To understand IOTA, you need to understand the Internet of Things, or IoT. IoT refers to the network of internet-connected physical objects able to collect and exchange data using embedded sensors. Computers, microchips, kitchen appliances, hospital devices and cars are all part of IoT. IOTA, the cryptocurrency, accurately refers to itself as “the backbone of IoT.” IOTA wants to become the standardized ledger of IoT, which supporters of IOTA call “the Ledger of Everything.”
To simplify: The Internet of Things is every object with an internet connection. By the transitive property, IOTA has the capability of being the standardized currency of those things. This is often referred to as the machine-to-machine economy or (m2m). Yes, in the near future, your solar panel may be contacting your neighbor’s light bulbs to “sell” its own energy (hopefully in IOTAs) without you even getting involved. It’s Wall Street meets iRobot.
How does IOTA work?
What makes IOTA special is that, unlike Bitcoin, it does not need to be “mined” because it is totally decentralized and blockless. This means that anyone can make transactions on the network for free, without fees. There’s also no fixed limit on how many transactions can be confirmed per second.
Removing the traditional blockchain design has allowed IOTA to work on a platform called Tangle, which uses a mathematical concept known as Directed Acyclic Graphs (DAG). You won’t be quizzed on this, I promise. What you need to know about DAG Tangle is that it works by approving two previous transactions in other IOTA wallets (nodes) in order to make its own transaction valid. By removing miners and middlemen, this makes buying and selling extremely fast. And with IOTA, the more users it has, the faster and bigger the network is.
The Economy of Things
As the Internet-of-Things keep expanding, the need for interoperability and sharing of resources become a necessity. IOTA enables companies to explore new business-2-business models by making every technological resource a potential service to be traded on an open market in real time, with no fees.
How to buy IOTA
I wrote a full article here on How to buy IOTA using Bitfinex