Because there are no miners, transactions on IOTA do not have to wait to be included in newly generated blocks, nor do they require any fees in order to be processed by the network. Since the Tangle is a DAG, it can potentially confirm tiny transactions much faster than conventional blockchain technology. IOTA uses a much lighter transaction consensus model, which dramatically improves transaction speed and its finality, allowing actors to secure any transaction or data on-chain instead of having to outsource them to a second layer solution (see below for more information). This precludes any applications that require near-real time settlement, such as traffic management that is secured directly on the base layer of a DLT. Blockchain transactions are typically limited by the speed at which miners can discover new blocks, called block timing. In terms of scalability and flexibility, IOTA’s founders also sought to improve upon existing blockchain transaction speeds. In order for the IoT to scale to the level of a city or a traffic system, these millions of transactions would need to be unencumbered by the fees inherent to nearly all public blockchains currently in existence. These principles have positioned IOTA to become a standardized network protocol for applications like the Internet of Things, in which “transactions” can involve something as small as one tiny sensor in a vehicle. Scalability and fee-less transactions remain the guiding principles behind most of the developments at IOTA. IOTA’s founders saw an opportunity for a technology that could scale to the level of enterprise and civic projects while simultaneously reducing or eliminating the fees associated with blockchain transactions. The IOTA Foundation was founded in 2015 to address some universally perceived shortcomings of blockchain technology. Although tiny transactions are not the only thing that the Tangle can facilitate, the ability to scale from tiny machine sensors to the largest networks of civic architecture is a distinguishing feature of the IOTA ledger. The name was chosen by the IOTA Foundation because the Internet of Things will consist of billions of tiny transactions and exchanges per day. The word iota refers to the Greek letter Iota and its contemporary definition, meaning a minuscule amount of something. The IOTA Foundation’s Board of Directors includes Dominik Schiener, Dr. The Foundation believes the machine economy should be built on a feeless protocol, be scalable and ecologically friendly, and allow for a low-energy exchange of value and information. The founding principles of the IOTA Foundation revolve around open-source and community-centered ethics. This new form of exchange is what we call the “machine economy.” Applications in e-commerce or for human-to-human purposes, however, can still be provided for with a fee-less cryptocurrency like IOTA. This evolution of value and data exchange will optimize manufacturing, supply chains, civic engineering, transportation, finance and other industries. As the internet evolves and more aspects of our world become digitally connected, the Foundation aims to use the IOTA protocol to enable a new form of value exchange and establish a web of trust between devices and people, as well as between the devices (“things”) themselves.
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