No, you cannot mine IOTA because it does not use a blockchain with a Proof of Work (PoW) or Proof of Stake (PoS) system like other cryptocurrencies. Instead, IOTA uses a different technology called the Tangle, which requires users to validate two other transactions before they can send one of their own.
This system is designed to remove the need for miners and ensure that the network remains free of transaction fees, making IOTA’s network more scalable and efficient for microtransactions in the Internet of Things (IoT) ecosystem.
If you are a veteran crypto enthusiast, you have likely heard of IOTA, the distributed ledger-based smart contract ecosystem for the Internet of Things (IoT). The IOTA project came into being back in 2015, and it was one of the earliest cryptocurrency-related start-ups that would proliferate in the years after.
IOTA and its cryptocurrency MIOTA were massively popular when the project was first announced, quickly gaining followers and investors around the world. However, delays in product releases, technical flaws, and vulnerabilities against hackers led the project to stagnate and caused a loss of faith in the community.
As with many other crypto-related startups, IOTA founders over-estimated their capabilities and the time necessary to reach the grand targets they promised, and the IOTA hype slowly faded as years went by.
That said, IOTA isn’t completely done in the way some other crypto projects certainly are, as the team still seems to be pursuing the end goal of distributed ledger-based solutions to smart contracts for accomplishing transactions between people and machines.
In this guide, we will take a look at IOTA and the things it’s trying to accomplish in terms of its end product, as well as the progress it has made over the years along with its failures.
What Is IOTA Network?
IOTA is a distributed ledger technology (similar to blockchain technology) that executes smart contracts using IoT devices. In the beginning, the IOTA project sought to create processors that could be used to integrate IoT devices with distributed ledger technologies.
Basically, the goal of IOTA was to help people make permissionless transactions with IoT enabled devices, such as hiring automatic self-driving cars without mediators. IOTA sought to solve blockchain associated problems such as scaling and performance through developing a new way of validating transactions.
Typically, blockchains use miner and staker based consensus mechanisms such as Proof-of-Work (PoW) and Proof-of-Stake (PoS) algorithms to validate transactions, but these solutions are hard to integrate to large scale projects due to their limits with performance and scalability problems.
IOTA developed its own distributed ledger in order to accomplish scalable growth by reconfiguring the mainstream blockchain architecture. Their product TANGLE uses a different system for validating transactions. Tangle consists of multiple nodes formed in a Directed Acyclic Graph (DAG).
Each node in the system is connected to all the other nodes and can refer to any node to make validations. That means that you don’t need to run full nodes to confirm IOTA transactions unlike many other blockchain-based digital assets, including Ethereum and Bitcoin. The advantages include developed scalability and low transaction fees.
At the moment, Tangle consists of many nodes, just like other blockchains, but the nodes are overseen by a central authority (though IOTA has plans to remove this feature) that validate the transactions.
IOTA aimed to develop its network as a way of interacting with different IoT-enabled devices and to offer interoperability between different brands. However, the project failed to deliver its products as promised, decreasing the cryptocurrency’s value significantly in the years after its launch.
IOTA has its beginnings in another crypto-related project: Jinn. IOTA founders David Sønstebø, Sergey Ivancheglo, and Serguei Popov had come up with the Jinn project in order to raise funds to develop a processor that would work with machines related to IoT ecosystems.
The Jinn project raised a quarter-million dollars from a token sale back in 2014, but the regulatory implications of selling “profit-sharing tokens” soon caught up with the founders and the Jinn project was rebranded as IOTA with IOTA founder Dominik Schiener joining the team.
The IOTA project and token sale were announced in 2015, bringing in half a million dollars in an online crowd sale. Participants bought IOTA utility tokens (MIOTA) in the IOTA initial coin offerings (ICO) with digital assets like Bitcoin (BTC) and Ethereum (ETH).
The total supply of MIOTA was mined at the beginning of the project and then dispersed to the founders’ addresses, to be distributed to initial investors. The IOTA network went online in 2016.
IOTA and MIOTA Between 2016-2018
MIOTA value quickly reached its peak within a couple of months after its release. The online currency received a lot of interest based on IOTA’s strong PR and reported partnerships between IOTA and companies like Volkswagen. The IOTA market cap and valuation grew immensely, along with many other digital currencies during the 2016-2017 cryptocurrency bull run.
However, IOTA received bad press in 2017, after it came out that IOTA founders had threatened MIT researchers who had released the Digital Currency Initiative (DCI) report with legal action. The DCI report included criticisms of IOTA’s hash function and security flaws. The debacle caused The Center for Blockchain Technologies to end its relationship with the IOTA Foundation.
The following year, the IOTA team moved to establish the IOTA Foundation to oversee the development and control of the IOTA project and IOTA technology, opening the IOTA Foundation in 2018 thanks to the many donations from early investors.
The foundation employed around 50 employees, who were paid in MIOTA, according to founder Dominik Schiener. At the time, MIOTA was the 11th largest cryptocurrency project on the planet, despite the events with the DCI report and the technical troubles. One of these troubles was a 2018 hack in which 85 IOTA seeds were compromised, leading to a 10 million USD loss for IOTA holders.
IOTA From 2019 Onwards
In November 2019, IOTA faced another hack, due to a vulnerability in the payment service MoonPay that is integrated into the official IOTA wallet, developed and managed by the IOTA Foundation.
The hack caused 50 IOTA seeds to be compromised, a loss that was worth 2 million USD at the time.
IOTA had to shut down the entire network and cryptocurrency in 2020 in order to stop hackers from stealing from user wallets. The IOTA Network was finally brought back online in March 2020.
Coupled with technical troubles, hacks and other delays, as well as the bear market, IOTA lost most of its momentum after 2018. Yet the IOTA Foundation kept releasing updates to the protocol, changing its more ambitious proposals, such as its plans to employ “quantum-proof” cryptography and “ternary encoding” in its operations.
The IOTA Foundation released a Chrysalis upgrade for the IOTA Network in 2021 as preparation for its Coordicide upgrade, which will remove the central coordinator for transaction validations. Currently, MIOTA transactions on the IOTA network are validated by a central coordinator on the system, a centralized authority that keeps the systems safe.
However, the use of a central coordinator is seen as a major weakness because centralized systems constitute a single point of failure that can be exploited by malicious attackers. This is against the spirit of decentralization that cryptocurrency-related projects have brought to the table and it is a major criticism against IOTA.
The IOTA Foundation had announced the plans to employ the Coordicide upgrade in 2021 but the ambitious timeline seems to have been delayed again, as Coordicide is still in beta testing.
Mining IOTA (MIOTA)
Compared to Bitcoin mining, which has become a cumbersome way of obtaining new BTC, many altcoins have developed a crypto mining process that requires fewer resources, making it a good way of investing in digital assets. Unfortunately, IOTA doesn’t offer a way to mine MIOTA.
The IOTA project mined its total token supply before it was launched and there is no way of mining more MIOTA, as the IOTA tokens are all pre-mined. That means the only way to obtain IOTA is to buy it on a cryptocurrency exchange like Coinbase.
You can store IOTA in a number of crypto wallets that support altcoins, including online wallets and hardware wallets.
Moreover, in 2018, it was possible to receive MIOTA through an IOTA faucet by joining a Monero mining pool. This is no longer possible, probably because anybody who can mine Monero would prefer to receive XMR instead of MIOTA.
A Few Words Before You Go…
IOTA was a much-celebrated open source project that promised to bridge the realms of distributed ledgers with the Internet of Things. Since the use-cases for such a collaboration are limitless, IOTA drew a lot of enthusiasm from the public upon its inception.
However, technical and professional setbacks, along with years of delay in releasing products led to IOTA’s stagnation as even the staunchest fans of the IOTA slowly gave up on the project.
The main criticisms of IOTA include its use of a central coordinator for transaction authentication, though the IOTA team has been testing solutions to the problem for a while now.
It isn’t very clear whether the IOTA project will eventually overcome the massive roadblocks, though the IOTA Foundation regularly releases reports that promise the project’s future growth.