The IOTA Tangle – The Technology Explained
IOTA tangle is an innovative new distributed ledger technology that serves as the foundation to the growing technology known as the Internet-of-Things (IoT). IOTA is a next-generation permission-less distributed ledger that is designed to eliminate the typical major shortcomings of blockchain, namely scalability, speed, and cost. Tangle makes it possible to send and receive micro-payments without incurring any transaction fees. The mission for IOTA is to create a currency for inter-networked devices and revolutionize the way they interact with each other.
What is Tangle and How Does It Work
Bitcoin and Ethereum utilize blockchain technology to function (transactions are tracked in “blocks” and linked together in sequence on a “chain”). But IOTA is different. Let’s define what it is. It’s a cryptocurrency project based on a distributed ledger that has no blocks, no chains and no transaction fees. It is, in essence, a blockchain without the blockchain. Instead, it uses a unique data structure called the Tangle. It is a third generation distributed ledger technology (DLT), which will be powered by machines all over the world known as the Internet of Things (IoT).
Instead of using the blockchain technology, IOTA uses a directed acyclic graph (DAG). The Direct Acyclic Graph or, DAG, employed by the Tangle differs from the blockchain in a few key ways. The Tangle uses a ledger for storing transactions, or sites, in the Tangle protocol. These transactions are connected via, what are called, edges. These edges serve as a representation of validated transactions on the Tangle network.
There are no miners, and, consequently, it means that each participant in the network that wants to make a transaction has to actively participate in the consensus of the network by approving 2 past transactions. If you select IOTA attach to tangle option while receiving the coins, the wallet will do the proof of work required and then broadcast this address across the network. This enables your wallet to remember which addresses you have used.
This attestation on the validity of two past transactions ensures that the network achieves consensus on the current state of approved transactions, and enables a variety of unique features that are only seen in IOTA.
The IOTA tangle visualizer below provides a simple explanation of how a tangled network operates if you think of each square as representing a transaction, and each arrow as representing transaction approval. Time moves left to right, so the first transaction on the network (0), is approved by 1 and 2. Transaction 1 is approved by 3 and 4, transaction 2 is approved by 4 and 5, and so on.
If you are interested in more detailed explanation of the IOTA, it is recommended that you study the official white paper.
IOTA scalability is near infinite due to the Tangle protocol. This is because an increasing number of users results in faster validation times. The lower hashing power required to transact over a Tangle network is also an added incentive for new users to use Tangle.
The IOTA Tangle uses the Winternitz signature which is a hash-based cryptography and is used instead of the usual elliptic curve cryptography or ECC. These hash-based signatures provide much faster processing times than the ECC signatures. That’s why confirmation and transaction times are faster than the blockchain, and the number of individual transactions that the system can process simultaneously is unlimited.
The Tangle is quantum-resistant. Due the superior computing power offered by quantum computers, some blockchain-based technologies may be susceptible to attack at some point in the future. However, due to the Tangle’s use of Winternitz One-Time signatures, it can be claimed that the protocol is quantum-resistant.
The new hash function operates with ternary, as opposed to binary operations which in turn make IOTA and Tangle a lot more secure.
Users that transact over the Tangle network also have to validate previous transactions, this results in zero transaction fees. Therefore, the possibility of micro-transactions becomes more of a reality. Micro-transactions were previously not possible on blockchain-based networks due to transaction fees. However, with the Tangle, due to the absence of transaction fees, micro- and even nano-transactions become possible.
- Masked Authenticated Messaging (MAM)
The Tangle protocol also allows for nodes to exchange authenticated and encrypted data between themselves. The quantum-resistant nature of the protocol ensures data sent to the network is also resistant to any attacks by quantum computers. This means that IOTA Tangle is resilient to a 51% attack.
- Data Transfer
Another key feature of the Tangle protocol is the transmission of data through the network. IOTA allows users to establish communication channels between devices. Data sent through these communication channels are fully authenticated and tamper proof.
IOTA Tangle Block Explorer is a simple tool which provides detailed information about any IOTA transaction, address, and block. Just enter any transaction id, address or block number and click on search to get its details.
Tangle vs Blockchain
Is Tangle better than Blockchain? Let’s take a look at the comparison table to find out how two protocols are different from each other.
|Transaction fees.||The founders of IOTA claim there are no transaction fees on the Tangle network.||You are charged for every Bitcoin transaction.|
|Micro payments||IOTA is able to process small payments without applying fees.||It is not feasible to process small payments on Blockchain.|
|Processing times.||Tangle speeds up when more people join the network, because the validation process only requires two previous transactions rather than an entire blockchain.||Bitcoin can manage just 7 transactions per second. Ethereum – 20. If you want to speed up transactions, you can pay a higher transaction fee to cryptocurrency exchanges.|
|Decentralization of the financial system.||Every time a transaction is made with IOTA, everyone in the network participates in the consensus. This means validation is entirely decentralized.|
There is no potential for IOTA to be controlled by a monopoly.
|All stakeholders are independent of each other. However, 75% of mined blocks are owned by just eight mining pools – six of which are in China. Thus, China is the majority stakeholder of Bitcoins. And there is a small chance that the Chinese government may declare Bitcoins illegal and seize the assets of independent cryptocurrency exchanges.|
|Smart Contracts (an agreement between two or more parties that enforce the conditions of the agreement using a cryptographic validation.)||Tangle cannot support smart contracts because transaction orders are subjective to individual nodes and would create uncontrollable forks.||Ethereum and HyperLedger are leading the way for smart contracts to function.|
IOTA’s unique Tangle ledger may change the IoT world as we know it. The ledger promises to be scalable, decentralized, and suited for a variety of applications. It also comes with no fees, and makes things like microtransactions more feasible than they are currently.