A Beginner’s Guide to IOTA (UPDATED)

What Is IOTA?

IOTA is a distributed ledger technology designed to support a new digital economy in a hyper-connected world. It facilitates affordable, open-access value and data transfers through a scalable and decentralized network infrastructure.

Key Takeaways

IOTA is a distributed ledger technology with a unique architecture and open-source product suite for individuals, businesses, and institutions in Web3.
It pioneered DAG (Directed Acyclic Graph) technology and is among the first networks to integrate Move smart contracts directly at Layer 1, combining DAG-based consensus with an object-centric ledger.

This article was updated in June 2025 with input from the IOTA team.

In this article, we will be going through the basics of IOTA and reviewing its features, purposes, and utilities.

IOTA is a distributed ledger technology launched in 2015 that offers an open-source platform for Web3 applications across individual, business, and institutional users. The network facilitates low-cost, permissionless transfers of value and data through its scalable, decentralized infrastructure.

In this article, we’ll explore the basics of IOTA, its main technology and future plans for the Foundation.

Understanding IOTA

IOTA offers an open-source platform for building decentralized applications that serve individuals, enterprises, and institutions. Unlike traditional blockchains, which operate as a chain of blocks, where every block contains a set of transactions, IOTA uses a Directed Acyclic Graph (DAG) and integrates MoveVM smart contracts at Layer 1. This hybrid structure enables decentralized validation and complex smart contract functionality directly on the base protocol.

The IOTA Foundation, a non-profit organization, steers the protocol's development and collaborates with global partners to drive real-world adoption.

Over the years, IOTA has partnered with organizations such as the European Commission, Jaguar Land Rover, Dell, World Economic Forum, Tony Blair Institute for Global Change, TradeMark Africa, EDAG, Filancore, Realize, EngieLab, Object Management Group, STMicroelectronics, TMForum, The Linux Foundation, TechMahindra, FiWare, Zebra Technologies, and others to explore practical applications of its technology.

The IOTA Token

The IOTA token is the network’s native digital currency. It is used for staking, transaction fees, value transfers, and on-chain governance, enabling holders to participate in the protocol’s development.

What Issues Does IOTA Solve?

IOTA addresses the core limitations of traditional blockchain systems – such as slow transaction speeds, high fees, and limited scalability—through a unique architecture based on a Directed Acyclic Graph (DAG) and a Layer 1-integrated MoveVM. This design allows for parallel transaction execution, eliminating network congestion and enabling fast and low-cost exchanges of data and value without relying on centralized validators.

Beyond infrastructure, IOTA provides tools and frameworks designed for real-world adoption across a range of industries. These solutions support secure digital identity management, transparent and verifiable data handling, asset tokenization, and seamless onboarding for users and developers. IOTA’s ecosystem empowers developers, enterprises, and institutions to build decentralized applications that are efficient, interoperable, and accessible—bridging the gap between emerging technologies and practical, scalable deployment.

IOTA's Architecture

IOTA’s DAG-based architecture immediately incorporates transactions into blocks that reference previous blocks, eliminating the need for shared mempools and centralized block leaders while enabling fast confirmations, parallel processing, and high throughput ideal for Decentralized Finance, supply chain, and industrial applications.

The platform supports multiple virtual machines, primarily using MoveVM for smart contracts and offering Ethereum compatibility through its Layer 2 IOTA EVM, allowing existing Solidity contracts to deploy without modifications.

How Is Consensus Managed In the IOTA Network?

In Distributed Ledger Technology (DLT), a consensus mechanism is vital for node agreement on the ledger's contents. Consensus in the IOTA network is managed through Mysticeti, a Byzantine Fault-Tolerant protocol optimized for low-latency, high-throughput environments. It features concurrent transaction proposals,three-phase finalization, parallel leader validation, and offline leader resilience. IOTA uses Decentralized Proof of Stake Sybil protection to secure consensus.

The consensus protocol will evolve into Starfish, an advanced variant designed for greater resilience and efficiency in large-scale, high-volume networks. Starfish maintains sub-second response at 150,000 transactions per second across networks exceeding 100 validators

More information about IOTA’s consensus mechanism is available in the IOTA documentation.

What Is Next for IOTA?

IOTA is advancing toward its next-generation Starfish consensus protocol. Alongside technical enhancements, IOTA continues expanding its free, easily integrated Web3 product suite including Digital Product Passports for supply chain transparency, IOTA Identity for decentralized credential management, Move-powered tokenization solutions, and practical tools like Gas Station for fee-less user onboarding and Notarization for data integrity verification, enabling seamless enterprise blockchain adoption without technical barriers.