![]() After the issuer of a transaction has approved good transactions or disapproved conflicting transactions (transactions that are in conflict with tangle history), it will become a tip that is waiting to be approved by the next issuer of a transaction. The only "payment" the network expects is the verification of two transactions and the proof of work. Empty transactions are possible on the tangle. All tokens have been premined, and there will be no new tokens issued, which will be an interesting analysis point in regard of the monetary system build on IOTA (More details in the financial outlook)! In order to use the tangle, the user doesn't necessarily have to own IOTA tokens. Resulting that the network consists of only one kind of participant that has to provide computing power to the network in order to issue transactions. The main point is: " Every new transaction must approve two other transactions." It is a tree-root system, starting with the genesis payments and growing into more and more branches that are interconnected. IOTA is not relying on a blockchain anymore. So what makes IOTA's tangle beneficial to the classical bitcoin blockchain, and what are its disadvantages? For this article, I will keep to the points stated above. There are more points about the Bitcoin protocol current state, future prospects, its economical and ecological value that can be discussed. Majority of computing power are held by 5 mining pools.The bigger the network becomes the more difficult the hash puzzle becomes.Micro-Payments are economically not feasible due to energy consumption and fees.Blockchain is a linear transaction proofing system, where each block is consecutively added to the next one.Transactions need at least 1 block depth to be verified (10-20 mins).Split the network between miners and transaction issuers.These are the main facts about the blockchain Proof-of-Work-protocol that I want you to keep in mind when we start talking about IOTA. The more computing power the network provides, the more difficult the mining will become.The bitcoin protocol will determine the moving average of blocks per hour and increase the difficulty of solving the puzzle to keep the pace at 6 blocks per hour. Higher Bitcoin values attract more people that will add their calculation power to the network, therefore increasing competition in order to receive the reward. I am well aware that the mining pools are based in area with low energy costs, therefore, making my number a very high approximation. If we take the average US price for one KWh (approx 10 cents), we get approximately $24 energy consumption per transaction. Next, we take a look at the energy consumption.Įlectricity consumed per transaction is 241 KWh. On the graph, we can see that the biggest 5 mining pools hold more than 50% of the total mining power, giving them some kind of authority over accepting updates in the code (which has been an issue in the past), therefore, they have the power to impede hardforks that could be in favor of the community. Source: Bitcoin Block Explorer - Blockchain Now, a quick glance about how decentralized the bitcoin network is. All in all from issuing the transaction until final verification it takes up to 20 min (not counting in that nodes prefer transactions with a fee applied to it). The network matured to a point where for small transactions a depth of one block is enough. These are roughly the steps a transaction on the bitcoin network has to go through to be part of the blockchain and therefore accepted, but even after these steps, it is recommended (or was since the 6-block-rule is from the very beginning) to wait until 6 blocks are added to the block where the transaction has been issued. If the solution is accepted, the block is added to the chain.If a solution is found the node which found it will broadcast to all other nodes.The nodes are working on finding a solution for a puzzle, "proofing their work".Each node will accumulate transactions and put them into a block.Issuer publishes the transaction to all nodes in the network.The issuer of a new transaction digitally signs a hash of the previous transaction, includes the amount that ought to be sent, and the public key of the next owner and adds them to the end of the coin.The transaction process is the following: ![]() In the Bitcoin-blockchain, we can and now have to distinguish between miners and issuer of transactions. As an example, we will use Bitcoins blockchain and its classical proof-of-work system. To understand the benefits of IOTAs "tangle" against the blockchain, we have to get some facts about the blockchain. I would like to share my thoughts about IOTA on Seeking Alpha, I am always open for feedback and willing to discuss about the things I say in my article. A couple of weeks ago, a friend of mine asked me about my opinion on IOTA, its usability, and future prospects.
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