IOTA is a decentralized distributed ledger that was designed primarily for the Internet of Things. Unlike other cryptos based on the Blockchain technology, IOTA works on the Tangle Network technology— which is a Directed Acyclic Graph (DAG).

The Tangle Network enables IOTA to work in a faster and smarter way that was not possible with blockchains. In a more connected network, IOTA opens a variety of use cases that cannot be replicated with the blockchain technology.

IOTA is designed to make IoT achieve the next level of networking — think of connected devices with sensor technology, machine to machine communication, smart cities, pay on demand and other IoT concepts which were otherwise not very feasible with blockchains.

What is a DAG and how does Tangle work?

A Directed Acyclic Graph (DAG) is a finite graph wit...

I'm Jimmy Song from Austin, Texas and currently a Venture Partner at Blockchain Capital LLC.

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Incentives

Why does everyone spend resources doing the calculation when they know that someone else will calculate and announce it to them? Why not sit idle and wait for the announcement?

Great question. This is where the incentives come in the picture. Everyone who is the part of the Blockchain is eligible for rewards. The first one to calculate the sealing number gets rewarded with free money for his efforts (i.e. expended CPU power and electricity).

Simply imagine, if #5 calculates the sealing number of a page, he gets rewarded with some free money, say $1, that gets minted out of thin air. In other words, the account balance of #5 gets incremented with $1 without decreasing anyone else’s account balance.

That’s how Bitcoin came into existence. It was the f...

For every complex problem there is an answer that is clear, simple, and wrong. — H. L. Mencken

The Current System

Imagine Joe is your best friend. He’s traveling overseas and on the fifth day of his vacation he calls you and says: “Dude, I need some money. I’ve completely run out.”

You, being the nice person you are, reply “sending some right away,” and hang up.