What is IOTA and How Can You Buy it?

Bob Mason
Updated: Dec 13, 2017, 12:19 UTC

IOTA is an open-source distribution ledger developed to provide secure communication and payments between a network of systems and products

IOTA The Internet of Things

What a year it has been for cryptocurrencies and for those investors willing to take the plunge into the virtual world at a time when the major U.S equity markets have hit record highs, with other global majors hitting levels not seen since before the global financial crisis.

Bitcoin has remained the leader of the pack by market capitalization, sitting at a whopping $281.79bn, with Ethereum a distant second at $45.19bn and Bitcoin Cash at $23.83bn at the time of writing.

Other front-runners through the year have included Ripple and Litecoin, currently ranked 5th and 6th respectively by market cap, while IOTA has recently taken the cryptoworld by storm, surging to 4th place with a market cap of $11.915bn.

The very fact that investors have seen exponential gains through the year that far surpass the performance of stocks and other financial instruments raised the appetite for cryptocurrencies and investors to take even greater interest into initial coin offerings and the offerings that each of the technologies has to offer.

IOTA’s price has been an impressive one, with the lowly price of sub-$0.20 levels back in July a distant memory when looking at today’s price of $4.87 and an all-time high $5.59 hit last week. From an all-time low $0.1427 in the summer, that’s a return of 28,488% and the lion’s share of the gains have come in just the last month.

Bitcoin may account for more than 50% of the cryptoworld’s market share, but with 1,324 cryptocurrencies as at 27th November, investors are taking note and a sound concept is enough for investors to loosen their purse strings.

What is IOTA?

IOTA is an open-source distribution ledger developed to provide secure communication and payments between a network of systems and products designed to connect and share information. The terminology is referred to as the internet of things (“IoT”) and it is estimated that the IoT will hit 30bn objects within the next few years alone, with a forecasted global value of $7.1tn.

The principal of IoT is to allow objects to be interpreted or influenced remotely across existing network infrastructures, providing opportunities to integrate the physical world into an electronic one. The ethos is to improve efficiency and accuracy, whilst providing economic efficiency gains derived from less human influence.

One could consider IoT as the cyber side of the cryptoworld, embraces and considers many facets of the more traditional cyber technologies.

IoT considers such technology to include hear monitoring implants, biochip transponders on farm animals, cameras streaming live feeds of wild animals in coastal waters, automobiles with built-in sensors, DNA analysis devices for environmental/ food/pathogen monitoring or field operation devices that support fire-fighters in search and research and rescue operations.

Such devices are established to collect information that can then be shared across multiple devices to be interpreted.

The rally that has taken IOTA to number four in the rankings comes from news that the IOTA Foundation has joined 20 companies to develop a decentralized marketplace, including Cisco Systems, Fujitsu, Microsoft, and Volkswagen. The 20 companies have embarked on a 2-month free trial, but the very interest from industry powerhouses is a confirmation of IOTA’s successful product.

Essentially, IOTA will facilitate the exchange of electronic information between sensor-equipped machines that form part of the Internet of Things.

Unlike the more traditional cryptocurrency technologies, the IOTA team has developed a platform called Tangle that is based on a mathematical theory referred to as Directed Acyclic Graphs (“DAG”). For each transaction to be verified, as is the case with the verification process in blockchain tech, each node in a DAG network, or Tangle, is required to approve the previous two transactions at another node.

A key benefit to IOTA’s Tangle technology is the fact that miners are not involved in the verification process, while network growth and speed become reliant upon the number of users of the technology.

Few will be unaware of the issues faced with Bitcoin’s technology, the bottlenecks and transaction speeds having raised fundamental questions over its future.

There are no transaction fees to speak of when using IOTA’s platform and there are no capacity issues and for this, the recent surge in IOTA’s price has been justified by the cryptoworld.

If we take a more simplistic look at what IOTA has to offer, IOTA holders could use barcode scanning technology to purchase consumer goods and have them delivered to their doorstep. While Bitcoin could be used, the transaction costs eliminate the option to purchase lower cost daily household consumable goods such as milk and eggs. IOTA eliminates such barriers with its lack of fees and delays in processing that has been experienced late as usage has picked up. Only over the weekend Bitcoin exchanges were reported to have more than 230,000 transactions pending…

How to Buy IOTA? Where to Buy IOTA?

Unlike the leading cryptocurrencies in the marketplace today, purchasing IOTA is restricted to Bitcoin and Ethereum coin holders, who are allowed to exchange their respective Bitcoins and Ethers for IOTA coins.

A number of exchanges provide the option to exchange Bitcoins or Ethereum coins in exchange for IOTA including Bitfinex and Binance.

While there will be concerns over the volatility of Bitcoin and even Ethereum, the recent price gains have done little to deter interested buyers and exchanges have certainly facilitated the buying and exchange process.

The key step is to purchase the Bitcoins or Ether coins on the reputable exchanges and then transfer the cryptocurrency to the address created on the exchange that allows the exchange of Bitcoin or Ether coins for IOTA coins. This ultimately involves sending the coins from an existing or newly created wallet that holds the exchangeable coins to a newly created account that permits the trading of IOTA coins.

It is worth noting that the transfer of Bitcoin or Ethereum can take as long as a few hours, so it’s not an instant process and requires further steps once the coins have reached the IOTA recognizing exchange. Fortunately for IOTA, the actual exchange process is quite simple, with exchange options available for multiple numbers of cryptocurrencies, so the key is to correctly identify the correct exchange pairing, whether it’s IOTA/BTC or IOTA/ETH depending upon which source cryptocurrency is being used for exchange.

How to Get an IOTA Wallet?

As is the case with each and every cryptocurrency, it is always essential to keep coins in a secure and safe environment. Selecting the appropriate wallet is of material importance.

For those looking directly to IOTA, there are the necessary tutorials provided by IOTA, but for the less experienced, it is also important to understand the difference between the types of wallets available.

Full Node (“GUI”): Described as an IRI (“IOTA Reference Implementation”), it runs and is accessible locally via a GUI. Full nodes need to be connected to the network via a static IP address to function.

Headless Node: This is a full node that runs on a user’s local console. Headless nodes can be accessed via a simple UI called Nostalgia in the browser. The requirements are the same as a GUI full node, but has the added advantage of allowing the opening of multiple accounts simultaneously.

LightWallet (“GUI”): This is a local interface that accesses a full node in a different environment. A LightWallet connects remotely to a server on which IOTA IRI is running. For more details on using a LightWallet, the necessary information is available here.

Headless nodes are considered to be the most difficult to set up, while LightWallet is considered easy.

Why is IOTA better than Bitcoin and other cryptocurrencies?

While Bitcoin continues to be the leader of the pack, the pressure is ever present on the founding cryptocurrency as developers look to provide the cryptoworld with enhancements to existing blockchain technology. Granted, we have seen Bitcoin experience a number of forks, but with the standoff between Bitcoin’s core developers and mining cartel, the forks have slowed the technological advancement rather than embrace it. Altcoins have taken advantage of Bitcoin’s network flaws and looked to deliver investors and the marketplace with viable alternatives.

Investors and those looking towards IOTA and an investment opportunity would perhaps be best suited to get a better understanding of IOTA’s concept on the Internet of Things and focus on what the technology is capable of delivering in the future.

Key differences between IOTA and Bitcoin that are considered to be in favor of IOTA include:

  • The IOTA network process and confirms transactions instantly, free of fees, facilitated by Tangle’s technology.
  • While Tangle delivers key advantages from a fee and transaction speed perspective, it retains the decentralized ethos of the blockchain.
  • Tangle does not depend upon miners to verify transactions, but creates new blocks automatically, with each and every transaction verified within smaller groups of similar transactions.
  • The entire IOTA network is not required to verify each and every transaction that contributes to the rapid transaction times.
  • Unlike blockchain transactions, Tangle blocks are in a non-chronological order, which makes it possible for transactions to occur off-line and be included at a later date.
  • Unlike Bitcoin, the IOTA network also includes an encrypted messaging platform known as Masked Authentic Messaging (“MAM”), which allows a secure exchange of data between electronic devices connected to the IOTA network.

Security concerns over Tangle technology have not halted IOTAs move to the number four ranking by market cap, in spite of recent concerns of Technology findings, where researchers were able to identify fundamental issues, including the ability to forge signatures on IOTA payments.

Clearly, the nascent period of the cryptoworld allows such flaws in the early phase of roll out on the premise that such issues would be ironed out before the technology is widely embraced, which is systemic of the embryonic phase of any asset class.

Principally, IOTAs prospects are favorable and it could become a front-runner and look to compete with the likes of Bitcoin, but the flaws and security issues would need to be ironed out. Investors have invested their faith in the ability of the developers to deliver.

Is IOTA better than Bitcoin technology wise? Time will tell, with the concept of the Internet of Things largely unknown by many investors, let alone the business world. But should the practical benefits become evident, Bitcoin could find itself with yet another major competitor alongside its hard fork siblings and other cryptocurrencies.

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Exchanges that Support IOTA

The recent surge in IOTA’s price is no secret to the crypto world and, while there are issues in the fact that IOTA coins can only be purchased by exchanging Bitcoins or Ether coins, the growing demand is less evident in the number of exchanges that allow the purchase of IOTA coins.

The number of exchanges that currently allow the exchange of Bitcoin and Ethereum for IOTA coins are limited to just 13. Trading volumes have peaked in recent days, with Bitfinex seeing the largest trading volumes, accounting for around 60% of trading volumes. Other reputed exchanges include Binance, Coinone, which accounted for 15% each, with lesser known exchanges sharing the remainder.

Bitfinex: A cryptocurrency trading and storage platform owned by iFinex Inc. and considered to be the largest Bitcoin exchange platform, accounting for more than 10% of the exchanges’ trading. The exchange allows up to 3.3x leverage trading. Bitfinex hit the news in 2015 when it became the target of a hack where a reported $72m in Bitcoin was stolen from a customer account, which contributed to a 20% slump in Bitcoin’s price. Bitfinex reportedly repaid each of the customers who had lost funds by April of this year.

Binance: Binance is a China-based cryptocurrency exchange that began live trading in July 2017. Interfaces accommodate both novice and professional investors, with margin trading also an option, though the exchange does not offer fiat/cryptocurrency pairings, with no plans to offer fiat – cryptocurrency trading anytime soon.

Coinone: Coinone is a South Korean exchange that facilitates the buying and selling of Bitcoin, Ether and Ether Classic, as well as the exchange of Bitcoin and Ether for IOTA. Coinone is considered to be amongst the most security conscious exchanges in the cryptoworld and is considered to be South Korea’s leading exchange that also provides foreign remittance services.

The Benefits of IOTA

While the complexity of Internet of Things will dupe the less technologically minded, the cold hard fact is that unlike Bitcoin, the greater the number of users, the faster the network becomes. Considering the limitations and issues faced by Bitcoin holders, when it comes to transaction speed, IOTA’s advantages are certainly more akin to an alt-currency capable of replacing the more traditional fiat currencies. The continued rise in demand for cryptocurrencies and the increased use in the business and retail spaces make IOTA’s offering all the more enticing, particularly when considering the fact that there are no transaction fees.

Today’s limitation is that those looking to purchase IOTA need to purchase or already hold Bitcoin or Ethereum, but this will likely change as demand picks up and once it does, the benefits may well propel IOTA into the forefront of e-commerce and more.

As is the case with most, if not all of the technologies being rolled out through the ICO world, how quickly the technology becomes mainstream remains an unknown. In IOTA’s case, 2-month demos are a world away from becoming a part of the day-to-day, with a company’s willingness to share information also an issue to contend with. The bad news is that it’s going to take time and companies such as Cisco and Microsoft are willing to put their name to the test, purely in the interest of not missing out on the next generation tech. The good news is that continued interest will support buyer interest, with more companies likely to enter pilot schemes on offer in order to test the waters.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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