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Blockchain versus IOTA Tangle

Blockchain technology, like any other technology, has merits and demerits.

Among the several advantages of blockchain technology, one is transaction record

accuracy. It does not require a third party during the transaction verification pro­

cesses. Transaction verification requires thousands of authenticated network nodes;

51% of the nodes must approve a transaction before it is accepted as a valid transac­

tion, thereby reducing or possibly eliminating the risk of error. Second, it is relatively

cost-effective. The absence of a third party, such as a bank or government organiza­

tion, eradicates these authorities’ transaction costs. Additionally, as it is a decentral­

ized system, information recorded in the ledgers is tamperproof. Data cannot be

modified without the approval of 51% of the verification nodes (computer network

or miners). It is noteworthy to mention that any transaction appended to the network

cannot be retrieved or edited. Another advantage of blockchain technology is that it

ensures transaction efficiency. A centralized network such as a bank works only 5

days a week within business hours. Blockchain technology, on the other hand, works

24/7. This implies that transactions are initiated and completed within a few hours

in a blockchain network. It is especially beneficial for cross-border trade, where time

zone variation could delay payment confirmation processes. Other merits of block­

chain include transparency, privacy, security and many more.

Despite the vast benefits of blockchain technology, it also has some drawbacks. The

technology itself incurs high computation power, which is associated with cost. This

cost stems from the hardware cost of the “proof of work” (PoW) concept employed

to validate a transaction. It is, however, more cost-effective for the user than the min­

ers. Secondly, the transaction speed is relatively slow. Bitcoin, for example, requires

about ten transactions per block. This speed is slow compared with other financial

processes, such as the legacy brand Visa, which completes 24,000 per second.

16.1.2  Introduction to IOTA Technology

According to the IOTA Foundation (Robert Shorten, Bill Buchanan, Serguei Popov,

n.d.), IOTA is an open-source DLT, which enables devices connected in the Tangle

to transact micropayments and exchange immutable data. The Tangle is a DLT that

employs a mathematical concept known as directed acyclic graph (DAG). Unlike

other DLT networks, IOTA removes the miners without sacrificing decentralization.

The rationale behind the feeless feature of the Tangle network is the absence of min­

ers. To achieve this, everyone in the network participates in validating transactions.

The two core distinguishing features of the IOTA are microtransactions and speed.

First, microtransactions are transactions that could be done for a fraction of a cent.

Most cryptocurrencies do not support micropayments, like the purchase of coffee,

due to high network fees for miners. Second, the IOTA network speed is breakneck.

Usually, in cryptocurrency, speed is measured in transactions per second (TPS). The

speed in the IOTA Tangle is scaled by the number of contributors in the network.

The more people participating in the network, the faster the speed, thereby alleviat­

ing the drawbacks that other cryptocurrencies like Bitcoin face today. These fea­

tures inspire the IOTA purpose, supporting and facilitating the machine-to-machine

(M2M) economy. ​