What is IOTA?
IOTA is an open-source Layer 1 distributed ledger designed to bring real-world economic activity such as trade and supply chains onchain. IOTA began around 2015, according to the IOTA Foundation blog, with a focus on moving small amounts of data and value between Internet of Things devices, and it was known for using a Directed Acyclic Graph (DAG) structure instead of a conventional chain of blocks.
IOTA has gone through several major redesigns, and according to the IOTA Foundation blog, the IOTA Rebased upgrade went live on mainnet on May 5, 2025, turning the network into a permissionless Layer 1 that handles smart contracts, digital assets, and digital identity directly. IOTA now presents real-world adoption in digital trade and supply-chain infrastructure as its central focus.
How does IOTA work under the hood?
IOTA, since the Rebased upgrade, runs the Move virtual machine on an object-based ledger model and uses a DAG-based consensus protocol to order transactions. Move is a programming language that treats digital assets as first-class objects, making ownership and transfer explicit at the language level.
IOTA's modular design aims to execute independent transactions in parallel, and the network supports low transaction costs along with application-level fee sponsorship. IOTA's fee sponsorship lets an application pay network costs on behalf of its users, so end users do not necessarily need to hold tokens themselves.
What is the IOTA token used for?
IOTA has been secured since the Rebased upgrade by a delegated proof-of-stake model, with governance handled through onchain mechanisms. The IOTA token is used for network participation, staking, and validator rewards, and onchain activity requires tokens to be paid as fees that are then burned.
IOTA handles storage through refundable storage deposits, so the deposit can be reclaimed when the stored data is released. IOTA's ecosystem highlights work with governments and industry partners on digitalized trade documents, digital product passports, and business identity, with the Trade Worldwide Information Network (TWIN) and the Africa-focused ADAPT trade initiative cited as flagship programs; the IOTA Foundation's 2025 year-in-review says TWIN is planned to be aligned with the IOTA mainnet during 2026.
What are IOTA's strengths and risks?
IOTA's notable strengths include a scalability-oriented design built around parallel execution, low transaction costs, practical features such as fee sponsorship, and concrete pilots in public and industrial settings. Trade and supply chains, where many parties must share verifiable records, align reasonably well with what the IOTA ledger is designed to offer.
IOTA also carries real caveats. IOTA has substantially changed its technical architecture more than once, including the Rebased migration, and announced government or institutional partnerships do not automatically translate into sustained network usage or token demand. IOTA additionally faces competition from other Layer 1 networks with similar goals, evolving regulation, and the usual smart contract security risks.
