Blockchain Wars: IOTA's Tangle Takes on Ethereum

The blockchain craze continues unabated as more companies create new applications faster than ever. The architecture made popular by bitcoin and its contemporaries has proven to be a useful tool that offers better security and transparency, leading to its growing adoption in several industries thanks to its effective communications and public ledger.

Even so, blockchain’s meteoric rise has not been without speed bumps, and there have been instances where it has shown weaknesses that could prove to be major challenges down the road.

In an industry such as the Internet of Things (IoT), blockchain’s capabilities have proven to be a particularly strong fit. Interconnected devices require rapid and transparent verification of data, something blockchain’s ledger can handle exceptionally well. However, some have complained that blockchain’s somewhat rigid architecture makes it well-suited for robustly storing small amounts of data. This means it’s not truly scalable for things such as big data storage that has come to be synonymous with IoT.

This and other concerns led a team of developers to launch IOTA, a cryptocurrency platform designed for the demanding IoT ecosystem. With a twist on the traditional blockchain the company calls Tangle, IOTA claims to provide zero-fee transactions, as well as a unique verification process that resolves many of the scalability problems associated with bitcoin.

Tangle is attempting to position itself as a viable alternative to the Ethereum blockchain, which is still the gold standard for most applications built on the architecture. Regardless, new Ethereum-based solutions for IoT could render the discussion moot, offering a better way for IoT to function.

One of the biggest points of contention between supporters of blockchain and Tangle is the former’s capacity for data storage. IoT systems create massive amounts of data to parse and store, and most existing blockchains simply cannot handle the load. Indeed, the technology is meant to offer strong, secure storage for limited amounts of data.

Detractors argue that this philosophy is incompatible with IoT design, and proffer that Tangle delivers a better solution thanks to its take on mining. With IOTA, every transaction requires the user to verify two other, random transactions, creating a tangled ledger that reduces the need for mining and theoretically removes any fees. This makes it a useful infrastructure for IoT devices that require micro and nano-transactions to process data being communicated, without raising overheads. 

In this sense, Tangle architecture does exhibit notable advantages over blockchain. Transaction processing in blockchain means that much larger block sizes and volumes will take significantly longer to process as they must be completely verified to be appended to the chain.

For an IoT platform, this could represent prohibitive costs, and a lack of functionality due to longer processing times. However, some blockchain-based applications could present a third option using Ethereum’s blockchain, helping to resolve many of the system’s issues with data storage.

Streamr, an application based on Ethereum, has designed a platform for IoT systems that uses live data streaming instead of storage. In the development team’s mind, storage in such technology is superfluous on an atomic level, as most devices require live data to make the best possible decisions, as opposed to outdated information.

Moreover, Streamr proposes to create a marketplace that allows IoT providers to monetize their live data and create a greater incentive for interconnectedness and participation. The system even hosts a development environment designed to facilitate easy creation of IoT applications.

On a deeper level, this IoT battle between Streamr and IOTA represents a broader clash of philosophies. On one hand, blockchain has proven to be a game-changing technology. Ethereum’s smart contracts and architecture have lead to a boom in the sector, and the democratization of information.

On the other hand, Tangle offers to virtually remove the cost of transacting and solve the mining issue thanks to its verification methodology. IOTA also claims that its verification method removes many of the centralization problems traditional mining creates. Because there is no need for miners to process blocks of transactions, there is no motivation to centralize the verification process.

However, Ethereum backers have countered that even with Tangle’s supposedly superior design, they must still run on hardware that is not optimized for that type of process. Instead, verification could become bogged down due to existing technology’s binary nature, and lead to longer processing times down the line.

Moreover, solutions like Streamr render the data conversation moot, as they remove the burden of data storage from the blockchain. Instead of handling massive amounts of data that can crash the network, live streamed data offers an immediate solution for IoT, and reduces the overall chain’s operational load. Most importantly, however, is that the existing ecosystem is already geared toward existing platforms such as Ethereum’s ERC-20. By creating applications that fit in to the wider environment, developers can reduce the development costs and compatibility issues.

Despite blockchain’s popularity, new solutions are constantly emerging that could threaten its recent darling status in the technology world. While Ethereum has in many ways solidified its staying power and remains the most popular development environment for blockchain-based applications, Tangle is an intriguing competitor.

IOTA’s architecture is still young, and while it has made promising steps towards broader adoption, the newer upstart must still contend with Ethereum’s existing infrastructure and first-mover advantage. Additionally, companies that build on Ethereum remain ahead, as they are already compatible with the prevailing systems. With the introduction of live-data streaming capabilities from companies like Streamr, Tangle may face an uphill battle dethroning Ethereum in the IoT sphere, even when considering its custom-built design.

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