IOTA's Tangle is a next-generation distributed ledger designed to overcome some of the blockchain's most basic challenges. While the blockchain has traditionally separated users and miners, the Tangle combines the two, eliminating the possibility of conflict between the two groups.

While the Tangle has only been around for a few years at the time of this writing, technologists, developers and companies have explored many different potential applications of this innovative technology.

The Tangle Explained

The Tangle is a distributed ledger technology (DLT) that relies on something called a Directed Acyclic Graph (DAG), a structure that moves in one direction (directed) and does not go back in a circular fashion (non-acyclic).^[1]

The first blockchain rolled out for [Bitcoin][1] and separated users and miners into two groups, creating the possibility for conflict between the two groups. While users benefit from lower transaction fees, miners bring in more revenue when these fees are higher.

To eliminate these problems, IOTA's Tangle simply refrained from separating the two groups. The Tangle has sites (transactions) and nodes (devices).^[2] To issue a new transaction, a node (device) in the IOTA network must contribute to confirming other transactions.

As a transaction is confirmed by more and more nodes, this increases the level of certainty there is that the network accepts it.^[2] Because of this feature, any node that issues a transaction is helping improve the security of the entire network.

Since there is no separate group of miners, IOTA's tangle is feeless.^[3] This feature can help the network enable the Internet of Things by allowing devices to make feeless microtransactions.

As a result, a wide range of devices such as appliances, phones and vehicles could potentially communicate with each other and exchange value using the Tangle.^[4]

Tangle Applications

After going live, IOTA has generated significant visibility with its innovative technology and next-generation ledger. Several companies have contacted the people behind IOTA to learn more about the project's underlying technology, according to a blog post written by IOTA founder David Sønstebø.^[5]

As a result, developers and technologists have been working on using IOTA's Tangle for several applications, ranging from being utilised in cars to enabling crowdfunding.

Automotive Applications

German automaker Volkswagen, for example, announced a partnership with the IOTA Foundation in 2018.^[6] During the Cebit'18 Expo in Germany, the two companies exhibited their Proof of Concept for integrating Tangle into the company's cars and using the distributed ledger to help the vehicles download software. This move could bolster the company's transparency after it got in trouble for emissions test fraud.^[7]

Later that year, IOTA and Volkswagen revealed that they planned to release something called Digital CarPass, which would be used for gathering data such as car mileage, in the first quarter of 2019.^[8] This development represented the first major sign of progress in the partnership between the two organisations.

Volkswagen is not the only car company to announced a partnership with the IOTA Foundation, as Porsche also revealed that it was working with the organisation on something called Program 4.^[9] IOTA News announced this development in a tweet in May.

The @PorscheLab is looking forward to work together with @iotatoken & @Porsche on a @StartupAutobahn Project. #StartupAutobahn is the ultimate innovation platform that unites tech companies with the tech expertise of #SiliconValley & the best of German engineering. #Porsche #IOTA pic.twitter.com/xMU7BSuX8r

— IOTA News (@iotatokennews) May 5, 2018

Another example of the potential that IOTA technology holds for the automobile sector is the announcement that the IOTA Foundation agreed to work with HIGH MOBILITY, a development platform that has aimed to foster collaboration involving automobile apps.^[10]

In October, HIGH MOBILITY and the IOTA Foundation announced that they had signed a Memorandum of Understanding to work together toward incorporating IOTA's content into the HIGH MOBILITY developer platform.^[10] To start off, the two organisations announced that they would work on a smart charging project.

Identity Management

The Tangle has shown promise in other industries as well. In October, IOTA announced that this technology would be used for a new biometric identification management solution that would recognise people using the veins in their hands.

"Identity is still one of the biggest unsolved problems today, as the inability to easily identify, verify and authenticate causes significant friction for users and service providers worldwide," stated Dominik Schiener, who is both a co-founder and a co-chair of the IOTA Foundation.^[9]

By leveraging the distributed ledger, IOTA hopes to provide an identification system that is secure, reliable and cost-effective.^[9]

Smart Charging Stations

Another application of IOTA technology is charging stations that allow users to pay with the digital currency.^[11] In April, Netherlands-based company ElaadNL released the first of these charging stations in Arnhems Buiten.

Crowdfunding Initiatives

Aspiring startup entrepreneurs who are seeking financing may also benefit from the Tangle, as the idea of using this distributed ledger for raising funds has been explored.^[12] One major impetus for this was the regulatory uncertainty surrounding initial coin offerings (ICOs).

ICOs, which are offerings of digital tokens, have at times provoked investigations by the U.S. Securities and Exchange Commission (SEC) because they appeared similar to offerings of securities.^[12]

The SEC has subpoenaed many people involved with these digital token sales.^[13] In some cases, the government agency has shut down ICOs entirely.^[14]

As a result, a member of the IOTA community proposed the creation of a platform where investors could provide funding for projects that interested them.^[15] This platform has been referred to as an IOTA-ISO, which stands for IOTA Initial Service Offering. He suggested a system whereby investors could contribute IOTA tokens, which could in turn be distributed to those interested in working on innovative projects.

Financial Services

IOTA has also made some inroads in the financial services industry. More specifically, financial services firm DNB ASA and the IOTA Foundation announced in May 2018 that they had signed a Memorandum of Understanding regarding future collaboration.^[16] Specifically, they planned to look into privacy/personal data management, as well as the potential of new business models.

"As Internet of Things (IoT) and Machine to Machine (M2M) communication and payment for microservices seem to escalate in the future, we think engaging in a Distributed Ledger based technology like IOTA gives us valuable experience and know-how on future revenue streams and business models. We are looking forward to dive into the IOTA space," said Lasse Meholm, who heads up Blockchain and DLT strategy at DNB.^[16]

Smart Homes

Another place where industry participants are working to take advantage of the Tangle's benefits is smart homes.^[17] Developers have already begun integrating the Tangle into smart home applications and software programs that could potentially govern everything from light switches to opening doors.

Interested parties can leverage the open-source Home Assistant platform, where they can develop applications.^[17] Using the Tangle, a homeowner (or renter) could potentially gain entry to their home by using their phone to send a message to their home automation system, which would take place on the Tangle. Once the ledger had verified the person's identity, they would be able to go inside.

Space Exploration

Commercial space company Spacebit Technologies Ltd. has developed a decentralised ground station scheduling system named LinkX, and it was announced in October that its Beta program was being tested on the EOSIO platform LinkX.^[18]

Spacebit also plans to explore how IOTA's technology could be used for space-related applications, such as facilitating a network of space vehicles.^[18]

Smart Grids

Members of the IOTA team developed a POC for a smart grid that could automatically balance itself by leveraging input provided by individual devices.^[19] The idea is to create a smart grid that gives devices incentive to use less energy by offering them some IOTA in return.

The individual devices connected to the smart grid would then have the ability to "decide" whether to help the grid balance or not.^[19] Harm van den Brink, who works for IOTA Foundation, noted that while suppliers are able to provide the energy demanded by consumers, there could be challenges because individuals tend to require electricity either early in the morning or at night.

"Creating the ideal grid is too big for a single proof-of-concept so we took a smaller part that is easy to extend later on," he continued.^[19] "We created a demonstrator that has a few actors and is able to manage usage on a small scale. It incorporates the thoughts mentioned earlier and shows the true power of a self balancing grid."

Real-Time Data Storage

Another potential application of the Tangle is real-time data storage.^[20] Van den Brink created a POC that leverages both IOTA and LoraWAN, a protocol leveraged by wide area networks.^[21] Basically, his POC allowed LoraWAN devices to transmit data to the IOTA network, which would hold the information.^[20]

The use case he outlined in his blog is a refrigerated truck that must ensure its goods remain at a certain temperature at all times.^[20] LoraWAN could send all pertinent data to the Tangle, which could in turn store that information immutably.

Summary

IOTA's Tangle is an innovative distributed ledger technology that harnesses a Directed Acyclic Graph structure to keep track of transactions. Unlike the blockchain, the Tangle doesn't separate users and miners, and instead combines the two. To make a transaction, a device must contribute to verifying other transactions.

Following its release, the Tangle has attracted quite a bit of visibility. Several organisations have expressed an interest in using the Tangle, and numerous others have announced partnerships with the IOTA Foundation. Going forward, it will be interesting to see how many real-world applications come of this innovative technology.