It is not a secret that blockchain was real technological progress back in 2008. Blockchain started a new era in the whole financial industry, security, e-commerce, and the Internet. It is literally integrated everywhere now, and innovative companies implement it. The idea of keeping the data without any chance to transform it was quite remarkable. Firstly, as you know, it was integrated into the oldest virtual asset called Bitcoin, but later, it was utilized by financial organizations, security systems, and authorities.
Why was the crypto community so obsessed with the blockchain? Because this ecosystem ensures that no one can tamper with the information encoded within the public ledger. Yet, it has some issues. With time, people have realized that this system is not ideal, and there are problems to be solved. For example, the ledger gets heavier and slower with every new transfer as the blockchain expands. Or, it cannot exist without miners, and thus — the fees are unavoidable.
Anyway, after some years of development and evolution, other approaches to data verification and protection were invented.
When you learn more about scalability components and issues, you have a chance to face such things as IOTA and Tangle. So, what do they mean?
Can you imagine the crypto industry with no transaction commissions at all, where there are no miners or anyone else to maintain the system, where you can transfer and accept the tiniest sums of assets and shares? Recently, that dream has come true. And if you still do not know about it, this blog post will bring you up to speed.
In this blog post, we will explain what Tangle is, its peculiarities and whether we can see a future where it replaces Bitcoin or becomes its prominent rival. We will also see their differences, and which one has more advantages.
The Tangle is a network that aims to achieve the same purpose as blockchain: facilitate transactions in a trustless and decentralized environment. Tangle is an implementation of the directed acyclic graph (DAG) – which is also a distributed ledger like the blockchain. Also, much like the blockchain, DAGs do not have intervening authority or entity such as a bank or a government.
This is where the similarities end. Tangle has special features designed to facilitate the Internet of Things (IoT). IoT is a universe of interrelated devices that can interact with one another through a multitude of little unique identifiers to enable them to execute the functions they were designed for without requiring human or computer intervention.
Unlike how it sounds, the Internet of things is not that complicated a concept. Imagine a shower switching itself on 5 minutes before you arrive, or a coffee machine that makes coffee 5 minutes before you wake up, or a washing machine setting itself on – all without any sort of input from you.
If this technology is to work as it is meant to, there must be an underlying network that can handle a massive amount of transactions- from facilitating exchanges to transferring data to sending of signals – all in a seamless, secure and fast network.
Enter Tangle. This technology is based on DAG, which is designed to support a plethora of data interactions but will facilitate the IoT in a way that the blockchain cannot. These features are like the following.
No miners. Unlike the blockchain, there are no miners in the Tangle network. This eliminates the need for fees or miners being able to block some transactions.
More relaxed data transfer rules. This makes Tangle more agile than the blockchain and thus better for handling a vast amount of transactions.
Scalable data units. This feature facilitates the transfer of training bits of data, enabling Tangle to process micro-transactions.
Blockchain is the technology that supports cryptocurrencies such as Bitcoin, Ethereum Litecoin, and so on. Blockchain is a ledger that holds transaction blocks – which are linked to each other and secured using cryptography. Each block has a reference to the block that came before it, hence a ‘chain.’
Each node (miner) independently verifies the authenticity of a transaction – meaning that transactions are agreed upon via group consensus. The miner who confirms a block of transactions receives block rewards or a fraction of the transaction fees. Miners usually invest considerable sums of money in a special mining computer known as an application-specific integrated circuit (ASICs).
Blockchains, like the Ethereum network, can facilitate the creation of a special type of application called decentralized applications (DApps). DApps are, unlike today’s applications (such as Facebook or Google), under no one’s authority or censorship. Also, DApps grant customers the full autonomy of their personal information – which is the complete opposite of how legacy applications handle users’ data.
The current blockchain architecture faces serious scalability issues. The fact that each node must verify transfers before they are added means confirmation is slow. The limited size of blocks, e.g., 1MB for the Bitcoin blockchain, is another bottleneck since a very limited amount of data can fit in each block.
Now, as more people transact on the blockchain, the more clogged it becomes. This means longer waiting times and increased fees, which leads to unsatisfied users. This has led to several hard forks of the Bitcoin blockchain – all of which sought faster transfers and rock-bottom commissions.
Let’s take a quick look at the pros and cons of the blockchain.
While only a few technical differences distinguish blockchain and Tangle, those differences are significant nevertheless. Let’s take a look.
Structure. It comprises a series of cryptographically connected data blocks. Tangle, on the other hand, consists of a group of data nodes that flow in just one direction. Also, blockchain can double back on itself in a circular manner, but Tangle can only move in one direction. This thing shows that the system is able to make transfers faster.
Security. Blockchain offers better security thanks to its extremely meticulous block confirmation process that involves solving computational puzzles and the confirmation process of transactions via group consensus. On the other hand, Tangle’s security feature involves validating the two most recent transactions before confirming the next. So, this shows that blockchain is more trustworthy and safe than Tangle.
Decentralization. Blockchain is undoubtedly decentralized since it operates on thousands of computers around the world, with no single authority overseeing transfers. Tangle is also billed as decentralized, but it utilizes a safeguard that it calls a ‘coordinator node.’ The presence of the safeguard renders Tangle centralized, one way or another. It’s hard to say that the tangle framework is entirely autonomous.
Tangle fans mention that the technology’s less detailed node addition protocol might make it less secure than blockchain, but it also makes it more agile. They stress that this makes Tangle better equipped to handle massive volumes of IoT interactions. But this uncertainty and its security, as well as its centralization problem, means the technology is far from ripe to fulfil its intended purpose, let alone compete with blockchain.
Tangle’s only application to date is the IOTA virtual coin. IOTA is named after IoT, which it’s designed to facilitate. IOTA can handle a multitude of tiny transactions, which makes it ideal for the micro-transactions that run an internet of things.
At the time of writing, IOTA is currently trading at $ 1.45 with a market cap of $4 039 703 723. Its all-time high price was $5.69 (Dec 19, 2017).
For its part, Bitcoin is currently trading at $50k, and it is the biggest cryptocurrency by market cap: $938 191 725 861.
As the debate about which of the two technologies is better raging on, it gives an ability to look at their peculiarities. To begin with, Tangle is yet to be proven as opposed to Bitcoin, which has been a mainstay for ten years now. Also, it does not have nearly half of the number of users on the Bitcoin network.
Additionally, IOTA is at risk of a 34% attack, as opposed to Bitcoin’s 51%. This means that an attacker would only need to gain control of 34% of the IOTA network, rendering it less secure than blockchain.
As previously mentioned, IOTA uses a coordinator node that synchronizes data among all nodes, making it centralized. This is the opposite with Bitcoin, and its segments are fully spread across the globe.
From these observations, it is clear to see that blockchain maintains the upper hand in the battle between these systems – at least for now. This does not mean that IOTA’s completely written off. It is, on its own, a force to reckon with, as evidenced by its fiercely loyal community as well as a strong value proposition.
Let’s keep in mind that blockchain, in general, and Bitcoin, in particular, are developing rapidly to solve existing issues. It is a long-standing technology, proven over time, and those who manage and support it are aware of the issues with the speed and commissions of transfers, scalability and emerging security danger. And certainly, they know what to do.
Bitcoin will hold an edge and remain the main cryptocurrency with the greatest market cap for a very long time, simply because it is extremely popular, both with merchants and regular users. The task of new cryptos is not to overtake Bitcoin but to find their own use and role in the economy of the fourth Industrial Revolution. IOTA is obviously something that fits harmoniously with this financial system, and it is a good start for this new asset and system in the crypto industry.
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