IOTA: Overview of Projects & Practical Benefits

Distributed Ledger Technology (DLT) for the internet of things (IoT)

Learn about practical solutions of the IOTA tangle, differences to former blockchain solutions and how to benefit as a company.

The concept of the Internet of Things (IoT) brought much excitement for seasoned and new businesses alike. According to recent research by Gartner, 61% of enterprises show a high level of IoT maturity, while 63% of businesses engaging with IoTs expect to break even on their IoT projects within three years of implementation.

IOTA (MIOTA) was conceived as the first cryptocurrency project built for the IoT. IOTA uses a directed acyclic graph (DAG) called Tangle to facilitate free microtransactions between IoT-connected devices and near-infinite scaling.

Throughout this article, we cover a handful of projects that made good use of the IOTA network’s features.

IOTA Oracles Bridge Physical-World Data to Digital

An Oracle transfers data. IOTA’s Oracles mostly do this for the purpose of operating smart contracts. The more breadth and depth of physical world data an Oracle can provide to a platform capable of creating and transacting smart contracts, the more room for sophisticated digital agreements to take place.

Businesses can benefit from IOTA’s Oracles as a means to gather information for smart contracts.

Example: Real Estate

A real estate business may wish to introduce conditional sales based on environmental conditions like neighborhood crime rate, school rating, and internet speed.

IOTA’s Oracle must grab this information from one or multiple databases and send it to a network that’s able to provide the real estate business with smart contracts capable of integrating this data. Then, a smart contract can be created that defines the conditions for a sale, much like an options contract.

IOTA’s Four Node Types

A node is a computational device that connects to others on the blockchain – without these, there is no blockchain. There are three categories of IOTA nodes, with a total of four different nodes that can be deployed.

Understanding how nodes work is critical to seeing how a business can benefit and utilize this digital architecture.

Full Nodes (Hornet, Bee)

Full nodes are the main network nodes acting as key transmitters to network transactions. The node ‘owner’ is in control of how many transactions are held on the full node; three is a minimum requirement of the number of transactions a full node needs to hold.

Full nodes mostly delegate the transactions that need to be stored. ‘Hornet’ and ‘Bee’ nodes primarily transfer data – they’re mediums.

Permanodes (Chronicle)

These IOTA nodes receive the delegated transaction data from full nodes. Permanodes are storage nodes with large capacities, often based in data centers. Permanodes, aptly named Chronicles, record everything that happens on the network.

They provide a way for network users to search, pull and query large datasets.

Smart Contract Nodes (Wasp)

Wasp nodes may be hooked onto other blockchains aside from IOTA’s Tangle. They are responsible for executing smart contracts, both public and private.

Business Nodes

Businesses can run nodes of their own, any of the three mentioned above.

As a user of the IOTA network, businesses can contribute with computational power, serving a clear function in the IoT space.

IOTA 2.0: Removing Coordinator Nodes

IOTA 2.0’s development network marked the first live version of a coordinator-free, further decentralized project. The main difference between IOTA and IOTA 2.0 is that instead of node-to-node communication to achieve consensus, the nodes are now said to ‘observe’ the IOTA Tangle (network) to achieve decentralized consensus.

Technologically speaking, nodes still communicate with one another, just faster, and without a central coordinator node run by IOTA. Businesses may benefit from such a model to incentivize users with a more democratic data architecture, as well as more control over their role in the Tangle.

Tangle Offers Reliability for Businesses

Many blockchain networks run solely on proof-of-work (PoW) or proof-of-stake (PoS) consensus mechanisms.

IOTA, on the other hand, runs a hybrid one – fast probabilistic consensus (FPC) as a consensus layer and PoW as a rate controller. Essentially, the PoW layer is responsible for processing, while the FPC layer handles verification.

Hybrid layers allow easier implementation of updates, potentially lower downtime, and therefore better reliability. Businesses need a network to trust, and that comes down to the quality of a network’s consensus and processing architecture.

IOTA & Europe’s Blockchain Infrastructure Project Continues

In 2021, IOTA was selected as one of seven contractors to design a DLT (distributed-ledger-technology) solution by the European Blockchain Services Infrastructure (EBSI) as part of the European Commission. The project aims to create technology that allows cross-border co-operation between governments, enterprises, and individuals.

Data transfer on such a scale is of great appeal to businesses, since it opens up a multitude of avenues for cooperation across the aforementioned range of participants.

At the beginning of 2022, IOTA stayed on for the second phase of EBSI’s project. Now the IOTA network is one of the remaining four projects, all of which are building what they designed last year.

There is a great likelihood of commercial and government-oriented partnerships to facilitate large-scale data transfer across Europe via the IOTA network. Businesses ought to be attentive to this.

Other IOTA Projects and Use Cases

The IOTA network is also a breeding ground for various other projects looking to make the most of a more decentralized environment. Many of these projects utilize non-fungible tokens (NFTs) and attempt to gamify the experience of using a blockchain.

However, private projects on IOTA are scarce, and the network is a more popular space for community development. Some of these — both live and in-development — include:

  • Soonaverse: A no-fee metaverse and community management platform, also called a DAO (decentralized autonomous organization).
  • Up!: A community project platform that encourages development on IOTA.
  • TangleBay: A group that provides support with installing nodes, encouraging further interaction with the IOTA ecosystem.

Unfortunately, most current projects on IOTA lack practical utility. Unlike NFT marketplaces on other crypto networks like Solana, Cardano, and Ethereum, IOTA also lacks ‘fun’ projects that encourage user interaction.

Main Problems Faced by IOTA

The fundamental problem IOTA faces as a network is an adaptation. According to many, it is one of the most scalable networks, though it hasn’t really been put to the test.

Projects like the EBSI-commissioned DLT may give the network a chance to test itself as a viable large-scale solution to tokenize physical aspects of daily life, and with it, aid cross-border collaboration between governments and businesses.

It seems that IOTA hasn’t received the traction as other competitors have. The hype train launched early and slowed down, and there was no effort from the IOTA community to change this. However, that doesn’t mean that the network developers have been inactive.

IOTA has serious development in progress, and right now that may seem like its greatest setback, since it partially holds it back from the limelight.

Do IOTA and Tangle Have Direct Competition?

No, not direct competition. IOTA’s Tangle is fundamentally different from other conventional blockchain models that operate on a single consensus, in that complete functionality can be exercised without partaking in the token ecosystem.

Some see this as a problem, since it disincentivizes network participation, though, from a business and development perspective, it’s an advantage. As we discussed above,  IOTA has a consensus layer separate from the processing layer that allows operations more independence than on other blockchains.

The greatest advantage of IOTA over its more ‘traditional’ competing networks is that decentralized applications that don’t necessarily revolve around any financial motive can thrive without the pressure of having to partake in the tokenized ecosystem.

IOTA May Not Save the World, But It Can Replicate It Digitally

Currently, IOTA has a minor carbon footprint because the network is small. Any calculations that predict an influx of high transaction volumes may be inaccurate, so we can conclude that we don’t know how IOTA would fare environmentally on a large scale.

The network does show great potential to build multiverses that are more decentralized than others, especially with the ongoing updates to IOTA 2.0 and the ditching of the coordinator node. Tangle may be useful as a voting layer that can enable complex interactions in a desirable multiverse.


This article is a cooperation with

Kai Gondlach ist einer der ersten deutschen Zukunftsforscher mit staatl. anerkanntem Master-Abschluss der FU Berlin. Seine Grundausbildung (B. A. Soziologie und Politik-/ Verwaltungswissenschaft) setzte er in Großkonzernen und Unternehmensberatungen ein, bevor er sich 2019 selbstständig machte. 2021 gab er den Band "Arbeitswelt und KI 2030" (Springer Gabler) heraus. 2022 gründete er das PROFORE Institut für Zukünfte. Kai Gondlach ist gefragter Keynote Speaker, Autor und aktives Mitglied der wissenschaftlichen Zukunftsforschung.

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