First, you need to understand what a cryptocurrency is. A cryptocurrency is a distributed ledger that is immutable and impervious to malicious changes. For example, imagine your bank. They have to maintain a ledger that shows your account balances, credits you for any deposits, and subtracts any money you withdrawal. Your bank doesn’t send physical dollar bills around for every transaction, they just note the balances on their ledger. It has to be impossible to delete old transactions, move funds without accounting for where they went, or spend the same funds multiple times from the same account. If it was possible to do any of those things, the whole system would fall apart.
This is what cryptocurrency is in it’s simplest form. Except with cryptocurrency the ledger is public, and can be accessed or viewed by anyone. A cryptocurrency ledger usually takes the form of a blockchain, which is a large file that contains a history of every single transaction ever sent. “Miners” are powerful computers that all have copies of this blockchain, but they can’t edit it without doing the computational work necessary to prove to the other miners in the network that the transactions they are adding are legitimate. These “miners” take fees from these transactions to create an incentive for the network to be maintained.
Together, forming a consensus, all the miners update and edit the blockchain constantly. All the other computers in the network keep an eye on each-other’s suggested changes, and check them for legitimacy. Each update to the blockchain only adds new transactions. It’s impossible to edit or change old transactions. Any change to a previous entry in the chain will cause the entire file to break. A good metaphor for this is breaking a single link in a chain causing the whole chain to fail.
The numbers in the ledger can be backed by real world assets in which a digital coin could represent ownership of shares in a company, or ownership of a physical commodity held in reserve somewhere. Or it can represent it’s own internal unit of value, the price of which is determined by the open market, like Bitcoin.
Now that we’ve explained the basics of cryptocurrency it’s time to get into IOTA, which is a next generation cryptocurrency for the internet of things and a machine to machine economy. IOTA doesn’t use a blockchain, but instead it uses a directed acyclic graph called “The Tangle”. You can learn more about that here and here.
But since this site is designed for people without a technical background, we’ll stick to just the general basics from a user perspective. However, keep in mind that the underlying technology is very complicated, which can make it very difficult to properly understand (and write about). Not only will the IOTA ledger be capable of storing transactions, but it will also be capable of storing time-stamped data streams on a public ledger that’s impervious to changes, and can’t be manipulated by anyone. This kind of technology has a massive scope of potential applications, and you can read more about them here.
From a user perspective, the main characteristics that separate IOTA from other cryptocurrencies are the fact that transactions are free to send, and that the network gets faster and more reliable as it’s traffic grows. The way it accomplishes both of those things is by eliminating miners from the equation.
Instead, it requires the device sending a transaction to do the computing power to confirm 2 other transactions on the network. So that each device adding something to IOTA’s ledger temporarily takes on the role of being a miner, except no fees are charged. You contribute computing power into the network to get computing power back out of the network, and you aren’t required to spend money or coins to do so.
This is really important because it enables an ecosystem where IoT devices can cheaply and effectively store and time-stamp data on this network, without having to spend real world money or tokens. Not only that, it provides the platform necessary to monetize and sell that data securely, and provides a unit of value for which to trade with (IOTA tokens).
Requiring each transaction (or data send) to confirm two others, also means that the network gets faster and more reliable the more heavily it’s used. This is a huge positive over other cryptocurrencies that experience bottlenecks in the number of transactions per second that can be confirmed. IOTA has no theoretical limit to how many transactions it can accommodate. It can scale infinitely.
Hopefully this is good enough to give you an introductory understanding of cryptocurrency and IOTA. Since this is a complicated subject some of this information might not be described in the most accurate terms. We encourage you to continue researching on your own to gain a greater understanding of how this technology works.
IOTA Units of Measurement
The IOTA network can carry data streams, but it’s also a traditional cryptocurrency with it’s own ledger of transfers. It is sold and traded in quantities of 1 million units known as MEGA IOTA. Any time you see it’s price listed on an exchange or price tracker, It’s always listed in MIOTA. Below you can see how the rest of it’s units of measurement breakdown.
1 = 1 IOTA
1,000 = 1 KIOTA (Kilo IOTA)
1,000,000 = 1 MIOTA (Mega IOTA)
1,000,000,000 = 1 GIOTA (Giga IOTA)
1,000,000,000,000 = 1 TIOTA (Terra IOTA)
1,000,000,000,000,000 = 1 PIOTA (Peta IOTA)