The rise of smart cities has brought a growing number of paid services, especially as IoT infrastructure expands. With this expansion, local businesses are increasingly interested in leveraging IoT capabilities. A key expectation is the ability to pay for small services and purchases using appropriate digital currency—a process known as microtransactions. This is where IOTA comes in. It is a ledger-based technology specifically designed for the Internet of Things (IoT) to facilitate microtransactions.
Several ledger systems exist, with blockchain—the technology behind Bitcoin—being the most well-known. While blockchain has certain features that support microtransactions in IoT environments, it also has drawbacks that limit its effectiveness in IoT ecosystems.
Electronic payment systems must excel in security, personalization, and convenience. IOTA offers advantages in all these areas. Compared to other electronic payment methods, it has three main benefits: modularity, decentralization, and no transaction fees.
IOTA is built on a new distributed ledger called Tangle, which overcomes the inefficiencies of current blockchain designs. It introduces a novel consensus method in a decentralized peer-to-peer solution. For example, this approach allows users to make various transfers without paying any commission—ideal for everyday expenses like parking fees, car washes, or even buying a sandwich.
The IOTA Foundation provides IOTA and has partnered with STMicroelectronics (STM) to elevate powerful, sustainable, and cost-effective IoT functionality. Their collaboration includes integrating IOTA Tangle into ST’s 32-bit microcontroller (MCU) ecosystem. This integration will simplify the development of IOTA-enabled products and services, allowing developers to quickly create and prototype IoT solutions (such as with X-CUBE-IOTA1).
Understanding Blockchain Basics
To appreciate the innovation behind IOTA and Tangle, it helps to review how blockchain works. In a blockchain network, registered members are structured into blocks containing transactions. These blocks are linked to form a chain, and validation between blocks is handled by a recognized permission mechanism. Blockchain technology is a subset of such networks, with key features including immutability, transparency, traceability, and cryptographic security.
Blocks contain multiple transaction records and are managed by nodes, which view, control, and approve transactions. This process forms a network of blocks that collectively record all transactions.
Each block stores all transactions along with their complete history. This information can only be altered with the approval of network nodes, making the data nearly immutable.
How IOTA and Tangle Work
IOTA’s innovation centers on Tangle—a different approach that enables scalable networks in pure IoT and blockchain environments.
The idea originated in hacker forums among young computer scientists. Dominik Schiener was one of the scientists supporting this IoT design concept. The project was funded in 2015 by David Sonstebo, Sergey Ivanglo, Serguei Popov, and Schiener. In a short time, it reached a market capitalization of over $8 billion. While cryptocurrency implementation is often complex, this project adopted a lightweight method suitable for any scenario requiring microtransactions.
Blockchain ensures transaction verification in decentralized systems and secures data transmission between machines and humans. Instead of blockchain, IOTA uses a directed acyclic graph (DAG) data structure called Tangle. Though similar to blockchain, it allows for greater scalability, faster speeds, and enhanced security.
The DAG structure assumes that users are also validators. It consists of vertices and nodes where each node points from one vertex to another. Interestingly, with Tangle, performance improves as the number of transactions increases. Each transaction’s "weight" is a positive integer.
The primary goal is to issue transactions while users approve other transactions. All users issuing transactions contribute to network security. For a node to issue a valid transaction, it must solve a cryptographic algorithm similar to Bitcoin’s blockchain. Note that the IOTA network is asynchronous.
IOTA uses hash-based signatures instead of elliptic curve cryptography (ECC). Hash-based signatures are not only faster than ECC but also simplify general protocols (signing and verification). IOTA uses Winternitz cryptographic signatures with a ternary hash function called Curl. Hash-based signatures rely on "one-time signatures" (OTS), meaning a key pair can only be used once. Otherwise, attackers could expose parts of the private key and compromise the signature.
IOTA’s ternary logic uses three symbols (0, 1, and 2). Hardware circuits implementing it must manage three distinct electrical states. A common variant uses 0, 1, and -1, represented by a trit, which corresponds to a bit in binary logic.
IOTA’s Role in IoT Applications
As connected devices grow and interoperability improves, IOTA and Tangle will find more applications. Their unique features are especially appealing in complex Industry 4.0 infrastructures.
The IOTA Foundation is collaborating with STMicroelectronics to develop a software package for easy integration of IOTA into ST development boards.
Holger Köther, Partner Management Director at the IOTA Foundation, stated: "Dedicated hardware plays an indispensable role in IoT market applications. Partnering with ST is exciting because it enhances IoT’s role as an innovation enabler."
The X-CUBE-IOTA1 expansion package runs on STM32 and includes middleware to enable IOTA functionality. The package improves portability across different STM32 microcontrollers. It also provides implementation examples for using IOTA middleware on NUCLEO-F429ZI or NUCLEO-F746ZG development boards.
Alessandro Cremonesi, Vice President of System Research and Applications at STMicroelectronics, added: "The X-CUBE-IOTA1 expansion package enables IOTA functionality through STM32Cube software technology. Developers can easily add IOTA features to their IoT devices, creating valuable applications within STM32’s open development environment."
Beyond STMicroelectronics, Bosch has partnered with IOTA to integrate new data acquisition devices for IoT into the IOTA Data Marketplace. Bosch will use a set of open-source software protocols to connect its XDK development kit with IOTA.
IOTA’s potential has also attracted major tech companies like Microsoft and Cisco. Several companies, government agencies, and universities are exploring Tangle networks for services such as election systems and certificate applications. The Dutch city of Haarlem became the first government organization to adopt an IOTA-based method for managing legal documents.
Recently, the IOTA Foundation signed a cooperation agreement with the International Transportation Innovation Center (ITIC) to create testbeds for "smart mobility." ITIC aims to build a network of testbeds using physical testing methods or virtual and augmented reality to validate AI-based sustainable mobility services.
IOTA’s Tangle architecture serves as infrastructure for sensors to exchange messages and data. In the future, such sensors could be placed in private homes, making building owners service providers for environmental monitoring agencies.
IOTA was created to enable commission-free transactions. Only through this approach can IoT unlock new developments, even in the realm of transactions.
👉 Explore real-time IoT transaction solutions
Frequently Asked Questions
What is IOTA?
IOTA is a distributed ledger technology designed for the Internet of Things. It enables feeless microtransactions and data transfer between devices, making it ideal for IoT applications.
How does IOTA differ from blockchain?
IOTA uses Tangle, a directed acyclic graph (DAG) structure, instead of a traditional blockchain. This allows for greater scalability, faster transactions, and no mining fees.
What are microtransactions in IoT?
Microtransactions are small-value payments, often between machines, for services like parking fees, energy usage, or data exchanges. IOTA facilitates these without transaction costs.
Is IOTA secure?
Yes, IOTA uses cryptographic techniques like hash-based signatures and one-time pads to ensure security. Its decentralized nature also enhances resilience against attacks.
Can IOTA be integrated with existing hardware?
Absolutely. IOTA collaborates with companies like STMicroelectronics to provide software packages (e.g., X-CUBE-IOTA1) for easy integration with popular microcontrollers.
What are real-world applications of IOTA?
IOTA is used in smart cities, supply chains, mobility services, and environmental monitoring. Its feeless structure supports machine-to-machine economies and data marketplaces.