Slashdot Mirror
A Cryptocurrency Without a Blockchain Has Been Built To Outperform Bitcoin (technologyreview.com)
An anonymous reader quotes a report from MIT Technology Review: Bitcoin isn't the only cryptocurrency on a hot streak -- plenty of alternative currencies have enjoyed rallies alongside the Epic Bitcoin Bull Run of 2017. One of the most intriguing examples is also among the most obscure in the cryptocurrency world. Called IOTA, it has jumped in total value from just over $4 billion to more than $10 billion in a little over two weeks. But that isn't what makes it interesting. What makes it interesting is that it isn't based on a blockchain at all; it's something else entirely. The rally began in late November, after the IOTA Foundation, the German nonprofit behind the novel cryptocurrency, announced that it was teaming up with several major technology firms to develop a "decentralized data marketplace."
Though IOTA tokens can be used like any other cryptocurrency, the protocol was designed specifically for use on connected devices, says cofounder David Sonstebo. Organizations collect huge amounts of data from these gadgets, from weather tracking systems to sensors that monitor the performance of industrial machinery (a.k.a. the Internet of things). But nearly all of that information is wasted, sitting in siloed databases and not making money for its owners, says Sonstebo. IOTA's system can address this in two ways, he says. First, it can assure the integrity of this data by securing it in a tamper-proof decentralized ledger. Second, it enables fee-less transactions between the owners of the data and anyone who wants to buy it -- and there are plenty of companies that want to get their hands on data. The report goes on to note that instead of using a blockchain, "IOTA uses a 'tangle,' which is based on a mathematical concept called a directed acyclic graph." The team decided to research this new alternative after deciding that blockchains are too costly. "Part of Sonstebo's issue with Bitcoin and other blockchain systems is that they rely on a distributed network of 'miners' to verify transactions," reports MIT Technology Review. "When a user issues a transaction [with IOTA], that individual also validates two randomly selected previous transactions, each of which refer to two other previous transactions, and so on. As new transactions mount, a 'tangled web of confirmation' grows, says Sonstebo."
Though IOTA tokens can be used like any other cryptocurrency, the protocol was designed specifically for use on connected devices, says cofounder David Sonstebo. Organizations collect huge amounts of data from these gadgets, from weather tracking systems to sensors that monitor the performance of industrial machinery (a.k.a. the Internet of things). But nearly all of that information is wasted, sitting in siloed databases and not making money for its owners, says Sonstebo. IOTA's system can address this in two ways, he says. First, it can assure the integrity of this data by securing it in a tamper-proof decentralized ledger. Second, it enables fee-less transactions between the owners of the data and anyone who wants to buy it -- and there are plenty of companies that want to get their hands on data. The report goes on to note that instead of using a blockchain, "IOTA uses a 'tangle,' which is based on a mathematical concept called a directed acyclic graph." The team decided to research this new alternative after deciding that blockchains are too costly. "Part of Sonstebo's issue with Bitcoin and other blockchain systems is that they rely on a distributed network of 'miners' to verify transactions," reports MIT Technology Review. "When a user issues a transaction [with IOTA], that individual also validates two randomly selected previous transactions, each of which refer to two other previous transactions, and so on. As new transactions mount, a 'tangled web of confirmation' grows, says Sonstebo."
Now two other posters, please verify me.
Iota "invented" a new hash function.
Their "accumulator" recently went down and no transactions were possible for a time--horribly centralized. ... that being said, while their network was effectively dead, the price went up.
Stop this stupid crypto advertising!
It seems like the big problem with Bitcoin is hoarding, which discourages trade. How about a decentralized ledger without a "coin"? If you just had a secure, decentralized record of trades, *and* you could transact in less than a second, *and* you were simply creating a secure record of transaction in pre-existing currency *then* you'd have something that might compete with what the credit card companies and check clearinghouses do. Then you might actually reduce fees for the rest of us, even if we don't use it directly.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
Pretty incredible how calling a DAG a "tangle" and sprinkling in a bunch of other mathy sounding words can net you a 10 billion dollar valuation when your product isn't even functional and there's no evidence to suggest it could ever even work / be viable.
After all, the first thing I think of when someone says IOT device is a device with no power or processing constraints that can afford to validate transactions on a network every time it needs to send data--why have miners running massive server farms when your tiny embedded devices can do all the work!
>> I'll use bitcoin
>> When I don't need any account or computer to use it and can carry it to the store in a sack.
You're looking for the Casascius physical bitcoins, from the first generation when they were pre-loaded with BTC. It was a very good idea for exactly the reason you describe.
At today's prices I'd be concerned about counterfeiting though.
"oh what a tangled web we weave...
when first...."
The concept of tangles is great, but it's designed for IoT devices. It has no concept of mining. It is funded by an initial issue (meaning any future funds come from the developers printing money.) It has the flaw that if they ever add a mining concept it will end up with a flaw where people can take 10+ machines offline, have them validate each other, then come back online.
If I had to pick other coins that aren't just stupid gimmicks and have a real function that are worth investing in right now they're:
Lightcoin because it was the 2nd one ever invented and it's simply superior to BTC.
Zec because transactions are NOT public, which is proving to be a problem with BTC
Sia because is is tied to an ownerless encrypted open source dropbox cloud storage system
Here's all my money!
I don't know about other cryptocurrencies, but bitcoin, at least, requires a significant amount of computation to mine a coin, and that computation takes time. Every block added to the chain represents more computing time that has been expended on all the transactions in the chain's history and all the coins that have been "mined". That computing time has both an energy cost (electricity to run the computer) and an opportunity cost (you could've been using the computer for something else besides bitcoin mining), and those are the basis of a coin's value.
Of course, the "worth" of any currency depends on what goods are available to buy with it, and how much confidence people have that it'll still be accepted to buy those goods in the future. But as a basic requirement, every currency has to be based on some sort of scarce resource (like the natural scarcity of gold, or the artificial scarcity of a fiat currency), and bitcoin is based on both time and energy.
Bitcoin blockchain is also based on DAG. This is how all Bitcoin transactions are linked with one another. in bitcoin, the transactions are stored in blocks whereas in IOTA they are not. Thus Bitcoin is predictably consistent, whereas IOTA is eventually consistent, and partial double spending is extremely common with IOTA. this is why IOTA needs centralization to enforce consistency. The infamous accumulator.
A centralized unregulated pre-mined currency is a terrible idea.
From the start IOTA makes conscious use of hype inflation to boost its value without offering actual value. There is a technique of associating yourself with well-known names to boost credibility, there is name dropping on Medium and history of fighting criticism without actual technical merits.
It is a scam.
Blockchain, crypto, mining, consuming electricity, distributed verification... It all don't matter. What matter are a few things :
1) is the value stable (e.g. not wildly fluctuating)
2) can the supply be increased indefinitely (e.g. there are no inherent limit on the maximum amount of currency amount issued).
3) can the supply be controlled by government and bank
4) processing fee cost is essentially near zero for the entity processing it, like banks - and that include processing monetary fee and amount of time
(3) is important because no country or super-national entity like EU would allow currency on which there is no control by central bank. It makes all kind of sense for monetary policies. Like it or not, baring anarchy and exchanging "caps" in a post apocalyptic world, all our economies and governmental monetary policies are based around that. I call that a condition "sina qua non" and all dreamer out there wanting to escape "government grasps" don't get what society is based on and why it is that way. Those who never learn from history...
(1) is important because without it you have no valid currency which can be used for exchange. Wild fluctuation make buyer think twice and maybe push a buy the next day/month, because next day the currency could be worth twice what it is now. Seller refuse for the contrary reason, it could be valued as half the value the next day/month.
(2) like it or not is important because without it you may as well go back to limited monetary policies based on the gold standard... There is a reason all countries switched to a standard which does not limit the amount of monetary supply. You are essentially stringing the economy if you limit the total amount of issuable currency (assuming the amount is something low like 50 millions bitcoins, and not a technical limitation like 2^64-1). Like it or not but current economy are not based on limiting the total supply
(4) is simply a question of adoption. If you have processing fee of 20+$ like today, or take minutes to close and be validated, then there is no way anybody with a sane mind will adopt it as a currency, it will stay niche.
That is why essentially I think ZERO of the crypto currency existing today will be anything but either a scam, a niche commodity, used for money washing, or a speculative bubble.
C. Sagan : A demon haunted world:
http://www.amazon.com/gp/product/0345409469/
visit randi.org
https://hackernoon.com/why-i-f...
Finally! A year of moderation! Ready for 2019?
There is another new currency, coined itoa().
Instead of using untrustworthy integers to transmit the coin value, it uses a chain of characters called a characterchain. For example, fifteen-thousand three-hundred and eighty-five would have a characterchain of “15385” and a hexadecimal characterchain of “313533383500”. If any of the bits are changed, it will (probably) become invalid. And the null terminator ensures that any forgery by modifying the value is limited to a factor of ten (because an extra digit cannot be added, without overwriting the next piece of data)..
In this way, it provides a trustworthy, verifiable, tamperproof, untraceable, open-source, non-central-government cryptocurrency with by-design limited supply and potentially infinite value.
Every currency is simply backed by trust. When someone hands you the currency in return for work or goods, you expect to hand the currency back to someone else the next day. As long as that trust exist, there's no need for any other kind of value.
Suppose you do a month's work for me. I offer you a choice of payment in cash or 1 bitcoin. Assuming it will take a few days to sell that bitcoin, what amount of cash would you consider it equivalent to ?
Like outperform has ever been a thing for bitcoin. my dead grandmother could outperform bitcoin, it is a turd when it comes to performance and every cryptocurrency since has made it look terrible, doesn't seem to have hurt its popularity though.
But in this case, the second line also fits (though it wasn't by Walter Scott):
_But when you've practiced quite a while, how vastly you improve your style!_
So how does this IOTA tackle the double-spending problem? You know, the thing to which Bitcoin was advertised as a solution?
I think you are incorrect to argue that the ability to indefinitely increase the supply of a currency is a good thing.
Robert Mugabe tried that in Zimbabwe - his solution to not having enough cash to pay for basic services was to simply print more money - in practical terms precisely what you argue for here.
What Zimbabwe have ended up with is hyper-inflation, in which most people in the country have ignored their own currency and now run their lives using the US dollar or the Euro, with some very old and extremely tatty bank notes changing hands. Indeed, I would go so far as to say your first and second points are potentially mutually exclusive: you can't have a stable economy whilst you have the ability to produce unlimited supply.
Your third and fourth points are potentially valid in that I don't think governments will cede control of their *national currency* to crypto-coins. But having said that, you completely ignore reality: in the western world, most people don't use "cash" anyway: we use digital numbers kept in databases on computers. Our control point is a small plastic card or a smartphone... But, far more importantly, I don't think anyone is suggesting that the world will suddenly replace fiat currencies with crypto currency. That is clearly nonsense. What might happen, however, is that crypto-currency could become an ideal vehicle for international trade and deals between two or more fiat currencies. At the moment the biggest banks have "currency conversion" sewn up pretty tight - and they make **billions** of dollars in fees from converting between currencies for clients. Using a low-cost alternative [your last point, which is crucial] to replace fiat currencies for this could absolutely be made to work, if only the middle-men weren't so greedy.
IOTA is an interesting concept, but it's silly to say it's not a blockchain. It absolutely is - it just allows parallel versions to exist for undetermined amounts of time, until they happen to merge together.
IOTA also has a fundamental problem that - imho - will prove impossible to resolve. It is possible for contradictory things to happen on parallel branches. On a blockchain, this would be something like double-spending, and one of two transactions would quickly be invalidated. Since IOTA allows parallel branches to exist for indeterminate amounts of time, what happens when conflicting transactions are discovered? Potentially, you would have to roll back a very long chain of other transactions - but that same branch may have already given rise to many, many other branches in the tangle.
As far as I can see, there are only two ways to deal with this. (1) Restrict the branching behavior - making IOTA more like a classic blockchain. (2) Only trust the IOTA ledger in a very limited scope - say, during the segment of the branch that you can see. An unrestricted tangle is fundamentally incompatible with a globally trustworthy ledger.
Enjoy life! This is not a dress rehearsal.
There is no empirical evidence that 1% inflation is a 'good' thing for the economy - it's just a random target that seems justifiable easily.
There is plenty of evidence and quite a lot of experience. We have centuries of real world data from the effects of various amounts of inflation and deflation on economies and every bit of evidence we have shows that a modest (1-3%) amount of inflation is the least worst option in most circumstances. Grossly oversimplified explanation: Deflation is almost always bad because it dis-incentivizes investment and creates perverse incentives. (why invest if your money will grow in value without the risk?) High amounts of inflation are bad because economic growth and wage growth cannot keep up and it wipes out the value of assets. Modest amounts of inflation force people to take reasonable risks to stay ahead of inflation but its low enough that economic growth can keep pace or get ahead. Maintaining zero inflation is as a practical matter essentially impossible and trying will result in dipping into deflation now and then which is worse for society than a small amount of inflation.
Any inflation mostly benefits investors with debts and basically constitutes a wealth transfer from savers to investors (~ from poorer to richer).
A wildly over simplified analysis if I've ever read one. There is quite a lot more to it than that.
The stock market isn't the economy, most of what happens to it is only relevant to it's investors.
Only an ignorant fool believes that what happens in the stock market has no effect outside of investors.
Come back when you have empiric evidence that deflation is bad to common people.
For a recent and relevant example I refer you to Japan for the last 20 years or so. Seriously, among people who actually study this stuff for a living it's not even a question that deflation is bad for economies. And 20 seconds of searching would provide all the evidence you need about why deflation is bad for the "common people".
The only way to get IOTAs is to trade with other currencies. Sounds like they are just trying to cash out and then sell it off to a government, banking system, or large tech company such as Amazon that could use such a system internally.
It is just a lighter version of the currencies we have now, and just like them cannot surivive out in the wild on its own.
While not having government and corporate bank controls over you currency sounds appealing (and it is from a certain perspective), there are some obvious draw backs. No one has any regulatory control to try and manage what is going on.
I think a interesting example if you can stretch the analogy a bit is Greece and the Euro. One can argue about the strengths of the creation of the Euro, but Greece certainly illustrated one of the drawbacks. Greece like many others, by accepting the Euro also accepts a loss of control over their own currency. Had they their own currency, they could have devalued it or done other fiscal measures to help manage their debt problem. However without that control they were pretty powerless to do anything about it, other than to threaten to leave and have Germany bail them out with even more debt.
This is a problem with countries and any widespread usage of any cryptocurrency, at least if they ever start getting used as an actual currency in the mainstream and not just a weird "investment" vehicle. Not having any control over its value, or any way to influence it may cause some issues down the road. I'm not really sure if any of the current offerings have legs enough to do that, but given the progress on this front it isn't inconceivable that eventually one will get traction and become dominant. At which point world finance at a macro scale could start to become very interesting...
A few years ago it was not even a question that the zero lower bound on interest rates made perfect sense.
That is a different question. Please stay on topic.
You put too much faith in economists.
So I should put faith in you instead? No thanks. If you understand these issues better than economists then publish your findings and collect your Nobel prize.
That suggests, to me, that you find prevalent economic theories useful to your political leanings
That's a curious argument since you have no idea what my political leanings might actually be nor what I consider to be prevalent economic theories. I follow the evidence wherever it may lead. My political belief have no relevance and I will change them readily in the face of compelling evidence about a subject. I have little use for ideology when it comes to economic theory.
Most economics is just apology for one or another political agenda.
I'll return the favor because that sounds like confirmation bias to me. That's a nice attempt to frame the issue but I think it says more about you than it does about me.
It's not gay! Everyone needs a crypto currency with cryptography simple (RE: WEAK) enough for your IOT toaster to be one of the agents verifying the distributed ledger. What could go wrong?
"Prediction: within 10 years, Windows will be a Linux distribution." Me, 7-6-2016
I have two issues with this that are straight show-stoppers.
1. 100% "pre-mined". The issuers start with literally all the money.
2. Centralized control. The blockchain/database has been "reset" a couple of times during the alpha to recover lost coins.
I love the scalability of this idea, but they've failed utterly at decentralizing. The lack of single authority is not a bug in Bitcoin; it's a feature. If I wanted an unaccountable organization to control the money I'd use Euros, not Iota.