IOTA is a smart contract platform designed to handle payments and other transactions between physical devices that are connected to the internet. MIOTA is a cryptocurrency token used by the IOTA platform to facilitate transactions.
What is IOTA?
Even if you haven’t heard of the Internet of Things (IoT), chances are you already have IoT devices in your home, car or office. These can include the sensors in your car that indicate tire pressure is low, or your internet television, smart refrigerator, or Nest thermostat.
As the name suggests, IoT devices are connected to the internet, typically via Wi-Fi or a cellular network. But despite their ubiquity, facilitating transactions and payments among IoT devices is challenging. IOTA is a ledger designed to power microtransactions among IoT devices.
“We actually see the IOTA token as the connective tissue between the human economy and the machine economy, creating interoperability between the two,” notes Dan Simerman, head of financial relations on IOTA Foundation.
Another way to describe IOTA is as a network that helps investors and companies monetize data feeds from the IoT. MIOTA is the crypto token used to facilitate transactions on the IOTA network, and is also utilized as a reward for network participants and supporters.
How Does IOTA Work?
Unlike other cryptocurrencies such as Bitcoin, IOTA is built on a distributed ledger technology that’s somewhat different from blockchain. IOTA uses a proprietary technology called the Tangle, which is a consensus algorithm that requires users to validate two transactions in order to complete their own IOTA transactions.
Technically speaking, Tangle is a direct acyclic graph (DAG) consensus algorithm. With this method, there are no miners or validators, no blocks and no transaction fees. This allows the crypto to “overcome cost and scalability issues of blockchain,” according to the IOTA website.
The DAG structure was designed to eliminate the scalability issues and costs related to blockchain by enabling no-fee payments, lower computing costs and the ability to connect to IoT devices.
IOTA’s structure is appealing for use in the IoT economy because it removes the friction of high transaction costs, which would require human monitoring and intervention—precisely what the IoT was designed to avoid.
This “smart contracts” platform is currently in the process of redesigning its ledger technology and its protocol for consensus. IOTA’s 2.0 version is fully decentralized.
- No transaction fees. With IOTA, there’s no need to pay for gas (like with Ethereum) or reward miners (like with Bitcoin) to complete transactions. Lacking miners or validators, IOTA is a fee-free data and value transfer protocol.
- Faster transactions. Conventional blockchains often experience bottlenecks due to the time it takes to create new blocks. The Bitcoin blockchain can handle roughly five transactions per second (TPS), although this may vary at times. For Ethereum, it’s typically around 15 TPS. For IOTA, it’s possible for its network to handle up to around 1,000 TPS.
- Energy efficient. IOTA is designed to accommodate devices such as sensors that operate in a low-energy environment. Even IoT devices with minimal computing power, like toasters, can write data to IOTA’s Tangle.
- Adaptable to different use cases. Large corporations may adapt IOTA for individual use cases. With IOTA Access, an open-source framework that allows access to control systems, a car owner can allow someone access to their vehicle remotely, for instance.
- Decentralization roadmap. IOTA’s 2.0 version is fully decentralized.
- Security vulnerabilities. In February 2020, hackers stole more than $1.5 million worth of MIOTA. It’s reported that the hackers appeared to have targeted a few high-net worth accounts, and IOTA’s founder David Sønstebø agreed to repay the victims of the hack with the network’s tokens. IOTA’s new and improved 2.0 version is aimed at improving security issues.
- Capacity for growth. The IOTA system is still in its infancy. Like many cryptos, success hinges on wider adoption of the network with increased numbers of participants.
How to buy IOTA
It’s key to understand that IOTA is the overall platform, while MIOTA is the crypto token that powers the IOTA system. Listed under the ticker MIOTA, IOTA’s crypto coin is available on a range of cryptocurrency exchanges.
You can’t purchase MIOTA directly in Canada, but you can acquire it indirectly. First, you will need to sign-up for an account with a local crypto exchange based in Canada such as Shakepay, Coinberry, Newton, Netcoins or Coinsmart and then you will need to transfer Canadian dollars into your exchange account to purchase a stablecoin pegged to the US dollar, like Tether (USDT). Once you have Tether, transfer it into a global exchange account from a MIOTA provider like Binance or Bitfinex (except in Ontario where both exchanges ceased operations due to a regulatory crackdown from the Ontario Securities Commission) and use the stablecoin to purchase MIOTA.
Here’s how to buy IOTA, step by step from a global crypto exchange that offers it:
1. Register for an account and get verified
If you don’t already have an account on your crypto exchange of choice, you’ll need to register and enter some basic information, then verify your identity to help prevent fraud. Most platforms require you to upload your photo ID for verification, which can take up to a few days.
2. Set up a crypto wallet
Once verified, you’re ready to purchase or trade cryptocurrencies. While you can store them on the exchange, this may leave your coins vulnerable to loss or theft. Setting up a crypto wallet is a more secure way to store your coins and keep them safe. There are many wallet options available, and they come in different forms. The IOTA Foundation, for example, offers a wallet it calls Firefly to store IOTA tokens.
3. Deposit your cryptocurrency
Log in to your exchange account and deposit your cryptocurrency to your wallet. This should take just a few minutes.
4. Buy your tokens
Now, you’re ready to buy. Simply find the pair that matches your cryptocurrency—IOTA/BTC, when buying with Bitcoin, for instance—and input the amount of IOTA you want. Click “Buy” to complete the transaction, and IOTA is all yours.
Should You Buy IOTA?
While IOTA and the explosion of IoT technology look promising, there are no guarantees it will have as bright a future as current predictions might lead you to believe. Many unpredictable external events could influence IOTA’s direction, from an enormous cryptocurrency sell-off to a recession and subsequent market crash.
Although the long-term outlook appears to be IOTA positive, it’s important to recognize that fear of missing out can cloud an investor’s judgment. Cryptocurrency is a volatile investment, so keep in mind that you could lose the money you invest.
But if you’re passionate about IoT technology and understand the underlying risks, IOTA may be an option worth looking at for a small portion of a crypto portfolio. Consider consulting a financial professional before investing.