MIOTA is the native cryptocurrency of IOTA, which is a blockchain-based project that aims to conduct transactions between machines and devices that are connected to the Internet of Things (IoT), a term that refers to a system of smart devices like Alexa speakers that share data and information between one another.
More specifically, IOTA creates a data storage and communication layer for web-enabled devices. Unlike traditional distributed ledger technologies, however, Iota uses a type of centralized distributed network system known as Tangle, which can operate without blocks, chains or miners.
One MIOTA represents 1 million IOTA, the native currency of the IOTA distributed ledger ecosystem. It’s commonly referred to as MIOTA as opposed to IOTA because IOTA is too small a unit. IOTA doesn’t feature on-chain governance or blockchain mining, meaning MIOTA doesn’t give holders an opportunity to vote on the direction of the protocol and isn’t used as an incentive mechanism for honest participation in the network. Instead, MIOTA is simply used for payments on IOTA’s feeless ledger.
In December 2015, IOTA held an initial coin offering for its IOTA tokens, by offering 1 MIOTA (1 million IOTA) for $0.001 worth of bitcoin. All IOTA tokens were created at the start of the ICO, and the total supply of IOTA was capped at 2.8 quadrillion. (A quadrillion is a number followed by 15 zeros.) At the conclusion of the ICO, the project raised around $500,000 for the development of the project, and IOTA opened a portal for ICO investors to claim their MIOTA. While the IOTA team didn’t reserve any MIOTA for early backers or developers, only 60% of the MIOTA supply was claimed by ICO participants, and so the remaining 40% went back to the project.
On Dec. 19, 2017, six months after the project was first made available on a token exchange, MIOTA skyrocketed over 1,000,000% to an all-time-high of $5.69, giving the token a market capitalization of over $12 billion and making it the seventh-largest cryptocurrency by market cap at the time.
MIOTA hit an all-time-low of $0.07962 on March 13, 2020. That came during a period of major tension between the IOTA Foundation board that caused co-founder Sergey Ivancheglo to leave the project and followed several days of network shutdowns,
How does IOTA work?
To store data on the IOTA network, IOTA uses a distributed ledger technology known as the Tangle. Although Tangle and blockchain technology are both distributed ledger technologies, there are two key differences in how they are implemented.
First, Tangle doesn’t use a blockchain. Traditional blockchain technology stores collections of transaction data (“blocks”) in a linear, chronological sequence (“chain”). That chain sequencing process requires each block to attach itself to the block before it. As a result, later transactions must wait until the block before it attaches to the chain before it can be added to the sequence.
Unlike with traditional blockchain technology, Tangle transactions can be attached to any part of the Tangle system rather than on a single point of a blockchain. By taking the chain sequencing out of blockchain technology, Tangle can validate and store transactions in parallel and quickly scale the processing of transactions. This process is based on a type of cryptographic verification known as Directed Acyclic Graph (DAG). In order to make a transaction using DAG, the user must validate two previous transactions on the web. That means the system is proportional in speed to the number of transactions occurring.
Second, Tangle doesn’t require blockchain miners or a consensus algorithm to validate transactions. For traditional blockchains like Bitcoin, transactions are validated by blockchain mining using a proof-of-work (PoW) consensus algorithm. For Tangle, messages are validated by IOTA’s “Coordinator” network node by determining whether the message contains a reference to a milestone.
The Coordinator is an application independently run by the IOTA Foundation that is responsible for sending signed messages, or milestones, to recognize their validity. All nodes within the IOTA ecosystem are programmed to know the location of a trusted Coordinator to confirm messages. Coordinators hold all of the information about every transaction on the network and communicate that information to nodes in the form of “milestones.” Coordinators send indexed milestones at regular intervals in order to maintain synchronicity among the distributed ledger and assure the validity of all transactions.
Because Tangle is a distributed ledger system that doesn’t require miners, data within the Tangle can be validated at a high rate of speed and can reach consensus in a feeless process. While the Coordinator system is now a centralized process, IOTA is expected to become fully decentralized when Coordinator is replaced with Coordicide through the IOTA 2.0 upgrade. While no official date has been penned for this update, it’s believed IOTA 2.0 could arrive by late 2022.
Key events and management
IOTA was co-founded by German entrepreneur Dominik Schiener, Russian mathematician Serguei Popov, Norwegian entrepreneur David Sønstebø and Ivancheglo, a software engineer from Belarus, in 2015. The IOTA Foundation was later established in 2018 by Schiener and Ivancheglo to guide the continuing development of IOTA. In June 2019, Ivancheglo resigned from the IOTA Foundation’s board of directors, demanding 25 million MIOTA that was worth $6.3 million and that was unclaimed from the IOTA ICO.
In December 2020, IOTA Foundation’s supervisory board announced that Sønstebø would no longer have a role on IOTA due to his unprofessional comments and behavior. Today, Schiener and Popov continue to serve on the IOTA Foundation’s board alongside Dr. Navin Ramachandran.
Over the years, IOTA has formed partnerships with major companies, including Volkswagen, Jaguar Land Rover, Bosch, Cisco and Dell Technologies. None of IOTA’s major partnerships has been fully developed and the company has been criticized for using vague language when announcing big partnerships to increase interest in its token. IOTA jumped 20% on its partnership announcement with Jaguar Land Rover, which the Financial Times called a “last-ditch effort to draw some sort of value… out of an otherwise failed investment.”
In another partnership announcement, IOTA claimed in November 2017, it had formed a partnership with Microsoft for its IOTA Data Marketplace. Following the announcement, IOTA trade volume exceeded $800 million – higher than both bitcoin and ethereum at the time – on the Binance crypto exchange.
The crypto asset also accounted for 47% of the daily trading volume on Bitfinex, another crypto exchange. MIOTA gains following the announcement exceeded 430%, with the token reaching an all-time high of $5.69 before the IOTA team clarified a few weeks later that it was merely using Microsoft Azure, a cloud computing software, for the data marketplace.
During the course of its development, IOTA has run into several criticisms regarding the centralization of its project and its team. In 2017, the Massachusetts Institute of Technology Digital Currency Initiative (DCI) released a statement claiming that IOTA had several security vulnerabilities and issues with its encryption algorithms. In 2018, further conversations about vulnerabilities were uncovered by MIT DCI and discussed with the IOTA Foundation.
Following the public release of the vulnerabilities, email communications were released between the parties where IOTA’s Sonstebo claimed that MIT researcher Neha Narula was working with CoinDesk to prematurely publish the vulnerabilities.
Vulnerabilities and questions of centralization came to a tipping point in February 2020 when the IOTA’s team shut down the network for 12 days to prevent continued damage from a hack.