A cryptocurrency for the Internet of Things – interview

A cryptocurrency for the Internet of Things – interview

For those of you who aren’t too familiar with blockchain, you may need to read the first paragraph of our blog before plunging into the interview. Dominik Schiener started out his career at 14 by hacking computer games like Call of Duty. Today, as the Internet of Things (IoT) keeps expanding, he’s creating a new cryptocurrency, iota, which can be transferred without any fees, amongst other advantages. He’ll be giving a keynote speech at Autonomy on the 19th of October in Paris, on the power of distributed ledger technology in the mobility space. Book your VIP pass here to come listen to him.

What does Iota stand for? Internet of things architecture?

Iota is the ninth letter of the Greek alphabet and designates the smallest possible unit. We chose this name because our system allows micropayments to be made. We only realised afterwards, when people started asking questions, that it did indeed look like an acronym beginning with “Internet of Things”. A fun coincidence!

Why did you decided to break with blockchain?

I started working in the blockchain field in 2011 and quickly understood that it had two main drawbacks. First, the mandatory fee for each transaction which prevents micropayments seeing as people don’t want to pay a fee that is equivalent or higher than the amount they’re transferring. Second, the clear separation between transaction issuers – people using blockchain – and approvers – the miners, or “gatekeepers” as I like to call them – which creates a form of discrimination. Blockchain has also become overhyped these past few years.

David Sønstebø and I decided to create the cryptocurrency iota and its main innovation, a blockless ledger called the Tangle, to overcome these limitations. Also, when we launched the project back in 2015, there was a gap to fill as nothing was ready to run in the Internet of Things (IoT) environment.

How does the Tangle work?

The Tangle is a revolutionary new blockless distributed ledger which is decentralized, scalable, modular and makes it possible for first time ever to transfer value without any fees.

Blockless, because each transaction approves two past transactions by solving a cryptographic puzzle, and there is thus no need for blocks.

Decentralized, even more so than blockchain, as instead of having miners, every participant in the network validates transactions. This means that the consensus is no longer decoupled but an intrinsic part of the system. For those who find that the full ledger takes too much space on their computer, they can “snapshot” it and only keep the more recent part of it.

Scalable – horizontally – because the more participants there are, the faster and the more secure the system is.

Modular as we build ad hoc protocols which can service specific purposes.

And finally no fees because no miners to reward!

The beauty of the Tangle is that it is partition tolerant, meaning that smaller clusters can be built, and that they can run on bluetooth instead of internet.

Do you already have some improvement ideas?

Yes we do! First of all, we’d like to make the Tangle more adaptive to the current network topology. So we’re working on a new analytical framework to analyse the ledger in real time, which will get it to go faster, to scale more globally, and to self-organise.

Another thing we’re trying to improve is the tip selection algorithm which decides which two transactions a user is going to validate. This will enhance the system’s speed and security.

How can IOTA be applied to the mobility world?

We’re working a great deal in the mobility space as we believe it will be an early adopter of our system.

Using IOTA to update and secure a vehicle’s data over the air is on top of our agenda. One project under way with Volkswagen at the moment is creating a digital twin of the car which stores all of its central data.

Another thing people are quite excited about is the digital wallet which allows a vehicle to become an independent actor. Thus equipped, it can not only pay automatically for parking, toll stations and electric charging for instance, but also be leased out on demand and charge customers on its own.

What is your ambition with IOTA ?

We are the pioneers of the Machine Economy which is going to evolve into a much bigger system than our current economy, as machines will take over a lot of our workload. What we’re creating with IOTA is the backbone of all future transactions, or a “machine declaration of independence” as we’re giving all machines their own wallet.

To build this new economy, we need permissionless innovation, which is why we didn’t patent IOTA and created a foundation to bring together major stakeholders and get them to commit to our cause. A great example of this is EV charging: there are many standards today, but if we don’t build a universal protocol it’s going to be complicated for this technology to really take off.

We’ve gotten a lot of positive feedback concerning the project, and some major companies on board through the foundation, so we’re confident for the future!

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