Broker to Trading

The cryptocurrency IOTA can be traded at some brokers as a CFD. This allows the trader to speculate on the price movement of the cryptocurrency, without owning it.

What is IOTA ?

IOTA is an attempt to deal with a problem blockchains have encountered: that to scale up, they need to become more centralised. So IOTA has come up with a new distributed ledger implementation, called the Tangle which seeks to have decentralisation with scalability. IOTA does not charge fees to process transactions, and sees itself as a protocol for use by the Internet of Things and what it calls a Machine Economy.

What is the blockchain ?

The blockchain is a protocol which is implemented on networks of computing devices. This protocol specifies a way of creating a distributed ledger or database, used to group verified transactions and in some cases other data. It has a mechanism which allows it be operated (to process transactions) in a way which does not require central control.

In its arguably more decentralised implementations, processing is done by miners who process data for a reward which is given to them when they successfully add a new block of data to the blockchain. It is called a blockchain because it consists of processed blocks of data (e.g. verified payment transactions) each of which has a cryptographically secured pointer to a previous block, i.e. they are attached in a way analogous to chains with locks.

However as demands for faster processing of data have increased in intensity, blockchains have encountered problems scaling up. One way they have tried to solve this problem is by creating layers which have specialised tasks, for example processing payments. However, these are arguably departing from the decentralised nature of the blockchain. Part of the argument supporting the security of the blockchain is that there is no central processing node. This is a debatable issue though.

Why does IOTA not charge fees ?

IOTA does not charge fees because of the way it incentivises those processing transactions on its distributed ledger (the Tangle). Typically blockchains automatically give miners who process transactions any transactions fees and some cryptocurrency generated as a block is successfully secured to the chain of other blocks. IOTA on the other hand, requires those who wish to use the network to make a transaction, to process two previous transactions. Thus to use the network it is necessary to do a share of operating the network.

What is the Tangle ?

The Tangle is a distributed electronic ledger, containing processed data. This data includes transaction data as well as other data. However it is not a chain of blocks. It is rather what is termed a directed acyclic graph.

How does IOTA seek to enable scale up ?

By the way transactions are processed: the more activity, the more transactions are processed. Thus increased activity does not in principle create bottlenecks, rather adds to the capacity of the network to operate.