The IOTA Foundation has announced the ‘Coordicide’ protocol, which is meant to decentralise the Tangle. The Tangle is the underlying system which powers IOTA’s distributed ledger instead of a blockchain, which is used by other major cryptocurrencies such as Bitcoin.
Due to its unique nature, Tangle did not possess some features inherent in blockchain technology such as decentralisation. The Coordicide solves this, by automatically managing transactions and associated security, without needing to be checked by the IOTA Foundation.
With the Coordicide, the network will no longer rely on the central “Coordinator”, which is needed to process transactions. The innovation is said to provide a long-sought-after solution to the inherent issue in distributed ledger technologies (DLT)- scalability without centralisation.
While Bitcoin is the first and most popular cryptocurrency, it faces extreme problems: the mammoth amounts of electricity that go into Bitcoin mining required to keep the network running, and the extremely slow rate of transactions: about 7 per second. While other networks and cryptocurrencies have been working to improve the scalability of networks to increase speed, IOTA’s new innovation is meant to significantly improve scalability while also maintaining decentralisation.
As the supply of Bitcoins in circulation reduces, the IOTA Foundation is hoping to fill that gap, by harnessing the increasingly-important concept of decentralisation while maintaining a regulated currency which runs the “Internet of Things”.
Despite the technological progress achieved with Coordicide, the IOTA Foundation must put forward a product to convince skeptical investors.
What is the Tangle?
Rather than using blockchain technology like all major cryptocurrency such as Bitcoin and Ethereum do, IOTA is a cryptocurrency which runs on its system: the Tangle. It differs from blockchain technology in a few key ways. In a broad sense, the Tangle does not have miners who use computing power in order to mine more cryptocurrencies and keep the ledger running. Instead, every user is a miner. When they perform transactions, say, through their phones, the phone will automatically perform the proof-of-work calculation to validate two previous transactions. This ability is not restricted to mobile phones, and virtually any “smart” machine could join the Tangle network, achieving the machine economy that IOTA is trying to cultivate. If it works, a user can buy a drink from a vending machine connected to the IOTA network using its cryptocurrency, the MIOTA. In a more futuristic sense, machines can interact with each other, with houses paying their own bills and cars paying for their own parking.