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Exclusive interview with Dominik Schiener, co-founder of IOTA

Speaking with Dominik Schiener, the co-founder of IOTA, we deep dive into the real-world case for IOTA’s DAG system. Amidst a waterfall of growth spurts for IOTA, such as the development of Chronicle, the Jaguar Proof-of-Concept, and the Linux partnership, Scheiner gives us an intimate look into IOTA’s future trajectory.

Scheiner speaks openly and honestly about his future vision of the world, and how IOTA facilitates and accelerates this by creating a bottleneck-free environment for the cross-pollination of technology, industry, and ideas.

Scheiner’s key takeaways:

  • Blockchain’s limitations around scalability and economic motivations
  • His vision for interoperability to open doors to new economics and business models
  • IOTA’s past vulnerabilities to social engineering attacks and the steps being taken to educate the community
  • IOTAs grant program that’s supporting great minds to extend the functionality of Chronicle
  • Partnering with Linux and acting as the connective tissue to complement Hyperledger
  • IOTA’s role and real-world use cases in environmental stewardship
  • Barriers to adoption of IOTA
  • Why IOTA is waiting for Coordicide
Co-Founder of IOTA Dominik Schiener
Co-Founder of IOTA Dominik Schiener

DAG’s capacity to surpass blockchain

Q: You speak widely about DAG’s capacity to surpass blockchain due to the speed and flexibility of its architecture. In this sense, where do you see the traditional blockchain architecture fitting into all this, if at all? And why/ why not?

A: Traditional blockchain architecture doesn’t fit into this for a few reasons. The two primary ones are an inability for traditional blockchain architectures to scale and transaction fees.

To host a system of millions of smart and connected devices, you need a system that scales proportionally to the number of nodes on the network. If you are constrained by block sizes, you will always eventually reach an upper limit on the network.

The second issue is fees. With our Directed Acyclic Graph (known as the Tangle), we’ve eliminated the need for miners and stakers altogether. Put another way, our incentives for running software are not necessarily economic, but more utility-driven. If a device wants to participate on the network by sending a transaction, all it has to do is validate two other transactions. This takes a small amount of computing to complete but is not something that has to be paid for via a cryptocurrency in the form of a gas tax.

This is incredibly important when we talk about supporting real businesses and applications on top of a decentralized network. For true microtransactions (fractions of a penny) we must make sure we have a value transfer mechanism that costs less than the small amounts that devices will want to send between one another.

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There is also a misconception going around the space (and something our competitors are actively pushing) that fee-based systems will fuel the ‘next internet’ or ‘the trust layer of the internet. IOTA asks: How will the internet be replaced by a system with a KYC/AML wallet, that must be debited each time you click a link on a website or take an action on a decentralized application? Not only does this create a terrible user experience but it doesn’t scale.

Finally, the question of using a system that must require a fluctuating digital asset is unrealistic for most partners. It is inconceivable that an enterprise company will get approval from their legal/regulatory team to hold ETH to run applications on a network, especially when the government has not clarified what these assets are and how they should be classified. It’s too much risk (and again, it’s a terrible user experience for a company).

IOTA Proof-of-Concept with Jaguar

Q: The IOTA Proof-of-Concept with Jaguar demonstrates your focus toward automation – especially with vehicles – as the linchpin for machine-to-machine communication and exchange. Without the need for such human elements in cars and moving vehicles and machines, surely the landscape and the way we function within it will change dramatically. With this in mind, when you imagine the world in the future, how do you visually picture the scene?

A: We envision a world where devices share a common, open-source standard to exchange data and value. If the standard is open and free to everyone, this creates an incredible degree of interoperability between systems. It enables trust in a trustless environment, where millions of machines and humans can engage in economic activity without being siloed or constrained by proprietary technologies. Rather than following the archaic paradigm of leaking our data to third-party companies, we will have access to, and control, the data that flows between the network of devices that we own (or communicate with).

Once this system is in place, entirely new types of business models and economic activity are possible. Pay-per-use car insurance, true data-as-a-service, and autonomous smart devices can flourish in an atmosphere where we own our own data and store it in a personal wallet, like IOTA Trinity.

IOTA showcases sustainable energy traceability at Powerhouse Energy Positive Building (Credits- IOTA Foundation Blog)
IOTA showcases sustainable energy traceability at Powerhouse Energy Positive Building (Credits- IOTA Foundation Blog)

IOTA to be a scalable and flexible enough conduit

Q: When you envision open-source tech stacks collaborating in the future, do you envision that IOTA will be a scalable and flexible enough conduit for machines to be able to share knowledge, skills, and resources to build their own tools to solve problems? And if this is the case, where do you perceive this could reduce bottlenecks?

A: This is an excellent question and really targets what our long-term vision is. The entire design behind the IOTA protocol is to reduce friction in the way systems and industries interact as much as possible. While also addressing bottlenecks and concerns around IoT security, data privacy, and open science and testing with regard to AI.

Most of these systems today are closed, proprietary, and centralized. We hope that as we continue to grow, we can start to reduce the existing bottlenecks, allow for open data sharing, global insights using open big data processes, and trustworthy AI integrations with the Tangle as a real-time data-producing system.

Importance of the Industry Marketplace

Q: You recently launched the Industry Marketplace, which is consciously vendor and industry neutral. Why is this important for the growth of the economy of Things from IOTA’s standpoint? And how do you intend to keep it that way as adoption increases?

A: There are so many vendors out there making very interesting products that can be used in the Industry of Things, and thus the economy of things. Some of these vendors are small and this is the perfect platform for them to get their products into the hands of the businesses that need what they are making. Limiting the platform to specific vendors would prevent innovation and collaboration amongst participants. Our new Industry Marketplace, for example, new makes it easy for companies to find what they need, no matter who is making it, without buying into a proprietary platform.

Regarding keeping it industry neutral – part of the benefit of the economy of things and industry of things is removing data silos and getting cross-pollination to happen across all sorts of industries. One example of this could be in the area of sensors. It is entirely possible that a sensor that is used by car companies to detect the fill on a fuel tank, could be used in a smart trash can to detect how full the trash can is. By keeping the platform industry neutral, it enables businesses to find products they need that they may not have even been aware existed.

By working on becoming a global standard (working with organizations like Object Management Group and Linux Foundation and Fiware, we hope that IOTA is seen as an open-source, open-standard technology that is vendor agnostic.

IOTA Industry Marketplace
IOTA Industry Marketplace

IOTA heist in January

Q: Following the $11 million IOTA heist in January, you must have felt the tremble of confidence in the company from the community. This, combined with the 35% attack threshold of IOTA, make it difficult for critics to trust IOTA’s security. What is being done internally to manage this risk and safeguard the system further since the incident?

A: The theft of tokens, unfortunately, happened due to social engineering (via a scam website), rather than any intrinsic issue with the IOTA protocol or its security. This attack vector is problematic for any system – as you can see from the multiple phishing websites out there. For more details, you can also reference this blog post.

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To stop social engineering attacks, it’s really about educating the community and making sure we have the proper resources and documentation available. Community members can engage with us if they have any questions on our subreddit and Discord. If there is ever a piece of third-party technology that seems questionable, it’s recommended that you DYOR with the help of an incredibly supportive community.

IOTA released Chronicle

Q: IOTA recently released Chronicle, a solution for long-term storage and accessibility of records. While this is a step in the right direction, it’s been rumored that you’ll be offering grants in the future for developers to extend Chronicle’s functionality. What are the future use cases you envision that need advancements in Chronicle?

A: We’ve already awarded grants to community members to further the functionality of the Permanode technology. One of them is Aion, which allows for selective storage of specific types of data (that can be specified by the owner). This could mean that someone could segment data by mobility, energy, DID (decentralized digital identity), medical data, and so on.

We are also in the process of porting Chronicle to Rust, with the goal of incorporating it into the upcoming Bee framework. This will enable us to build a range of not solutions from small constrained nodes (using low power microcontrollers), large unconstrained nodes, and everything in between.

Permanodes may also run their own consensus mechanisms, such that you could have consortia of permanodes that store a subset of data in a permission fault-tolerant manner (eg with nodes run by different members of a mobility consortium).

Another use case would be AML – due to the speed of permanode data, you could do AML checks in near-real-time on the network.

IOTA Chronicle
IOTA Chronicle

Joint venture with Linux

Q: IOTA’s new joint venture with Linux is an exciting leap into open-source collaboration into edge computing. In what ways does IOTA’s distributed ledger technology meet the needs for Linux’s vision that Hyperledger hasn’t so far?

A: IOTA joining the Linux Foundation for work under LF Edge is not to balance a need that Hyperledger doesn’t satisfy, but to compliment them with a use case in a collaborative way, which would actually enable them to garner larger use.

Hyperledger does an excellent job of managing data in multiple diverse ways in permissioned environments and we believe there will always be a place for them as an intranet-style solution for enterprise adoption.

We can bolster that capability by balancing their permissioned data management capabilities, with our permissionless data management capabilities. This way we’re working together towards standardization, and can act as the connective fabric, or internet equivalent, to their permission integrations.

IOTA’S partnership with the Taipei government

Q: IOTA’S partnership with the Taipei government to use Airbox to measure air quality is both innovative and admirable. In what other ways can you see IOTA being harnessed for environmental stewardship?

A: IOTA can support environmental stewardship in a number of different ways:

-Measure the production and consumption of environmental resources in real-time, using IoT devices like smart meters.

– Collect, transfer and store the data in a secure, tamper-proof manner that prevents data manipulation using a Distributed Ledger.

– Analyze the collected data to understand the long-term consequences of economic actions and analyze trends early leveraging machine learning and artificial intelligence.

– Reward those behaviors that contribute to the conservation or creation of environmental assets or resource allocations in a net-zero way, based on principles from behavioral and social economics.


Q: With Coordicidein the works and a blueprint underway, it seems that IOTA’s major centralization issue is soon to be solved. While the deadline has been fuzzy, can you give us an idea of what would happen if Coordicide was initiated too early?

A: We have to be cognizant of the fact that we hold hundreds of millions of dollars worth of value on the protocol at any given time, so taking precautions to ensure the solution is working as intended is a must. The worst thing that could happen is if we launched too early before the tech was finalized.

What’s more, we are talking about communication between digital systems and physical infrastructure. If we were to deploy before the system was ready, it could create serious vulnerabilities to the devices and IoT networks running IOTA now and in the future.

IOTA Coordicidein
IOTA Coordicidein

The concept of an automated IoT

Q: Overall the concept of an automated IoT, complete with machine-to-machine communication sounds incredible. IOTA has already made huge moves toward this technology, so what do you perceive as the barriers to adoption currently?

A: Our current barriers still remain in the area of awareness and integration. We’ve made major strides in Europe with our partners with multiple real-world POCs that have shown great promise and validated our capabilities. We now have to bridge that progress in the US with new partners and collaborations.

The Linux Foundation, LF Edge, and its members have truly opened up to assist us in these efforts with a welcoming community, and a stronger understanding of the problems we can address due to their industry-leading experience in the area. We hope to build on this with larger pilots to further validate our capabilities, and give us insight into the areas we still need to refine.

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