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The Rise and Fall of IOTA (mIOTA) – A Bittersweet Story
IOTA – A Brief History
IOTA is a cryptographic protocol that runs on a unique form of Distributed Ledger Technology (DLT), significantly different from most cryptocurrency projects. It is different for one vital reason; IOTA doesn’t run on a blockchain!
As we have tried to iterate multiple times, blockchain, the distributed database technology, is just a subset of DLT. So then, what kind of database technology does IOTA use?
IOTA was developed and initiated by David Sønstebø, Dominik Schiener, Sergey Ivancheglo, and Serguei Popov. They used a known cryptographic method – Directed Acyclic Graphs (DAG), to develop their version of DLT called ‘The Tangle.’ The Tangle built on the theory of Directed Acyclical Graph (DAG), describes a protocol allowing for greater intimacy among nodes by connecting them non-linearly with each other.
IOTA is a distributed ledger designed to record and execute transactions between machines and devices in the Internet of Things (IoT) ecosystem. The ledger uses a cryptocurrency called mIOTA to account for transactions in its network. The idea behind building a new form was the DLT mechanism, which was targeted to ensure IOTA could be potentially quantum resistant. Most blockchain ledgers can be penetrated with malicious intent if the attacker is using quantum hardware. Quantum resistant software is minimal because of the degree of protective measures required. IOTA solves this by increasing the size of a key to making it tougher to break.
The Tangle, which is the data structure behind IOTA, is a particular kind of directed graph, which holds transactions. Each transaction is represented as a vertex in the graph. When a new transaction joins the tangle, it chooses two previous transactions to approve, adding two new edges to the graph.
Compared with Bitcoin, IOTA keys and signatures are far more difficult to decipher because of how massive they are. But the drawback of a Witnernitz/Lamport signature is quite significant; you cannot reuse an address after using it for a transaction. When you sign a transaction, half of your private key is revealed. This means everyone has half of your private key after you sign a transaction. If you were to use it a second time, the random generation might give the network a portion of the entire remaining portion of your private keys, putting your IOTA tokens at severe risk.
The IOTA Medium blog has a very unique illustrated explanation for the more interested reader.
Ticker Symbol: MIOTA
Max Market Supply: 2,779,530,283
Current Supply: 2,779,530,283 MIOTA
Average Tx Time: 1-2 minutes
Inflation rate: Nil
What Went Wrong
To honestly portray the reasons for IOTA’s doom, one has to look into several cases that cumulated to what it is today. Events range from developing flaws, community instability to outright malpractice. It wasn’t one particular event that leads to IOTA’s eventual demise, but a series of events that spread the message of instability, manipulation, and lack of drive within the community.
In a report by MIT’s lead researcher Neha Narula, several of IOTA’s “cryptographic flaws” were revealed, which suggested that the project was “fundamentally flawed” and had to be bootstrapped from scratch. She explained that basic cryptographic hash functions had to go through years of vetting and testing before it actually is ready for large scale use. But in the case of IOTA’s hash function, Curl, which was developed in-house, no market testing was done, which lead to several vulnerabilities being left for manipulation.
Throughout the project’s life span, several markets manipulating moves were made to increase investors’ interest. In the 2017 bull run, IOTA had made claims of joining hands with another failed project: Einsteinium, which leads to investors rushing to get their hands on some MIOTA. Another instance was when a media bulletin was released about MIT and IOTA’s prospects joining hands to experiment with the project, which too turned out to be false. These announcements temporarily pushed the MIOTA token’s value as intended, but as the truth came to light, it pushed the price lower than it previously was. IOTA team made efforts to set the record straight. However, the damage was already done.
Among technologists, the IOTA Foundation became known for scandalous emails in 2018 between the IOTA Foundation co-founder David Sonstebo and Neha Narula of MIT’s Digital Currency Initiative, who ousted the hash flaws in IOTA’s code. David had accused the researcher of helping CoinDesk prematurely publish vulnerabilities in the IOTA software and violating professional disclosure norms. (She denied both.) By 2019, members of the IOTA community earned a reputation for routinely harassing women security experts, like Open Privacy founder Sarah Jamie Lewis, who found flaws in IOTA research.
Fear of Centralization
The IOTA Foundation turned off the coordinator node in February 2020 to stop an attacker from stealing funds from the foundation’s wallet service for retail investors, highlighting the fundamental challenge of decentralizing a crypto project. Although they have claimed to have saved about $15 million worth of MIOTA from the targeted wallets, this action takes the bigger picture out to light. The Foundation, by acting in the best interest of the wallet holders, failed in the very task that they were supposed to withhold, of being a decentralized community-driven project. If developer intervention can be made to stop attacks, it can manipulate the market.
The Years Since – Author’s Thoughts
In the years since the first domino was set into play, the road has been pretty much downhill for the foundation. With accusations such as Market manipulation by announcing fake partnerships, derogatory behavior at the top, to outright failure of decentralization, IOTA has managed to make investors absolutely wary of the project. Token wise, the road is not so different as MIOTA saw its long and steep voyage from $5.14 in 2017 to $0.22 in 2020.
Tangle’s concept, detachment from a traditional blockchain to a more forward-looking one, its claims of Quantum resistance, and the ability to do micro-transactions were some of the reasons IOTA seemed a huge prospect back in the day. But time has shown that without proper management, community vision, and lack of fundamentals, even a good project can be a failure.