IOTA is an open-source, scalable distributed public ledger created to perform and keep track of transactions in the Internet of Things (IOT) economy. The project’s goal is to make it possible for all devices throughout homes and businesses to be able to communicate and transact with IOTA tokens. The IOTA project was founded in 2015, after rebranding themselves from their former company Jinn. They branded themselves as a more efficient and faster cryptocurrency because their system doesn't run on a blockchain. Instead, they use an innovative Tangle system, which promises to be a lot more scalable than blockchain.
How does it work?
The IOTA Tangle system is a blockless protocol, which routes transactions through nodes rather than chains. That means it is more scalable and lightweight than a blockchain-based network, which can be bogged down by the number of transactions on the chain.
Transactions in the Tangle system are verified by other users on the network, called "nodes," and not just miners like in Bitcoin. This process involves someone with a node verifying two previous transactions on their own ledger and then broadcasting that transaction to other nodes.
This process continues until you get to consensus: when an unbroken chain of new transactions reaches the full network. This new consensus becomes one of many branches on the Tangle ledger, while also verifying two previous transactions on their own ledgers.
This doesn't add any blocks or bottlenecks to your transactions, so you can perform IOTA transactions faster than Bitcoin and Ethereum's ten-minute block time.
How does IOTA compare to other cryptocurrencies?
IOTA is a new and innovative cryptocurrency, but it doesn't use blockchain technology like Bitcoin or Ethereum does. Instead, the system they created is called Tangle, which they claim is more scalable than blockchain.
IOTA is a revolutionary new transactional settlement and data transfer layer for the Internet of Things. It's based on a new distributed ledger technology, the Tangle, which overcomes the inefficiencies of current Blockchain designs and introduces a new way of reaching consensus in a decentralized peer-to-peer system. IOTA offers a number of advantages over current Blockchain designs that may ultimately lead to it being the preferred protocol in the IoT space. The Tangle ledger is able to grow in size as the number of transactions increases, unlike regular blockchains, which need to be mined and become more and more difficult as they proceed. This means that IOTA can continue to scale as more and more IoT devices come online.
IOTA is also unique in that it doesn't use traditional “blocks” to form its blockchain. Instead, it relies on a mathematical concept known as a DAG, or Directed Acyclic Graph, which relies on nodes having an “unconfirmed” status. With the DAG design, every transaction is considered to be final as soon as it’s completed, so there is no need for miners.