The IOTA Foundation has announced the first launch of the new version of the IOTA network, under the code name Pollen.
This is the first of three planned launches to reach project completion Coordicidethat is, the complete and definitive decentralization of the network.
How does IOTA 1.0 work?
To understand the new features of IOTA 2.0, it is necessary to briefly describe how IOTA 1.0 works.
IOTA was born with the goal of pushing the boundaries of mining-dependent networks and blockchains, which in a nutshell have limited scalability and variable costs due to tariffs and mining.
IOTA does not require mining, and therefore there are no fees to record transactions on the network. Instead of blockchain, IOTA uses a data structure called Directed Acyclic Chart (DAG) or Tangle.
This technology allows nodes to operate asynchronously, and therefore each node can record every transaction it requires. This means that IOTA has no theoretical scalability limits.
Clearly, the absence of fees and the lack of a mining system, which prevents spam, makes the network vulnerable to attack.
In particular, if the consensus model envisaged in the original whitepaper were simply implemented, it would be possible to spend twice a transaction through spam.
The coordinating node
To avoid this problem, while waiting for the team of researchers and mathematicians to find the ideal solution, the developers of IOTA decided to adopt a very simple temporary solution: activate a reliable node whose transactions serve as a reference for the validity and confirmation of transactions.
This node, called Coordinator, has no network control functions or other nodes, cannot alter the registry, cannot sign transactions on behalf of other nodes.
Simply put, your transactions are considered reliable because they are pproduced by a node that is probably not malicious.
Approved transactions (to which the coordinator connects yours) are considered valid and after three consecutive approvals they are considered confirmed.
Obviously, this is a compensation solution that does not respect the spirit of distributed networks and, above all, could easily be attacked from the IOTA Foundation itself by an unfaithful collaborator. For this reason, the IOTA Foundation has always considered it temporary.
The problem with the system.
However, the problem to be solved was very challenging: how to eliminate the Coordinator without limiting the performance and without introducing the remuneration of the nodes?
The answer given about two years ago by the IOTA Foundation research team seemed like a joke: just make each node a coordinator.
It was not a joke. The complex simulation tools allowed verifying the various strategies to create a distributed system where each node of the network is really an authority, without competition, without tariffs and without bottlenecks.
The basic idea is simple: the coordinator is trustworthy because validation transactions can be traced back to them because their address is public.
Therefore, if each node were identifiable and each node received a reliability parameter, each node could provide a "reliable" confirmation of other transactions.
Each node would be a small coordinator.
The first step in this approach was to modify the protocol used to generate transactions. The new model makes it much easier for each node to verify the correctness of the transaction and thus the overall state of the record.
It goes without saying that this is not enough to avoid conflict.
To resolve conflicts, a solution has been created that provides a digital identity to the nodes. In this way, the transactions issued by a node are identifiable and attributable to a reliable source and not arbitrarily.
The MANA parameter
Having a digital identity to which transactions can be attributed, allows to attribute to each node a qualitative parameter derived from its behavior.
This parameter is called MANNA, a terminology used in many online games that generally indicates the amount of strength or energy the player has available.
MANA cannot be bought, sold or given away. MANA is not recorded in the general ledger. MANA is earned by receiving IOTA and lost by performing malicious transactions, as double-spending attempts.
Each node stores in memory the list of digital identities with which it becomes familiar and assigns each identity a quantity of MANA depending on the activity it observes.
Therefore, each node can autonomously evaluate the reliability of a transaction, also taking into account the digital identity of the node that produced it and, therefore, the MANA it has.
Consequently, if a node links its transactions to malicious transactions, it may lose MANA. If you carefully evaluate the transactions to which you link yours, thus contributing to the quality of the distributed record and the speed of confirmation, you do not lose MANA.
Therefore, it is a model that is organized in reverse compared to mining: instead of encouraging it to behave correctly, which leads to the growth of the energy expended by the nodes in the network as a whole, wrong behavior is discouraged, an approach that has no side effects.
The loss of MANA can, in fact, produce considerable limits for the nodes. In this first version, MANA management is not yet activated, but its role is essential.
However, even with a disincentive system, conflicts can occur. There are two conflict management systems under study. In this version, the Rapid Probabilistic Consensus (FPC).
The operation of FPC is similar to a distributed voting system. If a node receives two conflicting transactions, it issues a message on the communication channel between the nodes to report the problem and expresses an opinion on which transaction it considers valid. In the meantime, any other node will have received the transactions and will respond with your opinion.
By evaluating the received opinions, each node receives a view of the opinion of the majority of the nodes according to their authority. If your initial opinion disagreed, change it and retransmit it. Within a few seconds, a distributed consensus is formed on which of the two conflicting transactions is considered valid.
The FPC system produces the same effects as a PoS or PoW system but does not have a speculative economic basis, with all known side effects.
When the MANA parameter is available, this process will be even more reliable, allowing the opinions of the nodes to be evaluated according to their reliability.
Since MANA cannot be purchased, it is substantially impossible to counter the opinion of the majority of nodes or possibly the minority that owns the majority of MANA.
Attempting an attack would require obtaining a majority of MANA, but this means obtaining a majority of the existing IOTA in no time. In fact, MANA is not permanent. MANA is lost over time and can only be obtained again by obtaining IOTA.
MANA will not only be used for conflict management. Many other functions of the new network are based on MANA. For example, it is expected to be used in speed control, which can even eliminate the need to perform the expected antispam PoW of the nodes: the more MANA is owned, the more transactions can be entered into the network over a period of time.
This mechanism is particularly useful for applications that manage data: selling data in exchange for IOTA also allows you to obtain MANA and the more MANA is obtained, the more transactions (that is, data) can be processed.
MANA can also play a role in managing automatic node connection. In version 1.0 of the network, the connection is manual but in this new version, it is completely automatic.
Since the MANA owned by a node indicates its reliability, a node with little MANA could be rejected by nodes with a lot of MANA, thus limiting the direct connection of potentially malicious nodes to authorized nodes in the network, without preventing the actual node connection.
Other new features of IOTA 2.0 and Pollen
IOTA 2.0 introduces many other new features, including the ability to create "colored coins" Colored coins are a means of creating tokens, but, unlike Ethereum network tokens, they don't require a smart contract to be properly managed – they are simply IOTA that have been given a significant role in a particular application context and that the network prevents them from being used for other purposes, that is, they can be arbitrarily colored or discolored.
They are the first step in supporting decentralized applications that will be fully backward compatible, especially with the introduction of a distributed oracle-based smart contract system.
The colored coins they are the perfect tool to create stable coins. A stablecoin is a token that represents a value in fiat currency but, unlike fiat currency, it is subject to transfer costs (transmission fee) and performance limits linked to the blockchain.
Since they are not issued by the monetary authorities, they also run the risk of insolvency, a risk that is difficult to calculate but is certainly not zero.
If, on the other hand, the same central bank were to issue a stable currency that would issue the equivalent fiat money, there would be a functional match:
- There would be no administration costs to move the stable coins, since there are no costs to move the fiat money between two accounts of the same bank or in a paper money transaction;
- The number of transactions that can be carried out is practically unlimited in both cases;
- Having the guarantee of the same issuer makes these stable currencies fully equivalent to the fiat currency.
Obviously, it is still too early to consider all the problems solved and all the potential risks foreseen and managed, but the long phase of experimental research, which lasted almost two years with impressive theoretical research work with superior mathematical tools, followed of a concrete process The implementation, which is now also publicly available, leads to the conclusion that the IOTA project is rapidly progressing towards its goals And, if all the hypotheses are confirmed, it will provide fundamental tools to implement applications that today are impossible to carry out.