IOTA is a distributed ledger developed to facilitate transactions between devices in the Internet of Things virtual community. However, this crypto differs from the others in one significant way: it is not a blockchain. Instead, it uses a system called Tangle to confirm transactions.
Tangle allows for much faster, feeless, and less power-intensive transactions than conventional blockchains, which is a plus for the growing IoT virtual space. Tangle’s node system uses two previous transactions to authenticate each new one. This system easily solves the scalability and performance issues that blockchains usually experience.
What is IOTA?
IOTA is a next-generation distributed ledger technology and crypto specifically engineered for the Internet of Things (IoT) and Web3 ecosystems. As of 2025, IOTA operates as a fully decentralised network following the successful implementation of IOTA 2.0, which eliminated the need for a central Coordinator. The platform utilises a revolutionary Directed Acyclic Graph (DAG) architecture called the Tangle, enabling feeless microtransactions, smart contracts through IOTA Smart Contracts (ISC), and native digital identity solutions. The native crypto token is called MIOTA, with a fixed supply of 2.78 billion tokens that were pre-mined at genesis, ensuring no inflation and making it environmentally sustainable with zero energy consumption for consensus.
With IOTA 2.0’s full implementation in 2025, the network operates through a sophisticated consensus mechanism called “Nakamoto Consensus on a DAG” combined with a “Multiverse” approach that handles conflicting transactions. Unlike traditional cryptocurrencies that require miners or validators, IOTA nodes participate in consensus by issuing transactions that reference and approve previous transactions. The network achieves finality through a combination of the Tangle’s structure and a voting mechanism among nodes, ensuring security while maintaining the feeless nature of transactions. This innovative approach allows IOTA to process thousands of transactions per second with sub-second confirmation times.
As a result of IOTA 2.0’s full decentralisation, users enjoy completely feeless transactions without any network fees, gas costs, or mining rewards. The elimination of the Coordinator has transformed IOTA into a truly permissionless and censorship-resistant network where no central authority can control or halt transactions. This breakthrough achievement makes IOTA one of the few cryptocurrencies that combines true decentralisation with zero transaction costs, making it ideal for microtransactions, IoT device communications, and machine-to-machine value transfers that would be economically unfeasible on traditional fee-based networks.
The revolutionary foundation of IOTA is the Tangle, a sophisticated Directed Acyclic Graph (DAG) that has matured significantly with IOTA 2.0’s full deployment in 2025. Unlike traditional blockchain networks that process transactions sequentially in blocks, the Tangle allows for parallel processing of transactions, creating a web-like structure where each transaction validates two previous ones. This innovative architecture has proven to be exponentially more efficient than blockchain solutions, with the network now capable of processing over 10,000 transactions per second while maintaining instant finality. The Tangle’s maturity in 2025 includes advanced features such as IOTA Smart Contracts (ISC) for decentralised applications, native digital identity management through IOTA Identity, and seamless integration with IoT devices through IOTA Streams for secure data transmission.
With the completion of IOTA 2.0 and the elimination of the Coordinator, the Foundation has transformed IOTA into the world’s first feeless, scalable, and truly decentralised distributed ledger specifically designed for the Internet of Things and Web3 applications. As of 2025, the IOTA network serves as a “public permission-less backbone for the Internet of Things and machine economy,” enabling seamless interoperability between billions of connected devices, smart contracts through IOTA Smart Contracts (ISC), and secure digital identity management through IOTA Identity (DID).
History of IOTA: Founders and growth
IOTA’s journey began with the Jinn Project in September 2014, founded by David Sønstebø, Sergey Ivancheglo, Dominik Schiener, and Dr. Serguei Popov. Originally conceived to create energy-efficient IoT microprocessors using ternary logic, the project evolved into something far more revolutionary. By 2015, the team realised that the future lay not in hardware but in creating a distributed ledger specifically designed for the Internet of Things. This pivotal decision led to the development of the Tangle and the birth of IOTA. Over the past decade (2015-2025), IOTA has achieved remarkable milestones: from its initial token distribution in 2015, through years of research and development, to the historic launch of IOTA 2.0 in 2024-2025, which finally eliminated the Coordinator and achieved full decentralisation. Today, IOTA stands as one of the most successful blockchain alternatives, with a thriving ecosystem of developers, enterprises, and IoT integrations worldwide.
To solve their financial problems and fund the development phase, the Jinn project team organised a crowd sale during which they sold 100,000 JINN tokens for around $250,000 at that time. These JINN tokens then went on the NXT platform as shares in the Jinn project and its predecessor company.
A few months later, on a BitcoinTalk forum, the Jinn Project team announced another project called IOTA because JINN tokens would go into the market as profit-sharing tokens (or financial securities). In 2015, the IOTA founders were Sergey Ivancheglo, Serguei Popov, David Sønstebø, and Dominik Schiener, who was the final addition to the founding team.
According to founder David Sønstebø, the birth of IOTA happened because of the Jinn Project, so “…it only makes sense first to introduce IOTA and then Jinn afterward.”
Understanding IOTA: Why was it invented, and how does it work?
From its inception, IOTA was designed to solve the fundamental challenges facing the Internet of Things and machine-to-machine economy. The original concept centered on creating a distributed ledger that could handle the massive scale, micro-transactions, and real-time data requirements of IoT devices without the limitations of traditional blockchain networks – namely, high fees, slow confirmation times, and energy consumption.
Today, in 2025, IOTA operates as the world’s leading facilitator in the IoT ecosystem and machine economy. With over 50 billion IoT devices projected to be connected globally, IOTA’s feeless, scalable network has become the de facto standard for device-to-device transactions, data monetisation, and automated machine payments. The network processes millions of microtransactions daily, enabling everything from autonomous vehicle toll payments to smart city infrastructure management, supply chain tracking, and energy grid optimisation. IOTA’s mature ecosystem now includes enterprise partnerships with major corporations, government implementations for digital identity and voting systems, and a thriving developer community building the next generation of Web3 and IoT applications.
Unfortunately, these companies have no way to access or purchase this data. But, with the crypto that IOTA offers, even the least complex of devices can process MIOTA like a champ.
With this ingenious solution, experts believe the fast, free, and secure IOTA data processing solution could be the future key to powering everything from smart cities to interconnected factories while ensuring its users get financial rewards for their early investment.
But, how exactly does IOTA work?
As of 2025, most cryptocurrencies still operate on traditional blockchain networks that require energy-intensive mining and impose transaction fees. These legacy systems face significant scalability limitations and environmental concerns. However, IOTA has evolved far beyond these constraints with the successful implementation of IOTA 2.0, which operates on a fundamentally different architecture that eliminates the need for miners, fees, and energy-intensive consensus mechanisms while achieving superior security and performance.
However, IOTA is different.
IOTA 2.0 operates on a sophisticated Directed Acyclic Graph (DAG) called the Tangle, which functions as a distributed ledger without the limitations of traditional blockchain architecture. In this revolutionary system, each transaction directly validates two previous transactions, creating a self-sustaining network that becomes more secure and efficient as usage increases. The 2025 implementation features “Nakamoto Consensus on a DAG” combined with a voting mechanism among network nodes, ensuring instant finality and true decentralisation. This architecture requires virtually no energy to operate, processes thousands of transactions per second with sub-second confirmation times, and maintains zero transaction fees, making it the ideal infrastructure for the global IoT economy and Web3 applications.
IOTA: Its pros and cons
As of 2025, IOTA has matured into one of the most successful distributed ledger technologies, having achieved its original vision of becoming the backbone for the Internet of Things and machine economy. With the successful implementation of IOTA 2.0 and full decentralisation, IOTA has addressed many of its early challenges while maintaining its unique advantages. The network now operates at enterprise scale with proven real-world applications across multiple industries.
Pros
- No transaction Fees
IOTA remains the only major distributed ledger that offers completely feeless transactions at scale. With IOTA 2.0’s full implementation in 2025, this advantage has been proven in real-world applications processing millions of microtransactions daily. Unlike other networks that claim low fees, IOTA’s architecture fundamentally eliminates the need for any transaction costs, making it economically viable for IoT devices to conduct micropayments, data monetisation, and machine-to-machine transactions that would be impossible on fee-based networks.
- Smaller transactions are possible
IOTA’s feeless architecture has revolutionised microtransactions and nano-payments in 2025. The network routinely processes transactions worth fractions of a cent, enabling new business models such as pay-per-use IoT services, real-time data monetisation, and automated machine payments. This capability has unlocked the true potential of the machine economy, where devices can autonomously transact value based on usage, data sharing, or service provision – something impossible on traditional fee-based networks where transaction costs would exceed the transaction value.
- Scalability
One of the most significant drawbacks to regular blockchains such as ETH and BTC is the duration of authentication by creating new blocks. The peak transaction speed on the Bitcoin Blockchain is only four transactions per second. Ethereum still fairs better, peaking at 20 transactions per second, which is still relatively slow.
The Tangle system on the IOTA network allows several hundred transactions per second. In theory, the scalability is infinite as more and more devices write data.
- Lightweight
The vision of Tangle is to ensure that all IoT devices (even those with lower computing power) can write data and communicate with the Tangle system. This way, every device can perform proof-of-work authentication in minimal time. The lightweight characteristic of Tangle is yet another one of its several advantages.
- Quantum security
One of the criticisms of blockchains is that it is easy prey for quantum computers attempting to attack the network, which is because quantum computers are more than a billion times more efficient in performing hash algorithms than their classical contemporaries.
However, according to the founders of IOTA, the system is ‘quantum secure’ because it utilises trinary computations, unlike classical computers that operate on binary.
Cons
In addition to its advantages, IOTA also has various disadvantages compared to a blockchain:
- Smart contracts
Building a Decentralised Application (or DApp) with IOTA is impossible without smart contracts.
- Vulnerability
While no official proof of a successful attack on the Tangle system is available, many experts are worried. According to mathematical calculations, it may be easy for malicious nodes to infiltrate the system. Furthermore, these calculations show that attacking the Tangle only requires 34% of hashing power, unlike the 51% in the case of blockchains.
Is IOTA different from Bitcoin?
IOTA and Bitcoin may both be cryptocurrencies. But that may be as far as their similarities go. In addition to their similarities, the differences between IOTA and BTC are also quite numerous:
- IOTA requires no transaction fees.
- Unlike Bitcoin, there is no mining or blocks associated with IOTA. Instead, transactions occur on the Tangle.
- IOTA has a transaction speed of approximately 1000 transactions per second, unlike Bitcoin, whose best-case scenario is around 7 transactions per second.
- With IOTA, the more transactions that occur, the faster the system becomes. On the other hand, more transactions on BTC blockchains mean increased queues.
- IOTA is a ‘greener’ crypto as it requires lower computing power, unlike Bitcoin, which is significantly more power and energy-intensive.
- IOTA is the better choice for micro-payments and nano-payments as it requires no transaction fees.
IOTA wallets: What is the best option?
Various options between a physical wallet, a service, or a software programme are available to save IOTA. Whichever the case may be, the wallet will serve as storage for the private and public crypto keys and will help interact with the Tangle system.
Online wallets
An online IOTA wallet hosted on online servers, which is relatively easy to set up and requires no additional cost. The accessibility of these wallets is quite high by logging in from an internet device.
However, this easy accessibility also has its downsides, such as hackers and online scammers. Besides, online IOTA wallets are also less flexible regarding private key access and other settings.
Software wallets
A software IOTA wallet can be installed on a computer.
A software wallet is excellent for beginners because it is free, features simple interfaces, and even offers private security keys. This increases their security rating compared to online wallets. However, hackers and asset thieves can still get to them. Trinity Wallet is an excellent example of this class of wallets.
Full-node wallet
A full-node IOTA wallet is a free wallet that is connected to the network and is very secure. However, this type of wallet requires some technical know-how to set up, and the PC hard disks need to have ample free space.
Hardware wallet
As the name implies, a hardware wallet is a physical crypto storage device that’s offline and safe. However, carrying out transactions on this type of wallet is more challenging. Also, it may be a bit expensive to buy. That said, the IOTA Wallet Ledger is a popular example of a hardware wallet.
How to integrate IOTA payments into businesses?
Considering the fees, transaction speed, and the ability to transfer even very small amounts, IOTA stands out as one of the preferred payment methods that businesses can take advantage of and integrate. One of the preferred methods in the integration process is the use of an advantageous payment gateway such as Bitpace, which is a crypto payment gateway providing fast, reliable, secure crypto payment services.
The various advantages of Bitpace can be listed as follows:
- No coding knowledge needed
The whole process is a simple one-click (or drag and drop, depending on the e-commerce CMS version) installation.
- No fixed payments
No long-term commitments or having to pay any monthly subscription fees. The only commitment is to pay a fee per transaction.
- Crypto or FIAT choice
Get paid in crypto and have it exchanged to FIAT with real-time rates instantly.
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