Tangle (IOTA)

What Is the IOTA Tangle?

The IOTA Tangle is an innovative type of distributed ledger technology (DLT) that is specifically designed for the Internet of Things (IoT) environment. The IOTA technology is based on a new type of DLT, not the traditional blockchain model. It was created by the IOTA Foundation, a non-profit foundation incorporated and registered in Germany. The IOTA Foundation’s mission is to support the development and standardization of new DLTs, including the Tangle.

The design limitations of existing blockchain systems for some applications led to the development of virtual currency alternatives that could be used to serve different purposes. IOTA Tangle was developed to enable micro-transactions without fees for the growing ecosystem of IoT devices. IoT devices are network-enabled devices, including products such as smart appliances, home security systems, computer peripherals, wearable technology, routers, and smart speaker devices that have Wi-Fi connections, Bluetooth connections, or near-field communication (NFC).

Tangle was created with the promise of high scalability, no fees, and near-instant transfers.

Understanding the IOTA Tangle

IOTA is a cryptocurrency; its architecture is called the IOTA Tangle. Tangle uses a proof-of-work (PoW) system for authenticating transactions on a distributed ledger. Tangle's PoW system is similar to the one used by bitcoin, but it uses less energy and takes less time than other PoW systems (including the one used by bitcoin).

The interconnectedness of Tangle's architecture doesn't require total verification across the ledger. Instead, all parties are verifying simultaneously and, as a result, the energy and time required to complete transactions are shortened. In addition, Tangle's verification process purports to ensure that there are no duplicate transactions that would lead to double-spending.

However, the system itself was not sufficient to protect against a massive, coordinated attack. As the Iota Foundation noted, "If an attacker controls the majority of hashing power in the network they can also control the direction of consensus. In particular, such an attacker would be able to double spend and split the network."

To protect against this kind of attack, Iota developed a role called the "Coordinator." The Iota Foundation was in charge of running the Coordinator program. An announcement in May 2019 informed the cryptocurrency community that the IOTA foundation intended to remove the role of the Coordinator as part of a whole-system upgrade called Coordicide.

In IOTA's whitepaper, Tangle is described as the successor of blockchain technology: “The Tangle naturally succeeds the blockchain as its next evolutionary step, and offers features that are required to establish a machine-to-machine micropayment system."

Special Considerations

Advantages of Tangle

Another benefit of Tangle technology is the cost of operating it. For blockchain-based cryptocurrencies, like bitcoin, there is a transaction fee levied for all transactions occurring on the network (irrespective of the transaction value). Because the transaction storing and processing mechanism of Tangle doesn't require any miners, there are no transaction fees.

As the number of small-sized micropayments (payments that involve fractional amounts) increases significantly in the future, transaction costs will make the use of blockchain-based cryptocurrency impractical for such payments. High transaction costs have already led to the problem of bitcoin dust. Bitcoin dust refers to the small amount of bitcoin leftover or unspent in a transaction that is lower in value than the minimum limit of a valid transaction. Thus, processing the transaction is impossible, trapping a tiny amount of bitcoin in a wallet or address.

Iota's System Upgrade

Prior to the announcement of the launch of Iota's major system upgrade, called Coordicide, the role of the coordinator was necessary to protect user funds within the Tangle network. The coordinator was a security mechanism that ensured the authenticity of transactions and prevented double-spends. The role of coordinators was to nullify the impact of any conflicts in the record; in the case of a conflict, a coordinator was expected to reject a transaction.

However, since a coordinator was free to approve all kinds of transactions, they could approve faulty ones as well. In theory, a new transaction issued by a coordinator that approved an erroneous transaction would not be approved by other coordinators, thereby maintaining network integrity. In theory, this mechanism of requiring additional approvals was intended to ensure that only genuine transactions were approved by the system and with a higher level of confidence, speed, and efficiency.

However, the core tenet of the philosophy of distributed ledger technology (DLT) is that they should lack a centralized authority. Tangle ran afoul of this philosophy; it required the coordinators in order to properly monitor its system and prevent attacks. In this way, Tangle had a central authority verifying all of its transactions; this is exactly what cryptocurrency was intended to do away with.

Critics of Tangle said that the necessity of the coordinator role allowed the Iota Foundation to choose which transactions would receive priority. In addition, this role provided an opportunity for a single point of attack: If, for some reason, a coordinator stopped working or was taken over, confirmations in the network would halt.

The IOTA Foundation had been working for years to get rid of the need for the coordinator role. This initiative, which was finally announced in May 2019, is called Coordicide.

The fact that Iota experienced delays in moving away from this form of centralization was reportedly the primary reason Iota's lead developer and co-founder Sergey Ivancheglo served David Sønstebø, the Iota Foundation’s director and another co-founder, with a lawsuit for roughly $8.5 million.

In late December 2019, the IOTA network was down for 24 hours, possibly due to a coordinated attack. Once the IOTA Reference Implementation (IRI) system marked a transaction as “already accounted for” in one bundle, it was ignored in the next bundle, which resulted in a corrupt ledger state from which the node was unable to recover. The incident led David Sønstebø to say Coordicide shouldn't happen too quickly (and certainly not until all the bugs had been ironed out).