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Controversial IOTA. Nine heavy questions answered.

Controversial IOTA. Nine heavy questions answered.


Cryptoland is innovative, interesting, filled with opportunities, drama, unbelievable stories and fraud. We love it.

The ongoing list of scam-attempts, hacks, thefts, and inside-jobs, though, is part of the daily life -both entertaining and hair-raising.

Decentralized systems enable opportunities for bad parties, one cannot even imagine in the world behind the computer, and yet, we all believe in them.

When legitimate companies decide to collaborate with one of the ~1500 crypto-projects out there, it’s a good sign that things are going in the right direction, but to be honest: most of these companies are still learning about distributed ledgers, so they are merely a positive indicator for the answer of the question: is my money safe?

There are too many cases when these collaborations ended in a fiasco and the devs ran away with the funds. Since bleeding edge tech isn’t audited, and mostly unregulated, we have no bulletproof insurance that the persons involved are good-hearted and acting in the name of progression.

You’re on tangleblog.com, and I write about IOTA like I perceive it, so naturally, things are drawn in a positive way here.

The reason is simple: I believed in the vision before I invested, and now I give them my full support -which, of course, means nothing to smart investors from outside.

Due diligence is the most valuable currency of traders and investors, and also for companies that decide to give IOTA a chance.

The last weeks, however, have shown that there is nothing to fear and that I obviously backed on the right horse. What a year!

Time to sum up the latest evidence that IOTA is a legitimate project, that has the potential to change everything.

IOTA works differently as blockchains in my regards, it’s just a matter of customer habits, that a lot of people doubt the technology, they don’t know, yet.

Therefore, I’d like to sum up a few spicy questions, that have been going around for quite some time.


  1. What about the alleged cryptographic vulnerability in the IOTA signing algorithm, the “MIT”-scientists wrote about?
  2. I heard negative things about the coordinator, what is it?
  3. What about the incentive to run a full node? Does the network find enough supporters?
  4. Is IOTA truly free to use?
  5. What about the bad usability of the wallet?
  6. Why is IOTA still not listed on Bittrex, Poloniex, and Kraken?
  7. There are reports that people have been hacked. What about that?
  8. I waited 20 hours to get a withdrawal from an exchange? Is this IOTA?
  9. If companies and projects don’t need tokens for data-transfer, how does the token gain value?

 

1. What about the alleged cryptographic vulnerability in the IOTA signing algorithm, the “MIT” -scientists wrote about.

 

What a great show! The headline on Forbes and several other magazines alone were incredibly catchy and held back countless companies and investments -that’s for sure.

That the alleged vulnerability wasn’t in effect, that no funds were ever at risk, that the testing conditions were ludicrous, and that everyone involved acted with a conflict of interest, wasn’t part of that article by Amy Castor.

But in mine: https://www.tangleblog.com/2017/09/13/competitors-amy-castor-tale-reputation-usage-discredit-campaign/

Since then, a second article from the Digital Currency Initiative of the MIT Media Lab left many believers speechless, as the allegations were clouded in unsubstantial criticism.

The IOTA foundation then decided to respond to the matter at hand and they included a list of conflict of interests.

As part of a natural decision process, you should read all parts in order to draw a conclusion.

Part 1

Part 2

Part 3

Part 4

The not so responsible “responsible disclosure” was lead by Neha Narula of the MIT Media Lab. I’ve received several direct messages from Harvard and the MIT since then, that my research was accurate.

As for the future: The IOTA foundation decided to hire independent professionals (www.cybercrypt.dk), to work on the mentioned signing algorithm, in order to legitimize their efforts and to develop a working and smart solution.

Please read the blog-post of IOTA to understand how serious the efforts of the IOTA foundation are.

To draw my conclusion:

-IOTA is working as intended

-There is no vulnerability, the funds of investors were and are 100% safe at any time.

-Independent cryptographers, in addition to the competent IOTA team, are working on the maintenance and security of the tangle

-Competing projects try to slow down IOTA’s progress

-In order to get an unbiased opinion, investors should take their time and view all evidence to understand that forces are working in combined efforts to harm IOTA.

Up to this day and after repeated requests from the IOTA team, the DCI team has still not released any exploit code publicly.

-This is how the crypto-community thinks about it: https://www.reddit.com/r/CryptoCurrency/comments/7svr8r/mit_media_lab_dci_allegations_proven_wrong_iotas/?sort=confidence

 


2. I heard negative things about the coordinator, what is it?

Maybe the most controversial discussed topic in the IOTA ecosystem.

A node, in possession of the IOTA foundation, that is setting milestones, and that is used to take away the money from the people?

Bollocks. First of all, read the transparency compendium by the IOTA foundation.

The coordinator is training wheels for the juvenile network and has solely the task to set milestones as a Sybil-attack resistance, nothing else. Also, if people want to code referencing nodes themselves, they can do it, because the knowledge is out there, but people just did not do it yet, hence the importance of the security measure “coordinator”.

Needless to say: the foundation, which is officially registered in Germany as a non-profit organization, under German law, will not exploit it. They would stop their complete venture, which makes zero sense.

Luckily, we humans, sometimes, have a brain and can handle imperfect situations for the greater good.
So here is my personal opinion as someone that is part of the IOTA community for a long time:
I do trust these peoples, I know them for 2 years, they are nothing but progressive and eager, so I’d rather chose them over a world, where people just try to exploit everything they can. Including temporary solutions that aim for security.
Because it is necessary.
In a few months, when the hash power is big enough, the training wheels can be taken away step by step and the bad actors cannot attack the network with a Sybil-attack anymore.
That is a trade I’m willing to make, as someone that doesn’t like an inefficient Bitcoin et. al., that doesn’t like the waste of mining electricity and the hypocrisy of the whole cryptoland, because what matters is innovation and not a useless buzzword a la “decentralization” that won’t matter soon.

 

3. What is the incentive to run a full node? Does the network find enough supporters?

It’s been a while since I wrote my article about the incentives. Many things have happened until then.

The number of full-nodes has been steadily increased and estimates say we are at approx. 5000 but there is yet no way to pinpoint the number.

With the help of Zoran and the audience of my Sonntagsplausch and Sunday banter, we managed to add an additional number of ~400 full nodes to the existing base.

The people obviously believe in the technology and are willing to spend their time and money on it, even without compensation.

A good source to set up your own full node is IOTA.partners

But there are other mentionable ventures.

Roman Semko from Semko development in Leipzig, Germany, is creating an ecosystem for the improvement of the Tangle topology.

Carriota, Nelson, and Bolero are brand-names of his proprietary software, that is running on top of IOTA, a layer that enables connections between all other Nelson participants and the Tangle itself.

Bolero even goes a step further in creating an easy 5-step installation of a full node that connects to the Nelson Network.

This solution works as a supplement which is wrapped around the Tangle. Its effects are quite helpful, especially because it significantly lowers the entry barrier for people that want to help.

His solutions are on the website http://www.carriota.com/ and in Github 

We know that several cities and companies research the tangle for their business models.

Cities like Taipei, Tokio or Haarlem are creating clusters in the Tangle network, that rely on several hundred full nodes, which are added to the high number very soon.

We heart that argument very often: IOTA cannot work, there is no incentive.

They were wrong!

 

4. Is IOTA truly free to use?

That is a matter of taste.

In terms of transaction fees, yes. IOTA has no transaction fees. You send one cent from Japan, the guy in Brazil gets one cent.

However, you need to keep in mind that there must be a spam mechanism to prevent malicious parties from flooding the network.

Therefore a low proof of work algorithm has been added as an anti-Sybil-mechanism.

That is a countermeasure because a system like IOTA will always be targeted in order to try a double-spending attack.

There is practically no way to perform such an attack successfully, but that doesn’t stop some antagonists to attack the network anyway.

Mostly in order to slow down public nodes to make it look like IOTA wouldn’t work. That is a side effect of using the light-node system: you have to rely on your light node provider.

A full node has a way better user experience.

To conclude: IOTA is free to use, but the proof of work is necessary to protect the funds. There are no fees other than tiny amounts of electricity.

Compared to Bitcoin as the one cryptocurrency which is known the most, you had to pay ~$15 or more to send your amount.

Try to send 15 times one cent from your position to Brazil and compare the added transaction fees from Bitcoin and the electrical costs of IOTA’s marginal PoW.

$225 vs 0.0001 cents for electricity.

IOTA is as free as it gets.

 

5.  What about the bad usability of the wallet?

Before I get into that, I want to point out IOTA’s take on that, that has been repeated numerous times.

IOTA is made for the machine economy. Since competition and time are issues that are taken very seriously, the focus of the limited resources of the IOTA foundation lays, therefore,  in creating a protocol, the research of the technology, collaborations, and simulations.

Take a look around and compare IOTA with other projects that have a different approach: Byteball, Raiblocks(Nano), Pascalcoin.

The usability is higher in all of them, but they lack research, collaborations, simulations and a clear vision of how and where they want to solve problems. One of them received help from IOTA co-founder Sergey Ivancheglo because he found flaws in their system and helped them to correct the issues. Responsible disclosure done right – no FUD, no malice.

IOTA lacks usability and an easy to use wallet because they focused on getting Bosch, Volkswagen, Fujitsu on board. The list of collaborations and business connections is already too long to list them in one article, but it’s hard to deny that IOTA chose the way of success and adoption.

The Trinity wallet of the University College London around Dr. Navin Ramachandran, Charly Varley and a few other developers is the solution for the usability issues people communicated.

It will include an automated re-attach functionality, an address-re-use protection, a secure seed generator, and better UI. Critical issues that are problems of the Wallet that is in use right now.

This will take a few weeks, but from then on other projects have no advantage in terms of usability anymore.

Investments in the cryptocurrency sphere are often directly connected to the expectation value of an asset.

If the usability of IOTA is improved vastly, what do you expect?

 

6. Why is IOTA still not listed on Bittrex, Poloniex, and Kraken?

There are 5 reasons.

  1. Cryptoland has seen a tsunami of new registrations, ERC20 tokens, ICO’s, DDoS attacks.
    Exchanges need to compensate for all of that. Nothing is ensured or given, this is an ecosystem in development.
  2. IOTA is not easy to implement and maintain. The IOTA foundation develops the IXI, a library that makes it easier to implement IOTA on exchanges.
    The special abilities of IOTA need special treatment, therefore, we still see just a handful exchanges. Still. Bitfinex, Coinone, Binance, and Okex are not bad when we think about the circumstances.
  3. The focus of the Foundation on collaborations, adoption, research etc.
  4. The mentioned exchanges are regulated especially the US-based companies. Adding new cryptocurrencies is not easy under the new regulations.
  5. There are other, more important markets than cryptocurrency exchanges. The IOTA foundation lately talked about the possibility of adding IOTA to the stock market. This would mean that IOTA had access to regulated, legit funds, companies and traders all over the world. A very helpful company in that regard is the Advanced Blockchain AG in Germany.

 

7. There are reports, that people have been hacked. What’s that about?

That is a misconception that has been created by the yellow press and blogging landscape of cryptoland.

IOTA has never been hacked. Seeds cannot just randomly be found. The possible combinations of seeds in the IOTA Tangle are higher than all atoms in the observable universe. This is not just a phrase, it’s a fact.

If people lose their money, it’s mostly because they used a rigged online seed generator, or they gave someone access to their seed in other ways.

As long as only you know your seed, and no one has access to it, your funds are 100% save.

 

8.  I waited 20 hours to get a withdrawal from an exchange? Is this IOTA?

No. That’s a combination of 3 things. Your expectation, IOTA’s usability, and that exchanges are struggling to handle the insane numbers of requests by their user-base.

IOTA is pretty young, special, focused on corporal adoption. You shouldn’t expect it to be like consumer software with steady support and service.

The usability makes it look like IOTA is slow and broken, the truth is that if you know the appropriate solutions to issues, it almost always works, depending if the network is working as intended or not.

Attacks, snapshots, and improvements forced the developers numerous times to halt the coordinator or to upgrade the full nodes. That will improve vastly in the future, as the growing network ensure that the coordinator will be removed eventually and snapshots will be performed locally.

Exchanges will handle IOTAs deposits and withdrawals way better in the near future, as the IXI hub is in its final stages of development.

All 3 reasons considered, IOTA has a bright future in terms of user experience.

 

9. If companies and projects don’t need tokens for using the tangle, how does the token gain value?

A question that has been asked many times lately.

Remember that IOTA has basically 2 functionalities:

a) send data

b) send values

When companies use the IOTA data marketplace for selling their sensor-output, they use both functions as they offer their data and on the other hand, demand just a few iotas for each data-package.

How would they get paid, if the costs of the information are at a fraction of a cent? With a credit card or PayPal?

No. The established payment options cannot be used for micropayments. That is the whole idea of a machine economy.

Machines get a wallet and get paid for their work, especially when microtransactions are needed, such as electric vehicle charging.

For that, you need iotas, the currency of IOTA.

The total supply is limited, therefore rises in value the more real-world use-cases are built around it.

The IOTA foundation stated, that companies that are working with IOTA are “forced” to use iotas and not a “tokenized asset” on top of the tangle, to ensure that the value of the iotas will be secured.

If a company decides to only use the data transaction, they still support the system with proof of work and a better confirmation rate.


Most importantly: The IOTA foundation is a non-profit organization (gemeinnützige Stiftung) under German law, registered in Berlin.

That means that the founders and developers of the foundation are working transparently in favor of society to be “gemeinnützig” – serving the public good.

This major step into mass adoption and building a trustworthy standard for the Internet of Things shouldn’t be forgotten.

Their latest efforts in creating educational blog posts on their official medium blog should shed light on many uncertainties.

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8 Replies to “Controversial IOTA. Nine heavy questions answered.”

  1. Great information here. Summed up very well. A great read for anybody that wants accurate information and doesn’t have the time to filter multiple sources.

  2. So the incentive to run an IOTA full node is because people believe in it? There are a lot of good answers here to FUD questions That one isn’t one of them.

  3. Thanks for good article.

    Question on 6.5:
    Can you elaborate a little bit more about ‘adding IOTA to the stock market’? What do you mean by ‘add’ in this context?

    1. IOTA has a few connections in that direction. Also, numerous times they told us that they want to separate from cryptoland as soon as possible. Also, there was a thread on /r/iota about this topic, but I cannot look for that right now, it shouldn’t be too hard to find, look for IOTA Q theory, stocks, etc.

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