Crypto Pick: IOTA (MIOTA)

IOTA is one of my favourite cryptocurrencies, and is not built on blockchain technology. It is still a form of distributed ledger but instead of storing blocks of transactions that are connected sequentially (in a chain), transactions are instead stored in a neural structure. How does that work?

 Photo by StationaryTraveller/iStock / Getty Images

Photo by StationaryTraveller/iStock / Getty Images

The rationale for this structure is because of the way the proof-of-work (POW) is done on the network. For each transaction to be validated, it must first do POW to validate two existing transactions. Hence, newer incoming transactions are always doing the POW for the pre-confirmed transactions. This network of transactions is called The Tangle.

You can see that as more and more people use the system, there will be more incoming transactions, and existing pre-confirmed transactions will likely be validated more quickly. As such, this structure of distributed ledger has a significant advantage over blockchain – infinitely scalable.

Besides scalability, transactions in IOTA are also feeless. In traditional blockchain, the incentive for doing POW is the block reward, where you are paid in newly minted coins. In IOTA, it is necessary for users to do POW so that their transactions can be validated. There are no transaction fees or block rewards to speak of in IOTA.

The Implications of IOTA's Design

IOTA was designed to be a cryptocurrency token that runs behind internet-of-things (IOT) systems. As data is transmitted rapidly and frequently in IOT, it is necessary for a scalable and feeless design. 

However, the token itself has a value, which is why the IOTA token can also be used a currency. As a cryptocurrency, IOTA's feeless and scalable design also makes it an attractive alternative to Bitcoin (BTC) and Ethereum (ETH). During the crypto market's bull run in December 2017, there were too much ongoing transactions for BTC and ETH that transaction rates slowed while transaction fees rose because their prices escalated too much.

That is not to say that IOTA is perfect, because it has not gone through a real-world stress test like that of BTC and ETH in December 2017. Nonetheless, I feel that IOTA has become much more usable as a currency than BTC and ETH because of the Trinity Mobile Wallet.

The Trinity Wallet is a mobile application that allows users to send IOTA to each other safely, securely, and without much need to understand the underlying technology. Imagine everyone having a wallet on their mobile phones. It is currently still in beta phase and has faced many controversies leading up to its beta launch. However, as a beta user and long-time supporter of IOTA, I am certain that this is the way to getting the coin to hit mainstream adoption.

The last aspect of IOTA that I would like to talk about is its trinary design. Without jumping into the details about binary and trinary structure, this design allows IOTA to be quantum-proof.  Quantum computers, which are often considered a threat to blockchain technology, will not be able to attack and disrupt The Tangle because of this design. 

Proponents of blockchain technology will argue that quantum computing is at least 5 years away, and the technology will have matured significantly to counter its threat by then. However, the trinary design supposedly allows IOTA to function very much efficiently (note the use of much), which brings us to this whole realm of Qubic and Oracles that IOTA is working on.

Market Value of MIOTA

The smallest unit of IOTA is 1 iota, and the traded token on exchanges are Miota, which means 1 Million iotas. Do look out for that if you are buying it.

I started exploring MIOTA when it was under US$1 each. It then rose to around US$5 during the bull run, probably because people were pumping prices up. It has since been on a steady decline, and I have dollar-cost-averaged my IOTA holdings all the way since, so I am actually on a loss.

Despite the release of Trinity Wallet, being launched on many new exchanges, notable partnerships, and even the announcement of Qubic in June 2018, prices continued on a downward spiral. This can be largely attributed to the price movement of Bitcoin. The entire altcoin market mirrors the upwards and downwards price changes in BTC, so you would not expect IOTA to be spared, unless there is a significant change where investors do not believe in BTC anymore.

Personally, I feel that the stage is already set for retail investors to join in the speculation, not to mention that the "right type of positive news" are already in place for pump-and-dump groups and speculators to capitalise on and bring the price of MIOTA to new highs. We are all awaiting the trend reversal in BTC to ride the next wave, which also applies to many other altcoins.

Personal Evaluation Of IOTA (MIOTA)

I am invested in and see the value of the token for use in IOT systems, and am even more excited about the use cases of Qubic. As a currency, I would also rate IOTA as more usable and user-friendly than most cryptocurrencies out there. However, my personal beliefs do not necessarily translate to a fair market valuation of MIOTA.

As an investor, I recognise that the market is highly manipulated, and even when prices do pick up, I will definitely be closing some positions rather than holding all my coins forever. From a technical standpoint, we have had strong market support at just around US$0.93, so that would be my recommended buy-in for long positions. Even current prices today (around US$1) are already a significant bargain from my averaged-down purchase price.

So yup, top crypto pick, and my personal favourite, IOTA (: