What is IOTA? Your ultimate guide

If you’ve ever wondered 'what is iota?', then read on, as we tell you all about it.

Iota is a coin that is not based on a blockchain - Photo: Shutterstock


What is iota? The iota cryptocurrency is a token which aims to be a specific crypto coin that does not rely on blockchain technology as it interacts with the so-called Internet of Things as part of the IOTA protocol. But what is IOTA used for? How does IOTA work? Let’s take a look and see what we can find out. 

One of the important aspects of both iota and IOTA that make them different from their rivals is hidden in their names. The system and, by extension, the native token are designed to work with the Internet of Things, or IoT for short. What is the Internet of Things? Let’s define it. 

IOTA, iota and the IoT

The internet is, at its heart, a computing phenomenon. Traditionally, people have used their laptops and desktops to go online. Even if we look at the smartphone boom of the past 10 years or so, they are, in effect, portable computers with wireless connectivity, cameras and phones integrated into them.

There are, however, a growing number of devices that connect to the internet which are not computers in any traditional sense. For instance, smart fridges, which can send an online message to their users if their doors are open, or if they are low on certain items, are part of the internet of things. They are not anything like computers, but they are connected to the internet.

Another example would be voice-controlled digital assistants, such as Amazon’s Alexa or Google Home. Again, these devices are not computers but there is no way they could work without the internet. There are also devices in cars that help track mileage and use which fall into that category. 

So how does IOTA link to the IoT? In order to explain that, we'll have to have a look at how IOTA works.

Not a blockchain

Let’s start by talking about IOTA. This is a distributed ledger. A distributed ledger is not quite the same as a blockchain. One of the differences is that blockchains, as their name suggests, contain blocks of data, while a distributed ledger does not have to be made up of blocks, it just has to have data spread across a group of computer users, or nodes.

Another difference is that all the data in a blockchain has to be in a particular order, while a non-blockchain distributed ledger does not need to have data in sequence. A blockchain might use the Proof of Work consensus but a distributed ledger does not necessarily have to have this consensus. Blockchains also need to have a token, but while a distributed ledger might have a token, like IOTA has iota, tokens are not strictly necessary.

While this list so far might suggest that distributed ledgers are more flexible than blockchains, we should also point out that blockchains are more used in practical, real world situations. There are also enough similarities that it might be most accurate to say that a blockchain is a kind of distributed ledger but not all distributed ledgers are blockchains. 

The distributed ledger aspect gives the coin and the network their own unique selling points. We are, at least in theory, looking at a cryptocurrency that is not associated with a blockchain. While there are crypto tokens, which are based on programmes that sit on another blockchain, it is fair to say that IOTA has its own computing ecosystem behind it making it a coin, much in the same way that bitcoin has the Bitcoin blockchain and ether has the Ethereum blockchain. But there is a difference in that IOTA is not really a blockchain.

This means that crypto investors who are looking for a crypto coin that uses genuinely alternative technology and a system that provides that different technology might well want to invest in it.

Iota infographic
The difference between distributed ledgers and blockchains - Credit: Currency.com

Iota, the crypto

The proper name for the distributed ledger that powers the IOTA system is the Tangle. While this name might seem a bit unusual, it actually makes sense. This is because if we were to draw a diagram of how the various computing nodes interlink, it would look like a big tangle of lines. What IOTA wants to do is to exist on the internet of things and, in effect, sit on the network and serve as a way for people who can access the IoT to take part in transactions. The iota coin is what powers the system, allowing users to fund these transactions. 

One thing to note about the iota cryptocurrency is that it is usually traded in mega-iotas, or MIOTA, which comprise 1,000 iota coins. Somewhat confusingly, you will often see IOTA used to mean MIOTA, although hopefully the context in which they are used should tell you whether someone is talking about the system or the crypto. 

Two previous transactions from another node are used to process a transaction, while a comparatively simple mathematical puzzle is used to help validate it. This means, at least in theory, there are no fees for transactions on the system and very small microtransactions can take place. 

The iota cryptocurrency itself is used to fund the transactions that take place across the system. Because there is no mining or staking in the processing procedure, there are no fees. 

As of 23 November, 2,779,530,283 MIOTA,the entire supply of the coin, is in circulation.

History and controversy

IOTA was set up in 2014 by developers David Sønstebø, Dominik Schiener, Sergey Ivancheglo, and Serguei Popov. While IOTA itself was launched in 2015, it was not until 2017 that its associated cryptocurrency was launched on the open market, even though the concept behind it had been there since the distributed ledgers launch.

As Sønstebø said at the time: “IOTA should not be considered an alternative coin (altcoin) to existing cryptocurrencies such as Bitcoin, rather it is an extension of the growing  blockchain ecosystem. It’s meant to work in synergy with these other platforms to form cohesion and symbiotic relationships. IOTA is designed to provide one solution that no other crypto does: efficient, secure, lightweight, real time micro-transactions without fees.”

That’s IOTA explained, but a fair IOTA review should look at some of the problems with the system that have turned up over the past few years. For instance, in 2018, an IOTA coin worth $11m was stolen from 85 people in a hack. The crypto was found, but the news that so much had been stolen from so many people caused concern. Then in 2020, the entire network had to be shut down after another hack. The foundation behind the system later changed its security procedures, but this would be something that would have caused some concern for potential investors. 


As of 23 November, 2,779,530,283 MIOTA,the entire supply of the coin, is in circulation.

It's fair to say that both the iota coin and the IOTA system are legit. It does need to be pointed out, though, that the system has suffered hacks in the past. 

You can buy iota at some, but not all, cryptocurrency exchanges. We don't have it at currency.com yet, but we will let you know if and when we do. 

Further reading

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