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What is IOTA? — a short guide

Here's what IOTA is, how it differs from Bitcoin, how much it costs, and more.

Published onJanuary 26, 2018

IOTA is a cryptocurrency, but that doesn’t tell you much. It’s very different from other forms of digital money like Bitcoin, Ethereum, Ripple, and Dash — it’s designed for the Internet of Things (IoT). Its developers see a future where machines trade resources (electricity, storage, bandwidth, data, etc.) and services with each other using IOTA as payment. So what is IOTA, exactly? How does it work, and what are its advantages over other cryptocurrencies?

iota crypto logo

IOTA solves many of the problems other cryptocurrencies face. This is because it’s not based on a blockchain but rather on a directed acyclic graph (DAG), referred to as the Tangle.

Related: What is a blockchain? – Gary Explains

The result? All transactions are free. You don’t have to pay a single cent when using IOTA, whereas sending someone a Bitcoin can cost a few bucks these days. And the transaction fee associated with Bitcoin increases as more people use the cryptocurrency. Not so with IOTA, which will stay free regardless of how popular it may become.

IOTA trading chart view

The free nature of IOTA opens the door to micropayments, which will be important as the IoT industry develops and grows. Bitcoin and other cryptocurrencies fail in this area: when sending a small amount of money to someone, you have to pay a transaction fee that can be many times larger than the payment.

In addition to being free, IOTA has room to grow. With Bitcoin, the more transactions there are, the slower the system gets. Scalability is one of the biggest problems with Bitcoin, which led to the introduction of Bitcoin Cash. IOTA is different, as the network speed increases when more users are making transactions.

What is IOTA, how was it created, and where can I buy it?

IOTA market share
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IOTA first came onto the scene in 2014. It’s not mined like the majority of other cryptocurrencies. All IOTAs that will ever exist have already been created with the genesis transaction. This means the total supply of coins will always stay the same.

And how much is the total supply? A lot — exactly 2,779,530,283,277,761 coins. IOTA is designed for machines, so the high supply makes the cryptocurrency optimal for nanotransactions.

Getting your hands on IOTA isn’t as straightforward as buying Bitcoin — you can’t buy it directly with your credit card. You first have to get a cryptocurrency like Bitcoin or Ethereum and then transfer it to an exchange that supports IOTA, where you can trade one cryptocurrency for the other. Binance is a great option for US citizens, while those in Europe and other regions should also check out Bitfinex.

Is IOTA a good investment?

IOTA wallet

Now that we know What is IOTA, what is its mission? Namely to become the backbone of IoT. On the other hand, Bitcoin aims to become a globally adopted currency that could improve or even replace conventional money, and Ripple mainly serves as a payment network for financial institutions. Nevertheless, the majority of people today still only see cryptocurrencies as an investment opportunity.

IOTA is the seventh largest cryptocurrency in the world by market cap. At the time of writing, one IOTA will set you back around $5 — see up to date price below — making it far less valuable than Bitcoin.

Is IOTA a good investment? That question is almost impossible to answer. Financial experts all have their own views, but the fact is that no one knows in which direction the price will move.

But so far, IOTA has proven to be a fantastic investment. If you had bought $1,000 worth of IOTAs in July 2017 when you could get one for around $0.40, you would now have $12,500. That’s a fantastic return on investment, and a remarkably quick one. Try putting $1,000 in a savings account at your local bank and check how much interest you’ll get after only six months — not much.

IOTA’s value has increased dramatically in recent months, but that doesn’t mean the trend will continue in the future. Some financial experts see cryptocurrencies as a bubble that will eventually pop, while others still believe that they should be a part of everyone’s investment portfolio.

You should never invest more money into cryptocurrencies than you can afford to lose.

So, a word of caution: never invest more money into cryptocurrencies than you can afford to lose. They are extremely volatile — value goes up and down a lot — making them less stable than standard currencies like dollars and euros.

What is IOTA?

What is IOTA – Conclusiuon

Hopefully, we have answered the question, “What is IOTA?” for you. These are only a few basic facts about IOTA. The technology is still relatively new, and while we may treat it primarily as an investment opportunity today, IOTA might soon become a bigger part of our daily lives.

Although people mostly talk about Bitcoin (and occasionally Ethereum, Litecoin, and Dash), there are more than 1,000 cryptocurrencies out there. Some could impact our lives in major ways, while others will quickly be forgotten. It’s hard to predict which camp IOTA will fall in.

What about the other cryptocurrencies?

Now you know more about IOTA, but what about some of the other popular cryptocurrencies out there? To learn even more, check out the following guides:

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