used once. Reusing an address can result in a loss of funds.
Another questionable decision was to use ternary rather than binary coding for data. That was because, according to Schiener, the hypothesis of the future was that ternary is a much better and more efficient way to encode data. The problem, as he further added, is that this also requires ternary hardware to work.
There’s more to do with the way the ledger is built. It’s still a DAG, but it has different algorithms. Schiener said that over the past year and a half, IOTA has been reinvented and rewritten from scratch. This new phase of the project is Chrysalis, which is this new network upgrade.
Coordicide is a slang used to remove the coordinator from the IOTA network and make it really decentralized
With Chrysalis, IOTA is also moving towards Coordicide. This is a fancy term that simply means removing the coordinator node on the network that helps validate transactions. This has been a huge criticism of IOTA for a while now. Schiener noted that a lot of research has gone into optimizing the consensus protocol behind IOTA so that it can be completely decentralized.
Another point of note is interest control: determining which transactions are preferred among those issued. In IOTA, this works by having the IOTA token holders on the network generate a specific token called mana, which is used to distribute this scarce resource, which is transaction throughput.
Schiener denies that this allows IOTA to scale transaction processing without incurring processing fees that can cause use cases to stop working, as is the case with Bitcoin or Ethereum. This should work similarly to how it does today, he added:
“Today we have different frequencies in one spectrum. And we also have different owners – mainly telecommunications companies, but also investors. The same will happen with IOTA, where large companies that want to use the network will also acquire IOTA tokens because they are theirs Makes usefulness possible. “
Oracle, smart contracts, and real-world use cases
Schiener mentioned a number of projects with partners such as Zebra Technologies or Trademark East Africa for transparent supply chains. One project that highlights the IOTA perspective is Alvarium, a collaboration with Dell.
Project Alvarium’s focus is on securing data from IoT devices and evaluating that data. These results are intended to reflect confidence in data that has not been tampered with and is secure enough to be used, shared, and monetized.
Schiener described Alvarium as a very exciting project that will be open source. In addition to Dell, IOTA is discussing with Intel and other large companies to develop Alvarium as a standard and product, added Schiener.
The norm for this type of project in the industry is to work with approved chains (i.e. networks that are owned, controlled and tailored to the needs of the project participants). However, the focus of IOTA is on permissionless chains (i.e. on the use of the IOTA main network).
According to Schiener, this enables interoperability and guarantees security. There is a lot of interest from big companies, and more of them understand that authorization-less networks are more secure and prevent supplier loyalty, he added. IOTA advertises without permission, but can also be used to start private networks.
Oracles are key to enabling interoperability between distributed ledgers and the outside world, and IOTA is also introducing oracles.
Another new addition to IOTA are oracles (i.e. the ability to bring data from the outside world to IOTA). Schiener referred to Alvarium as an IoT oracle and said they want to empower third parties like Chainlink to build oracles on IOTA. However, IOTA is currently building its own oracle for bootstrap.
Last but not least, IOTA is also working on its own version of smart contracts, currently in Alpha. These differ from Ethereum’s “world computer” approach, as IOTA uses sharding to partition the network into subnetworks.
In this sharded network, nodes will process certain smart contracts that they are interested in, and thus will be able to achieve much higher scalability and lower fees than in other networks, according to Schiener. However, the goal is to maintain interoperability. As part of this, IOTA smart contracts can also be programmed in Solidity, the programming language used for Ethereum smart contracts.
Schiener emphasized sharding as a central research area for the future development of IOTA. But even with the current transaction throughput, IOTA can process between 1,000 and 1,500 transactions per second in the mainnet, which already enables many use cases.
A new morning for IOTA?
All of this indeed points to a new phase for IOTA. Any of the new products introduced would also be interesting in isolation. Together they appear to be a “completely new project,” as Schiener put it, although they kept the core ideas behind IOTA.
IOTA and Schiener are certainly not lacking in ambition. Whether or not they can fulfill the great promise of the new IOTA largely depends on the maturation not only of the technology itself, but also of the organization that stands behind the technology.
The IOTA Foundation currently employs around 140 people. The funds consist of what Schiener calls treasury – IOTA tokens that were received as a donation. The IOTA Foundation is also funded by research grants and intends to work with its corporate partners to set up for-profit initiatives to achieve financial independence.
The timeline Schiener shared is pretty aggressive and aims to deliver all of that within 2021. It will be interesting to keep an eye on IOTA to see if these bold ideas can be materialized.
NOTE: In an earlier version of the article, IOTA’s market cap was incorrectly listed as $ 120 million. As of March 23, 2021, IOTA’s market cap is $ 4 billion.
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