The Big Problem With IOTA
IOTA uses great and revolutionary technology, the Tangle (or DAG) in order to create an environment where there are no transaction fees and transactions take place almost instantaneously. This allows for microtransactions to be feasable and even commonplace. But IOTA is missing one big thing to accomplish its goal to become the backbone of the IOT (internet of things): smart contracts.
IOTA is built to be used for robots and IOT-connected devices to hire or pay each other for things. Here are some use cases:
Your Alexa hires another person’s Roomba (automatic vacuum cleaner) to clean the house for the day through a microtransaction.
You pay for electricity at an electric car charging station with a small microtransaction through IOTA.
Etc.
But all of these transactions work on the honor system. For example, with the first use case, what happens if the Roomba doesn’t come over to clean the house, or does a poor job? How does one stop that?
In most cases, cryptocurrency applications solve this problem with arbitration. Arbitration is where an account/person is selected to resolve issues. For example, if in the first case, if the Roomba does a poor job, the arbitrator would work with the Alexa and the Roomba’s owners to decide if the payment goes through.
But IOTA has no way of using arbitration. It can’t settle disputes over where the money goes. Once a transaction is done, it is set in stone. Even Bitcoin has a simple scripting system that can handle arbitration, and it was the first cryptocurrency ever!
Another possible solution would be for IOTA to add smart contracts to their system, but smart contracts don’t work on the Tangle (DAG) because it is many times very difficult to figure out in which order transactions occured.
But it doesn’t seem like IOTA is going to fix this problem anytime soon, and so for now, IOTA won’t be truly able to reach its goal.
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