Iota is today one of the major cryptocurrencies on the market. How IOTA works? What is it used for? in order to answer these questions, we are proud to host a series of articles on this theme by Stefano della Valle

A deeper insight into IOTA: part 1

Iota is today one of the major cryptocurrencies for market cap. To try to deepen its nature and its functioning, we’re proud to host a series of interventions on the theme by Stefano della Valle (find about Stefano at the end of the article)

Before IOTA

IOTA is a database distributed among users (“Distributed Ledger Technology”, or DLT) that supports financial transactions through the homonymous cryptocurrency.
To understand how IOTA works and why it was conceived, it’s necessary to understand some peculiarities of the DLTs that preceded IOTA, focusing on the mining process.

Bitcoin mining is a “monofunctional system”, i.e., set up to perform one function only. There are many examples of monofunctional systems: a thermostat, a traffic light, an elevator are all digital systems that perform a single function. Generally, monofunctional systems tend to evolve towards multifunctional systems: mobile phones have evolved into smartphones, smart TVs, smartwatches, etcetera. All these tools are able to interact with the outside world and run applications to process the gathered data.

” the IOTA project was launched to create a fee-free payment system”
– Stefano Della Valle


The first attempt to transform the Bitcoin mining process into a multifunctional system was made by Ethereum with the creation of Smart Contracts (SCs). However, SCs have a limit: they cannot interact with the outside world, so they can’t create outputs from inputs that are not in the blockchain. This means that it is impossible for the Ethereum network, despite the multifunctionality of its miners, to process transactions derived from data external to the blockchain.
To overcome this limit, “oracles” have been created, systems external to the network that insert data into the blockchain and provide elements to verify its validity. This tool doesn’t produce distributed consent on derived transactions because the oracle is not distributed among users.

IOTA logo. IOTA aims to create a fee-free payment system
IOTA logo. IOTA aims to create a fee-free payment system

IOTA founders started working on this issue with a specific project called Qubic.
Qubic are the algorithms that are executed by “node assemblies” that produce consensus outputs as the “assemblies” consist of several nodes that operate independently and are remunerated, such as the Bitcoin or Ethereum miners, if they correctly execute the Qubic assigned to them.

QUBIC project presentation on IOTA website
QUBIC project presentation on IOTA website


In the development of Qubic, its creators encountered two problems:
1) Differently from the Ethereum smart contracts, Qubic can interact with the world outside the blockchain to gather data and perform complex elaborations. This allows workloads to be distributed over multiple systems in parallel. Obviously, to encourage participation in these operations, a reward is due to those who contribute with their own system. This reward also works as an anti-spam deterrent, since the contributors who provide data not validated by the majority of other nodes get no remuneration.
2) The processing of a Qubic may require insignificant resources, such as to require as a reward a sum too small to be transferred, because lower than the transaction fee.
For this reason, the Qubic project was frozen, but the IOTA project was launched anyway, to create a fee-free payment system.

This is how IOTA was born. In the next article we’ss see what IOTA is and how it technically works. Don’t hesitate to ask if you have any question.. and have a nice day guys!

Stefano della Valle is CEO of Things Lab, a company founded to carry out research and development on IoT (and therefore on IOTA platform specifically). It is member of the Board of Directors of Bcon, a consulting company created by experts in crypto, finance, and marketing, dedicated to supporting companies that want to take advantage of the ongoing transformation both from a technological and organizational point of view, born from the DLT. A computer expert in IT and TLC architectures, he worked on the development of the trading platform of Borsa Italiana, he designed high-efficiency metropolitan networks. He has held managerial roles in Dell, BT, Vidyo and collaborated with the main Italian telco operators. He firmly believes that the crypto revolution has begun, and it will offer us enormous opportunities.

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