When Bitcoin was first released to the world
in 2008 it started a revolution.
People claimed that the blockchain would solve
many problems and that it has countless of
Blockchains indeed have very interesting properties
and you can learn all about them in this video
However they have one big limitation and that
is that don’t scale very well.
This is exactly the problem that the creators
of IOTA wanted to solve.
Instead of using a blockchain, IOTA uses something
called a DAG or tangle.
DAG is short for Directed Acyclic Graph and
it’s a storage system where individual items
link to each other.
“Directed” means that the link between
items always have a direction and acyclic
means that you cannot create loops inside
This might sound complicated, so let’s take
a look at a simple tangle.
Each square represents a single transaction
and is also called a “site”.
Each site contains all the details about the
transaction: such as the sender, the receiver
and the amount of coins.
It also has a connection to at least two other
These are called “edges” and they validate
Here is an example of a bigger Tangle.
Near the end of our Tangle we find a few transactions
that don’t have two or more incoming edges.
This means that these transactions are unconfirmed.
We also call these the tips of the tangle.
Alright now that we understand some of the
IOTA terminology, let’s take a look at how
we can add a new transaction to the tangle.
We have to attach our new transaction to one
of the tips of the tangle.
An algorithm selects two of them at random
and makes sure that the transactions don’t
conflict with one another.
If one of the tips is a fake transaction,
it is ignored and a new tip is selected.
If everything checks out, we attach our transaction
to the two tips.
This adds our transaction to the tangle and
verifies the two other transactions.
Our transaction is now part of the tangle
and becomes a new tip.
This technique makes IOTA’s tangle incredibly
For every transaction that is added to the
tangle, two others are being confirmed.
This means that the network doesn’t slow
down when there are a lot of new transactions.
In fact, it actually speeds up!
That’s all great, but how do we know we
can trust a transaction?
In traditional blockchains people often use
the number of confirmations to check wether
or not a block should be trusted.
Well IOTA has similar technique.
Each site has a weight.
This number signifies the amount of work that
a node has done to make this transaction.
In other words: a higher number means the
node spent more time doing the proof-of-work
for that transaction.
Each transaction also has a cumulative weight.
This is the sum of it’s own weight plus
the sum of the weights of all transactions
that approve this transaction.
It seems quite complicated, but it really
Here is an example of a Tangle where every
transaction has a weight of 1.
We’ll put the weight of an individual transaction
in the bottom right of each square.
Now let’s check how trustworthy this pink
transaction is by calculating its cumulative
To do that, we sum up the weight of the two
transactions that have approved it.
But those transactions where approved by other
transaction as well.
So we keep summing up all these weights until
we get to the end of the tangle.
In this case, the accumulative weight of the
site is 6.
Transactions with a high cumulative weight
are usually older and have more direct or
So we can trust those transactions more then
So now you know what IOTA’s tangle is and
But how does it stack up against traditional
Well, the tangle solves two big issue’s:
scalability and miners.
Let’s discuss _scalability_.
As we’ve seen: IOTA’s network becomes
faster when more transactions happen.
This means that IOTA can handle almost an
unlimited amount of transactions per second
while traditional blockchains can only handle
But there is an other aspect to scalability
that most people seem to forget and that is
In a blockchain, you need a full copy of the
chain before you can start adding new transactions.
Right now the Bitcoin blockchain is almost
150GB in size and keeps growing very fast.
Storing all this data is not something every
device can do and will get harder over time.
IOTA’s Tangle is much more lightweight.
You don’t need a full copy of the tangle
to add transactions.
You only need a small part of the tangle to
create and verify transactions.
This makes it much more future proof.
And finally IOTA has _no miners_.
Usually miners are there to create blocks
and validate transactions.
For this hard work, miners take a fee from
In IOTA, no miners means no fees.
Sending money around is this completely free!
So now you know how IOTA’s tangle works,
and how it compares to regular blockchain
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