- Dan Simerman has explained why IOTA’s Distributed Ledger technology is more likely to be adopted by the enterprise sector for data-centric applications than blockchain-based solutions.
- According to the IOTA Foundation member, the IOTA Tangle has four major advantages.
In an interview with the website City A.M., Dan Simerman, Head of Financial Relations at the IOTA Foundation, spoke about the influence of coronavirus, adoption and the advantages of IOTA over blockchain solutions. As Simerman explained, there could be two converging forces driving the use of digital assets as a result of COVID-19.
On the one hand, the fear of a new outbreak could force governments to digitize the money, which could also benefit cryptocurrencies. On the other hand, governments will use the coronavirus as an opportunity to study alternative economic possibilities. According to Simerman, the most promising use case is the link between the human and machine economies.
Which is why I’ve been such a fan of IOTA since day one. Traditional blockchain architecture doesn’t support two critical elements for true adoption: Scalability and feeless microtransactions. By offering the ability to scale the network as participation grows, IOTA creates use cases to secure the data and value that is sent between humans and devices in future corporate, independent and smart city networks.
As part of his field of activity, Simerman also explained that the technical, legal and regulatory infrastructure still has some catching up to do when compared to the traditional financial world. Simerman’s work focuses on how to build an infrastructure that allows individuals, organizations and possibly governments to make broad use of the technology. As Simerman states, this requires a variety of systems, processes and approvals.
Simerman therefore sees the current greatest obstacle to a broad adoption in creating a feel-good factor through legal framework conditions for all parties involved:
Comprehensive legal and regulatory guidelines – many companies that want to use digital assets are still waiting for guidance in the form of formal legislation. Until that happens, it will probably be the more risk prone groups that start to incorporate digital assets into their business models.
IOTA will find adaptation faster and easier
As Simerman further states, IOTA will be able to offer companies and organizations a much higher feel-good factor than blockchain-based solutions. The fee less and scalable nature of the IOTA Tangle will allow organizations to implement real-world use cases:
For most blockchains, data and value are stuck on the same ‘thread’, meaning that you cannot send data without paying a fee to the network. This makes data heavy or data-centric applications nearly impossible for large corporations to adopt.
Explicitly, Simerman cites four reasons that make using the blockchain for data-centric applications less attractive: usability, cost, accounting and regulation. For example, most blockchains force companies to keep the cryptocurrency, although this in itself has nothing to do with value transfer. On the one hand, this makes it unnecessarily user-unfriendly to use, while on the other hand it creates complex obligations in terms of accounting and tax reporting, according to Simerman.
Ultimately, for data-centric applications with millions of transactions, the costs of fees are extreme, even if the individual fee is small. From a regulatory perspective, Simerman also pointed out that the legal situation regarding the valuation of many cryptocurrencies as securities worldwide is still not completely clear:
There is a good chance that the digital assets that sit atop DLTs may end up being securities due to how they initially raised funding. Companies will not want to take the risk of holding a digital asset (that may be a security) for paying for data transfer in a distributed application.
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