IOTA is a public distributed ledger that utilizes a novelty, called “Tangle”
The Tangle is a new data structure based on a Directed Acyclic Graph. It has no Blocks, no Chain and also no Miners. Because of this new architecture, things in IOTA work quite differently compared to other Blockchains.
The major difference that is worth mentioning is how IOTA achieves consensus and how transactions are made. As mentioned previously, there are no miners. This means that each participant in the network that wants to make a transaction has to actively participate in the consensus of the network by approving 2 past transactions. This attestation on the validity of two past transactions ensures that the whole network achieves consensus on the current state of approved transactions, and it enables a variety of unique features.
IOTA has a range of features that are uniquely enabled due to its architecture:
- IOTA can achieve high transaction output thanks to no limits of transaction aprroval.
- IOTA has no transaction fees.
- IOTA has no miners. Every participant in the network that is making a transaction, actively participates in the consensus, which lead to a complete decentralization.
The IOTA Tangle
The main innovation behind IOTA is the Tangle. It’s a novel new distributed ledger architecture that is based on a DAG (Directed Acyclic Graph). Also called a “Blockchain without Blocks and the Chain” .
The Tangle still has the same underlying principles as any Blockchain: it’s still a distributed database, it’s still a P2P Network and it still relies on a consensus and validation mechanism.
In IOTA there are no “blocks” in the classical sense. Instead, a single transaction references two past transactions. This referencing of transactions is seen as a validation in usual sence.
Instead of a smaller subset of the network being responsible for the overall consensus (miners / stakers), the entire network of active participants (i.e. devices making transactions), are directly involved in the approval of transactions. As such, consensus in IOTA is no longer decoupled from the transaction making process.
The transaction making process in IOTA is a simple, 3 step process:
- Signing: You sign the transaction inputs with your private keys
- Tip Selection: Two tips (i.e. unconfirmed transactions) are selected.
- Proof of Work: In order to have your transaction accepted by the network, you need to do some Proof of Work — similar to Hashcash (spam and sybil-resistance).
Once you’ve done that, your transaction will be broadcast to the network. Someone else will come along, choose your transaction in the tip selection process and validate it. And just like that, your transaction is confirmed.
No Transaction Fees
Because IOTA achieves consensus on the validity of transactions without the involvement of any miners, no transaction fees are paid. IOTA is the first transactional settlement protocol that enables you to transact even sub-cent values Peer-to-Peer without any transaction fees for either the sender or the recipient.