IOTA offers no fee smart contracts, Ethereum interoperability and compatibility for next generation distributed apps
Do you remember IOTA? IOTA was designed to rethink blockchain and gain mainstream adoption. It took a few wrong turns at some point, but now it seems to be back on track.
After relaunching in March 2021, IOTA is today releasing a beta version of its smart contracts implementation with some notable features like zero fees, Ethereum interoperability and compatibility.
Smart contracts are programs stored on a blockchain that are executed when specified conditions are met. You can think of code with crypto guarantees and security, and they support some of the blockchain’s most advanced features like DAOs and DeFi.
We met with Dominik Schiener, co-founder and CEO of the IOTA Foundation, to discuss the rollout and the progress made since March 2021.
The new IOTA
Schiener described the transition to Chrysalis, IOTA’s network upgrade, as “a great success”. IOTA now has a completely new protocol, implementation and cryptography, but all token holders were on the old network. Therefore, an interoperability solution had to be developed that would allow token holders to move from one network to another.
This is known as a bridge, and Schiener said that so far more than 75% of the total IOTA supply has been bridged from the legacy network to the Chrysalis. That’s over $ 3 billion worth of tokens, and migrating to the new network successfully and securely was no easy task. The new network runs smoothly, transactions are confirmed in less than 10 seconds and the Firefly wallet was also a great success, said Schiener.
It sounds good that 75% of the total tokens in circulation will move to the new network in 6 months, but what about the rest? Schiener noted that if you think about it, a network currency like IOTA is deflationary and users may lose access to their keys or otherwise access to their tokens.
According to Schiener estimates, a total of 85% of the tokens will be transferred to Chrysalis. Incidentally, the token holders decide what happens. People will be able to vote on their Firefly wallet not just for these but for all governance decisions. One vote for a token, which, according to Schiener, is currently the easiest, fairest and safest way.
Schiener added that Coordicide, the removal of the coordinator node on the network that helps validate transactions, is also doing well. A development network is running and the knowledge gained from it is used to improve implementation. The goal is to be able to show the community a way to general availability before the end of 2021, said Schiener.
The other large blocks of the new IOTA are also in good shape, Schiener reported. That is, rate control, that is, determining which transactions are preferred among those issued via a token called Mana, and oracles, that is, the ability to bring data from the outside world to IOTA.
The Alvarium project, known as the IoT Oracle, a collaboration with Dell Schiener, has just started as a Linux Foundation project. In addition, IOTA is working on another solution based on digital identity, which will also be generally available by the end of 2021.
IOTA aims to address digital identity, Schiener said, as one of the big problems today is if you run a digital entity on Ethereum, for example, you have to pay transaction fees. Signing up for a website or service shouldn’t cost any money, and IOTA has high hopes of addressing that, added Schiener.
Smart contracts with no fees, Ethereum interoperability and compatibility
There seems to have been progress on all fronts, but the main course is smart contracts. Schiener acknowledged that IOTA is too late in the smart contracts market. Ethereum has had that since 2015, as has Polkadot. IOTA has focused on making the base layer, i.e. the ledger, work as efficiently as possible, including tactility:
“For the past two years we have been working on this new approach to building smart contracts on top of IOTA. So far, everyone has recognized that smart contracts with the DAG as a blockchain simply do not work because you have to have the transaction sequence and the complexity of the time stamp, so that smart contracts with blockchain are currently the most practicable way.
What we are actually doing with our smart contract solution is that we are building blockchain networks on top of IOTA. IOTA is this DAG, this directed acyclic graph. We now have blockchain networks on top of that, which are used to execute smart contracts, and they use the base layer, which is IOTA, for security, “Schiener said.
IOTA presents its smart contracts with a clear onboarding path and many interesting functions for developers
Schiener highlighted the interoperability aspect of IOTA’s smart contracts. This means that a smart contract can communicate with another smart contract by, for example, transferring assets from one blockchain network to another blockchain network. What IOTA does is that it uses sharding to spin different networks on its base layer, and the smart contracts that run on those networks can communicate with each other.
This is a very different approach than Ethereum, where everything runs on the same network. Think about there will be different types of blockchain networks, Schiener said. For example, there could be an open main network where anyone can provide a smart contract. But if you want to use a different network with different properties or even spin out your own, that is also possible.
This also includes the fees charged by each network; Each network can define its own charges. Iota smart contracts allow you to define how much you want to charge for transactions and possibly even make it callous by providing the right incentives, Schiener said.
What is happening with other networks today, for example Cardano or Polkadot, is that there are validators that secure the smart contracts. Schiener believes that validators there really don’t have enough incentives to compete with one another. “What we want to do is allow you, as a smart contract developer, to define the incentives you give to a validator,” he added.
Last but not least, the smart contracts from IOTA are compatible with the virtual machine (EVM) from Ethereum. This is the current industry standard, and developers can write smart contracts using Solidity, Ethereum’s programming language for smart contracts, Rust, or Go.
Another feature of the IOTA Smart Contracts Beta is the Smart Contracts Schema Tool, which can be used to automatically generate boilerplate code for many of the standard form sections of a Smart Contract.
Schiener also emphasized scalability through sharding and ease of use. In terms of applications, he mentioned there are quite a few already, mostly in gaming, and NFTs, with tokenization and DeFi as the next big goal. All existing applications were developed by the IOTA open source community.
Overall, IOTA’s approach to smart contracts looks promising. Schiener mentioned that IOTA’s strategy is not to compete directly with Ethereum, which is the market leader at the time, but rather to offer an onboarding path for people to try out IOTA’s smart contract features. It seems like a pragmatic approach, and the combination of zero fees, interoperability, and compatibility makes this an interesting choice for developers.
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