Beginner’s Guide to IOTA

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IOTA is a crypto token (IOT) specially designed and optimized for the Internet-of-Things (IoT). The team behind the project developed a new distribution ledger architecture which aims to support the 4th industrial revolution and machine economy, where machines trade resources and services with each other without third party involvement.


In the near future, your phone and computer probably won’t be the only devices connected to the internet. Every physical device ranging from your fridge, oven, car, and even house may be interconnected via the internet. This inter-networking of equipment is called the Internet of Things (IoT), a market that is expected to be worth $267 billion and have 30 million devices connected by 2020.

However, the mainstream adoption of the IoT faces a lot of challenges, with the two most challenging ones being security and scalability. The mission behind the IOTA project is to solve these issues leveraging cryptography and directed acyclic graph (DAG) technology to provide a decentralized alternative to the blockchain.

Why the need for a Blockchain-Free Cryptocurrency?

Although bitcoin and its underlying technology, the blockchain, have certainly proven their worth, both from a technological and financial viewpoint, they still have to prove themselves in terms of scalability. The fees given to the miners are an essential incentive to keep the network running, but become unsustainable when making large numbers of payments. There is also scaling issues regarding the limit to how many payments can be processed per second. The need for greater amounts of micro and nano payments will grow when industries and businesses start adopting the IoT. The Economy of Things, the business side of the IoT, will start when all physical assets are digitized and placed into a single global marketplace.

How does it work?

The main innovation behind IOTA is tangle, a directed acyclic graph (DAG) based ledger. In DAG-based cryptocurrencies there are no blocks. Instead, transactions are confirmed by one or more following transactions (tangle requires two parent transactions). As a result, the structure of the network and nodes is represented by a direct graph with no directed cycles, this makes for a lighter structure that resembles a never ending tree like the one represented below.

But wait. If there are no blocks, how are transactions verified? Instead of having a portion of the network responsible for the overall consensus, be it miners in Proof-of-Work or stakers in Proof-of-Stake, consensus and validation are decided by the whole network of active participants. This makes it so that everyone has an equal say in the network regarding the transaction making process.

Transaction making process is split into three steps: first you sign the transactions with a private key, then MCMC (Markov chain Monte Carlo) algorithm is used to select two unconfirmed transactions and check if they are not conflicting, and finally, for the transaction to be valid, the node must solve a cryptographic puzzle. This means that, similarly to bitcoin, some Proof-of-Work is required.

Once the three steps are completed, the transaction will become part of the network. Executing the MCMC algorithm gives information about the probability of your transaction being accepted by the network. If you’re a merchant in IOTA, you have the freedom to decide with which probability you want to start accepting payments.


By maintaining features from the blockchain, a peer-to-peer network (P2P) that relies on the consensus and validation mechanism, and improving on the original DAG technology, tangle is able to be more efficient. Transactions are faster, slow transactions are a problem with blockchain based cryptocurrencies, and increasingly reliable, because of the multiple confirmation of transactions mechanism aforementioned.

There is unlimited data growth and scalability, with the network becoming increasingly more secure as more transactions are made, and seeing as there are no blocks, there is no mining as well. This poses a lot of benefits: feeless transactions, no centralization of control (oligarchy) by part of the miners and no discrimination of participants in the network, and no high resources and hardware being used. Most mining is done in China by burning coal, so saving energy and resources we also save the environment and the planet. Another good point is that tangle and DAG based networks are impervious to the threat of quantum computers. Although they are still far in the future, the gargantuan calculating capabilities of these computers might pose a threat to blockchain cryptocurrencies by solving and breaking the encryption protocols.

ICO Details

The initial coin offering (ICO) for IOTA crypto token (IOT) was in 2015. The token started being traded this June by Bitfinex. The exchanged admitted to have been following the development of IOTA for the last year and has publicly supported the project. After trading went live, the transaction volume was so massive that the Bitfinex servers briefly went down.

“The first two hours of IOTA trading was more than double the USD volume and ten times greater than the BTC volume of the last token we released, Ripple, over the course of its full trading day.” – Brandon Carps, Bitfinex representative

Hitting $1.5 billion in market cap, IOT was a huge success and was among the top 10 cryptocurrencies with most market cap. It currently sits at the number 22 spot at the time of this publication ( 31st august 2017 ).


All of IOTA’s founders have been in the blockchain space since 2010 or 2011. Some of the team members were responsible for the developed of NxT, the first full Proof-of-Stake blockchain that had decentralized asset exchange and name registry features. The core team has been developing the project for the past two years and more experience members have been added to the team since then. The team says the project came out of a real necessity for solutions, and seeing as IOTA is run by a non-profit organization headquartered in Berlin, it seems that they are integral in their motives and not just seeking profits.

How to Buy IOTA

Purchasing IOTA directly with “Fiat” currency is not currently possible, so the easiest way to purchase it at the moment is by buying either Bitcoin or Ethereum and then swapping these for it on an exchange. In this section we will show you how you can purchase IOTA with a Credit or Debit card using the Coinbase website and then swapping it for IOTA at Binance.

Register at Coinbase

For first time buyers of crypto currency, we recommend that you use Coinbase to make your first purchase – its easy to use, fully regulated by the US government so you know it is one of the safest and most reputable places to purchase cryptocurrency from. Coinbase offers the ability to purchase Bitcoin, Litecoin and Ethereum with a credit or debit card or by sending a bank transfer. The fees are higher for cards but you will receive your currency instantly.

You will have to carry out some identity verification when signing up as they have to adhere to strict financial guidelines. Make sure you use our link to signup you will be credited with $10 in free bitcoin when you make your first purchase of $100.

Coinbase Website

To get started, click the “Sign up” button where you will be taken to a registration form where you will need to enter your name, email and choose a password.

Coinbase will then send you a link via email to verify your email account, once you click the link in the email you will be taken to a verification page. You must then add your phone number and upload a photo of your ID – this can be a passport, driving license etc. You also have to add your payment details, so you can add your bank account or a debit or credit card as required – after a short period your account will then be verified and you can then make your first purchase.

Coinbase Verification

Purchase Ethereum or Bitcoin

For this guide, we will be purchasing Ethereum to swap for our target cryptocurrency. The reason for this is that it has far cheaper fees than bitcoin for sending and the transaction also happens a lot faster. So in Coinbase, visit the “Buy / Sell” tab at the top, select “Ethereum”, choose your payment method and enter the amount you wish to purchase – you can either enter a US Dollar amount or a number of Ether.

Buy Etherum

You will then be asked to confirm your transaction, if paying with a card you might have to complete a verification with your card provider. Once that’s complete, your Ethererum will be added to your account.

Purchase IOTA at Binance

You can now send your Ether over to Binance to make your purchase of IOTA, take a look at our review of Binance here to see how to signup and purchase on their exchange.

Binance Wallets


IOTA is one of the most innovative projects ever seen in the crypto world. Not a lot of information is known about certain aspects of the project, and the information that is available is highly technical. The main network was launched in July of last year and seems to be running smoothly and making steady progress. However, it’s important to note that in its current form IOTA is not decentralized. There is a special node called Coordinator that is run by Iota Foundation, and its main purpose is to protect the network until it grows strong enough to sustain against large scale attacks.

The team behind IOTA has been growing as of late, and counts with many experienced individuals. If everything goes well, and if the team is able to accomplish their plans, then the sky is the limit for IOTA. We could be at a brink of seeing a superior technology to blockchain.

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Editor-in-Chief of Blockonomi and founder of Kooc Media, A UK-Based Online Media Company. Believer in Open-Source Software, Blockchain Technology & a Free and Fair Internet for all. His writing has been quoted by Nasdaq, Dow Jones, Investopedia, The New Yorker, Forbes, Techcrunch & More. Contact

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