Is IOTA’s Coordicide the solution for DAGs?

A couple of days ago, I wrote an article discussing how IOTA is implementing a new consensus mechanism called Coordicide.

If IOTA is able to deliver as promised and successfully remove its coordinator while at the same time achieving a higher degree of decentralisation and maintaining security, there is absolutely no reason that this DAG-based protocol will not be adopted by the majority of IoT-developers, producers, and supporters.

To better understand this, let’s take a look at some of the advantages of Coordicide.

Coordicide features

Reliable timestamps

Instead of directly voting on the fate of transactions, users can instead vote on the credibility of timestamps. Here, ‘credible’ means that the difference between the issuing timestamp of a transaction and its arrival time to the nodes is not above a certain threshold. This has multiple benefits, such as:

• Devices that do not have full knowledge about the ledger state can take part in the voting process, which is extremely beneficial for IoT environments.
• Since the network can reach consensus on which transactions carry credible timestamps, there will be a timestamp order to transactions.

Let’s not forget that not having timestamps has been one of the major drawbacks for IOTA and other DAG-based cryptocurrencies, so the hope is that this implementation will appease some dissenters.

Multiple Tangles

Without the coordinator, it is possible to have multiple Tangles coexisting as separate domains. Each domain can implement a different logic for the transactions it processes and associate a different meaning to the tokens it contains. Even though these domains do not necessarily share the same rules, it is still possible that transactions from one domain refer to data from another domain.

This will enable IOTA to model extremely complex use cases with very simple building blocks.

In addition to adding a lot of flexibility to IOTA, the modular approach enables a way of sharding network activity into separate domains, thereby further increasing IOTA’s scalability. As explained by the IOTA foundation:

“A ‘data-only’ Tangle that contains only data transactions could be separated from a Tangle that contains only value transactions. Since data transactions can never be conflicting, transactions in this Tangle could ‘confirm’ instantly without the involvement of any consensus mechanism. This would enable a wide array of IoT use cases that depend on immutable data.”

Different data structures for every domain

Since a Tangle is the most generic form of a DAG — with bundles being able to reference other transactions — it will now be possible to build completely different data structures tailored to the specific needs of a use case.

Additional rules encoded in the signature message fragment

As every transaction carries a “signature message fragment” that can contain arbitrary data, it is possible to encode more complex behaviours such as certain conditions for the application of a transaction, or side-effects that are triggered automatically. These can then be parsed and applied by the nodes of that specific domain.

This complex set of features allows IOTA developers to build smart contracts and other dApps for IoT-enabled devices.

Coordicide benefits

Some of the benefits highlighted in the white paper are:

1. Higher levels of decentralisation as there is no central coordinator.
2. More permissionless, reliable timestamping and finality within DAGs.
3. Increased scalability both in terms of transactions output and throughput (again, there is no coordinator, so it’s easier to scale).
4. The ability to create data transactions – commonly known as smart contracts.

The fact that IOTA is open source and has a strong community of members leads me to think it can be one of the major winners within the space over the next couple of years. Only time will tell whether IOTA’s delivery will be successful.