IOTA (MIOTA)–Of all the reasons to take interest in IOTA, the project’s method for handling network scale is paramount.
Let’s look at a brief history of how Bitcoin scaling issues have evolved over time. In 2013 and 2014, the talk surrounding Bitcoin was as a digital form of money that could be sent for free (or fractions of a penny in miner fees), opening the door for the innovation of “micropayments.” Due to the advantage of Bitcoin’s divisibility over traditional fiat, micropayments presented an innovation in everything from transaction “key” unlocks to pay-as-you-go content streaming in minuscule amounts. Imagine a game or video that charged every user a penny per minute for using their service. Or if The New York Times could charge a reasonable rate for individual articles as opposed to requiring a lump sum. Not only would this allow a shift away from the incessant and annoying advertisement model that makes up current internet revenue, but also aligns the incentive for content creators to produce what users are willing to pay for. However, the promise of micropayments and low-fee money transfers across the globe was destroyed in 2017 with the rise of miner fees as BTC adoption and network volume reached a pinnacle.
Average Bitcoin fees started 2017 at 0.30 USD, which was still a barrier to growth. The average crypto user is going to balk at having to pay such a fee for each transaction, and limits the usability of Bitcoin and cryptocurrency to an appreciating asset as opposed to a high-volume currency. If you buy and hold Bitcoin, in the way you would invest in stocks or real-estate, the high fees of transfer become a non-issue. But that ignores what currencies are for.
The situation only got worse as Bitcoin captured national headlines and investment furor. The peak in both BTC coverage and valuation in late December 2017 corresponded with the currency’s highest average miner fee, reaching 55 USD for several days and staying above 10 USD, per transaction, for over a month.
The combination of fees and network stress has limited the growth and adoption for Bitcoin, which, by extension, has put the brakes on general cryptocurrency interest. A developer looking to Bitcoin for potential application is going to be dissuaded by the currencies behavior in times of scaling. Amazon has zero incentive to start accepting Bitcoin, if the very announcement of doing so would create the type of network congestion to render the currency unusable for payments.
A Solution to Growing Adoption
Scale has to be the focus for the industry, both in the near term and as a way to eliminate the barriers of long-term growth.
Lost in the emphasis on day-trading crypto volatility and speculative driven price changes, investors need to vote with their dollars on the currencies that are actively working to solve the industry’s most pressing issue: scalability. “Third Generation” cryptocurrencies may be an accolade that is too soon to ascribe, but the newest batch of coins are all being built to handle the type of growth necessary for crypto to thrive.
Commitment to scale is not just a white paper buzzword for cryptocurrencies to bandy about–it’s a feature all investors should demand from their technology. If a currency does not even have an outline for scaling to the network load necessary for widespread adoption, it doesn’t deserve the faintest interest from the market.
IOTA is going after scale. Tangle is both a distinguishing innovation for IOTA and a possible model for other currencies to emulate. The concept is powerful: maximize resource efficiency by having a currency that scales with user volume. The downside is that the network is actually slower with fewer users, but also the demand is smaller. As the currency grows–and also the incentive to use the currency increases–the ability for the network to handle an expanded user volume scales proportionally.
The average investor may not appreciate what a currency like IOTA offers in terms of affecting the scaling debate, but the future of cryptocurrency is one that is going to put the spotlight on functionality as opposed to pure price speculation. Warren Buffett, Charlie Munger and Bill Harris have all heaped their displeasure over the ponzi-like market they see building in the crypto industry. Until functionality becomes more than just a talking point, but an actual consideration for investment and monetary support, the industry is not all that far off from what the detractors have labeled as empty speculation. Buffett has gone so far as to call crypto investing “gambling,” with no genuine value to support the massive market capitalizations. What all of these arguments are getting at is the inability, thus far, for cryptocurrency to prove itself in handling real-world usability. Bitcoin is still the flagship currency and figurehead for the industry, but until Lightning Network or some other solution to scale becomes a reality, the currency will continue to be held back from reaching its market potential. In the meantime, the door has been opened for other currencies to pave the way in terms of functionality and ability to handle usable network loads. IOTA is a strong candidate for being an industry leader in scale, in addition to offering the type of innovation that was originally promised through cryptocurrency.