Guest post : Anujit
Tangle is a technology that promises to revolutionize the world of Internet of Things (IoT) with blockchain-like technology. Iota is the cryptocurrency developed using Tangle.
What is Blockchain and how it works ?
Blockchain is a technology where a network of computers maintain a shared, verifiable, and permanent record of data. Blockchain has a reputation of being very hard to corrupt, due to the fact that it is a distributed database with each node considered as a ledger, and the entire database maintained by all nodes. Changing or deleting existing blocks is not possible, hence, to update a blockchain, a new block has to be created. To create a new block, each “Miner”, i.e. the combination of powerful software, specially designed hardware and their user, has to provide proof of work (POW) for the last recorded block in the blockchain, an operation which is essentially a massive number-crunching done at high speed. This is in an environment where many other miners are also doing the same, which makes it more difficult for any miner to provide POW. This makes updating blockchain very hard, only when a miner provides proof of very significant number-crunching work done, he/she gets to create a new block. Hacking blockchain is, hence, a very hard thing to do. Blockchain holds significant promise of simplification, and reduced back-office costs, for the banks and large financial institutions, as well as many other businesses. It’s the technology that powers Bitcoin, as well as other cryptocurrencies like Ethereum.
Internet of Things Scalability issues with Blockchain :
There is work to be done with respect to blockchain, though, and that’s more apparent in the IoT( Internet of Things) space. IoT, with its sensors embedded in machines, will be everywhere in the future, and it depends on secure communication between machines. When payment transactions between machines over IoT become more frequent, IoT can be expected to transform the economy. IoT requires the power of blockchain making it hack-proof. IoT also requires highly scalable technology, and the system must be able to support very large number of micropayments. However, blockchain currently is not sufficiently scalable: as of May 21st 2017 there were 200,000 unconfirmed transactions. Blockchain also requires transaction fees to prevent the miners from spamming the already-congested network, for e.g. Bitcoin’s mean transaction fees have risen above US $1. In case of a business model depending on numerous micropayment transactions, no profit may be left after paying the transaction fees! Uncertainty over transaction completion, and profit margin, currently limits adoption of blockchain in the IoT space.
How Tangle Network solves the problem making it a blockchain rival :
Tangle is a new distributed ledger technology based on Directed Acyclic Graph (DAG). It’s a distributed database, and has a peer-to-peer network. It depends on consensus and validation mechanism. However, unlike blockchain, it does not have “blocks”. Iota, the cryptocurrency designed using Tangle, has a fixed number, which stands at 2,779,530,283,277,761, and all of these have been issued. No new Iota will be created ever again, hence, there is no mining, per se. A single transaction must reference at least 2 past transactions. This attestation validates these 2 earlier transactions directly, and a subsection of Tangle, indirectly. Not just a subsection of the network, like miner/staker, is involved in the transaction making process, but the entire network. The transaction making process includes the consensus, and hence Iota can scale without transaction fees. There are 3 steps in the process:
- The user signs the transaction input with private keys;
- The algorithm randomly selects two unconfirmed transactions, which will be references by the new transaction;
- User provides POW, as done in blockchain.
IOTA foundation, founded in 2015 by David Sønstebø, Sergey Ivancheglo, Dominik Schiener, and Dr. Serguei Popov, is a not-for-profit organization based out of Germany, which oversees developments related to Iota. Tangle and Iota will likely benefit industries such as mobility, energy, and smart cities and infrastructure.