Altcoin Explorer: Using Social Incentives for a Sustainable Ecosystem on IOTA – Part 2
In part 1, we through the network design and criticisms of IOTA owing to their in-house cryptographic implementations. Most of the positives of the network shine through in the tokenomic framework and an overview of the protocol, November 15, 2019.
Tokenomics and Business Development
IOTA is a fully issued cryptocurrency with nil inflation or dilution going forward. Details regarding the team’s token vesting are unknown but it is not a significant factor as supply is fully issued.
The economic framework IOTA inculcates is extremely fascinating. Since the network utilizes a lite PoW algorithm, there are no dedicated miners on the network.
Essentially, the economic framework of IOTA revolves around community-driven harmony. If Alice wants to transact on IOTA, she has to mine two transactions with the lite version of PoW the network utilizes. In fulfilling her own desires, Alice helps the network secure itself and helps two other transactors get their transactions confirmed. The model of incentives that IOTA is based is on can be considered robust, simply because it successfully implements a ‘give-and-take’ relationship in the network.
Long term sustainability of this design can only be tested when the coordinator is finally phased out. At this point, the network must have enough participants so that a single entity cannot spam the network and effectively double spend a bunch of their coins, and this is where business development initiatives come in.
From a partnership and integration standpoint, as mentioned in part 1, they have tie-ups with companies focusing on IoT like Bosch and STMicroelectronics. Getting corporations on board is an absolute necessity as they will contribute a massive amount of transactions. The IOTA Foundation seems to understand this all too well as they focus on onboarding these larger entities.
Quantum Resistance and Closing Remarks
One of the most standout features of IOTA is the use of the Witnernitz signature algorithm. This algorithm is much longer and tedious relative to Bitcoin’s ECDSA. The nature of this algorithm makes IOTA almost perfectly quantum-resistant given then computing constraints we know of today.
In addition to quantum resistance, IOTA enables an encrypted data transfer layer called “Masked Authentication Messaging”. Users can send each other messages, or data, for free with inbuilt encryption so the rest of the network cannot see the details.
In short, there are a lot of criticisms of IOTA that aren’t without merit. But overlooking the benefits entails missing the bigger picture. If IOTA is successful, it could be a revelation to the way we transact. Instead of building in economic incentives for third parties, there are social incentives for using the network.
In the long term, if the network thrives after the foundation removes the coordinator, there really wouldn’t be much room for major criticism, and instead, we may be witnessing the evolution of one of the most viable projects to emerge from cryptocurrency and blockchain technologies.