Orchestrate all the Things - IOTA still wants to build a better blockchain, and get it right this time. Featuring IOTA Foundation Co-Founder and CEO Dominik Schiener

Episode Date: March 23, 2021

In 2014, IOTA set out to offer an alternative to the key issues with blockchain: Scalability and transaction fees. Somewhere along the way, things went wrong. Not everything is lost, however, and IOTA is looking to regain momentum. IOTA's main premise, namely solving the issues around blockchain by introducing a different data structure, remains. IOTA, like blockchains such as Bitcoin or Ethereum, is a distributed ledger. Unlike those, however, the data structure it uses is a directed acyclic graph, called the Tangle. We discuss with IOTA Foundation Co-founder and CEO, Dominik Schiener, on what IOTA got wrong, what it got right, and what is being done to build on what it got right and fix what it got wrong.  Starting with the release of a new wallet, IOTA has been reinvented and rewritten from the ground up over the last one and a half years. This new phase of the project is called Chrysalis, introducing a network upgrade. It promises a truly decentralized solution with high throughput and no transaction fees, oracles, and smart contracts. Article published on ZDNet

Welcome to the Orchestrate All the Things podcast. I'm George Amadiotis and we'll be connecting the dots together. In 2014, IOTA set out to offer an alternative to the key issues with blockchain, scalability and transaction fees. Somewhere along the way, things went wrong. Not everything is lost, however, and IOTA is looking to regain momentum. IOTA's main premise, namely solving the issues around blockchain by introducing a different data structure, remains.

IOTA, like blockchain such as Bitcoin or Ethereum, is a distributed ledger. Unlike those, however, the data structure it uses is a directed acyclic graph called a tangle. We discuss with IOTA Foundation co-founder and CEO Dominic Sinner on what IOTA got wrong, what it got right, and what is being done to build on what it got right and fix what it got wrong. Starting with the release of a new wallet, IOTA has been reinvented and rewritten from the ground up

over the last one and a half years. This new phase of the project is called Chrysalis, introducing a network upgrade. It promises a truly decentralized solution with high throughput and no transaction fees, oracles, and smart contracts. I hope you will enjoy the podcast. If you like my work, you can follow Link Data Orchestration

on Twitter, LinkedIn, and Facebook. Hey, George. Thanks a lot for the invite to the podcast. My name is Dominik. I'm one of the co-founders of IOTA. I'm currently on the board of directors of the IOTA Foundation. And I would define my day-to-day role to help lead the organization, lead the IOTA project and to really focus on the operational side but also really focus more on the strategic partnerships

and strategic projects that we are doing in IOTA and really focus on building up an entire ecosystem and realizing the vision of the machine economy. Okay, thank you. That's a good summary, I guess. And I'm personally somewhat familiar with the IOTA Foundation, having covered it before and having met one of the co-founders previously, David Sensible. I'm not sure if I'm pronouncing his last name right. So, yeah, so that was some time back, actually. That was in 2017.

And I guess lots of things have changed since then. But again, for the benefit of people who may be listening to the conversation, I guess the key things one should keep in mind when asking like, okay, so what is IOTA? It's well, you can probably summarize it much better than I can, and I'm sure you've done it much, many more times than I have. But you know, in my mind, it would be like be like okay so it's an alternative let's say to the blockchain structure, it's a distributed ledger, it has a different data structure so it's a directed isoclip graph and a key feature that differentiates it from typical blockchain, let's say, is the fact that you don't actually have to

pay for transactions, which gears it specifically towards IoT. Well, hence the name as well. It's a kind of play on words. Yeah. So did I get it right? Would you have anything to add or subtract to that? No, I think that's a perfect summary. I would say our core focus at IOTA from a technology perspective is to solve the problems of blockchain. Because as you're probably aware, blockchain in its current phase is not going to be production ready.

It's not going to be utilized by, it's not even able to be utilized by the entire world because we have scalability issues. We have huge transaction fees where, for example, in Ethereum, some transactions can cost up to 80 to $100. And obviously, we also have really big problems when it comes to the energy consumption. Like I think bitcoin today uses as much electricity i think as denmark at this point and it just poses the question is this really the best that we've got and and our focus at iota is to further innovate

on on this concept of the blockchain and with IOTA to solve these problems by having a new distributed ledger that doesn't need the miners, that doesn't need the electricity waste, and that doesn't need the transaction fees to really have a protocol, a technology that is going to be production ready and that billions of users, including machines and humans, are able to utilize and benefit from. Thank you, that was indeed a bit more eloquent than my summary.

So okay having gotten the basics let's say out of the way, what I was thinking would be a good way to actually start getting a bit into more detail in the discussion was to take a step back and try and figure out how things have changed since the last time it was for me that I caught up with the project. So, 2017. And I think a lot of things have changed. Well, some others haven't. I think first on the organizational side, David, with whom I spoke back then, I think is no longer with the foundation. Is my understanding correct? Yeah, exactly.

Basically, the way that I would summarize it is that the IOTA project in 2021 is a complete new project from 2017 because as you can probably understand is when you start from nothing which which iota really did and you build up something you make many mistakes along the way and sometimes those mistakes are either technically right where you make the wrong assumption of the future. And sometimes those mistakes are also public communication, where you make enemies, where you get into public fights.

And so I think the core focus of us at the IOTA Foundation was to, first of all, admit to those mistakes, but then really try and solve those mistakes and really, for one, bring a new technology, which is this new protocol version or network upgrade that is coming out now over the next few weeks, where it's really about staying true to the core assumption of IOTA. The core assumption of IOTA is that the Tangle is a better version than Bitcoin or is a better version than blockchain in general.

And then really focus on that and remove all of the other bad technical decisions that we've made in the beginning of the project. But it was also organizational where we are much more focused on being an open, focusing on building an open ecosystem and empowering the ecosystem to build on IOTA. So that's why we also call this a new DOM. And so that the project has a new face collectively, new technology, better organization

and much better focus on what we do best. And what we do best is really developing the tangle and making it production ready. Okay, yeah. Thanks. And actually, I have to say that having gone through your recent publications and blogs and such, it was quite clear, for me at least, the messaging that you're putting out. Like, OK, we're owning, let's say, to the mistakes that we made and we want to start over. And I think that's a very healthy stance for an organization to take. I also know that even though I haven't been keeping up

with all the updates and all the ups and downs of the projects. I also know that there's been quite a bit of criticism and even some public disagreements, let's say, on the project. So without getting... I'm not interested in any behind the scenes or who said what or any of that. What I'm interested in basically is like, okay, since you're acknowledging that some wrong choices were made

and that caused, I guess, some people to be upset, some people to be critical or whatever, let's figure out what those mistakes have been and how you're addressing them. So basically kind of aligned to where you are today. Yeah, totally. So when we started out with IOTA, you're addressing them so basically kind of aligned where you are today yeah totally and so when when we started out with iota we introduced some very novel technologies as well like for example for us it was very important to be quantum immune in that regard right so the quantum computer

couldn't attack the network that is why why we used more special cryptography. And this special cryptography only allowed, for example, to utilize an address once. So if you reuse your address, it could lead to a loss of funds, for example. So that was one of the technical decisions that we made in the beginning. And the other technical decision that we made was also in terms of using ternary encoding.

So data is encoded in ternary and not in binary, as is the standard, because the hypothesis of the future was that ternary is a much better way to encode data. It's much more efficient. But obviously the main assumption there is to have ternary hardware. And then there was also some other things

that had to do with the way that the ledger is basically constructed itself. So it's still a DAG, right? But it has different algorithms, I would say. And so over the last two years, or I would say over the last one and a half year we really came together as as our research team our our research and engineering team to figure out what could we really make better what could we really optimize with better algorithms with better

standard technology so that the core assumption of of iota is being proven and the core assumption of iota is the tangle right so that's why we're using a different cryptography now that allows for address reuse that's why we are switching to binary encoding that's why we are introducing much more hardened and improved algorithm algorithms for certain aspects of the protocol so that that is all really coming together now, which is new network upgrade. So basically what we have done over the last year is to completely rewrite IOTA from the ground up.

So it's a new protocol. It's a new node implementation. It's new libraries. And it will also be a new wallet, right? Because we did have the wallet from last year, which had security issues because of a third party integration and so we also completely um re-architected that wallet so that it's much more secure and it's also making iota ready for this new phase of the project and

the new phase of the project is Chrysalis, which is this new network upgrade, and is also moving towards Cordicide, which is sort of like this last major criticism of the project where we have this coordinator note in the network that helps in the validation of transactions. Okay, okay. Yeah, actually thanks for giving a brief summary of the points and I guess we could go into more fine-grained detail into any of those but let's actually do that for the last part and the coordinator issue. And to be honest with you, when I first saw the term cordicide, it wasn't exactly clear to me what it was. It sounded like something that came out,

I don't know, from a Netflix series or something, like cordicide. So what does it mean exactly? Are they going to kill the coordinator or what? And well, are you actually? So does that mean that you're removing the coordinators yeah no it's it's a funny word right because basically the suicide of the coordinator because the coordinator is killing itself in that regard and basically what cordicide is

is over the last few years we've really been doing a lot of research on how we can further optimize the consensus protocol behind IOTA so that it is able to run fully decentralized because that is the major criticism of IOTA today, that the consensus is not yet fully decentralized because we have this coordinator. And this year, we are releasing this new protocol,

this next upgrade of IOTA, which will be fully decentralized. It's still true to the same principles. It is fee-less and it is fully secure. And every node in the network is still validating transactions in the history. But we found a very novel approach to this protocol to ensure that it's secure and that it is able to run fully decentralized. And that the next major release there is actually coming next month. So people can already participate in a test network, can send around transactions, and can also experiment with us on this protocol. Maybe one thing that's worthwhile to mention here is doing distributed ledgers is incredibly difficult because you do have protocols that are worth billions of dollars and you need to be very meticulous and very careful when you're doing such an upgrade. And that's why we at the IOTA Foundation, we work very closely with large universities

who are doing this research together with us and give us this external validation as well. And so we're happy about that. Yeah, that's a good point. And actually, I was going to ask you precisely about that for the exact reasons that you mentioned. I mean it is something that you definitely need to test in practice but ideally you should also study its theoretical properties and the robustness of the protocol and the algorithms in analytical means. And I was wondering if you have people in your team or people you work with whose job is to do that.

Yeah, no, absolutely. So we have people in the foundation who just do attack analysis, right? And I'll do it theoretically, but also do it in practical attacks. And we also have external partners that help us with that. I would say, and this is one of the major differences between permission blockchains and permissionless

blockchains is the goal of a permissionless blockchain because you have a cryptocurrency behind it and because it has a value is to really battle test it right it's a yoda bitcoin ethereum all of those public networks are being battle tested every day because an attacker, a hacker, somebody really smart that understands the protocol has a big incentive to steal money, right? Because it is money, it is valuable. And so that is why IOTA as a protocol has really been battle tested over the last few years.

And with Cordiside right now, we are also thinking about how we can do this battle testing so that the public is able to participate in the network, is able to try to attack it, and is able to benefit from it. So that's what we call like an incentivized testnet, where you have incentives to attack.

And I think through that, we can really make sure that it is secure and that most of the major bugs at least have been resolved. Okay, great. Thanks. And actually, your reply leads me to what I was going to ask you next anyway. So I think we're very much in sync here. So you spoke of incentives. and one of the things that may be I guess one of the hardest parts for people to wrap their heads around

IOTA and the protocol and how it works is precisely that, incentives. So if there are no transaction costs then how are nodes incentivized to do validations and to secure the network? Could you talk about that in a bit? Yeah, of course. The main incentive for IOTA is really the utility function of the network.

If I want to utilize IOTA today, I also have to participate in its utility. I have to participate in the security of the network. I have to confirm transactions in the history. So I actually have to invest a resource, which is executing the algorithms and confirming transactions in a history before I can participate myself and before I can issue my transaction.

This new future of IOTA, this new protocol version, we're taking a very interesting approach there where basically one of the most difficult things to do in a distributed ledger is rate control. How do you determine the transactions that are being issued? How do you determine which one is being preferred? So that's why, for example, in Ethereumereum and in bitcoin we have this fee market and if interest goes up um there we have these crazy fees that can they can come up and and basically um stop use cases from working the way that it will work in iota is that we have the iota token and you and you as an IOTA token holder, you basically generate a certain token in the network,

which is called MANA. And this MANA token is actually there to help to distribute this scarce resource, which is the transaction throughput. So basically by holding IOTA tokens in Cortisite, you are actually enabling your use case, which is to issue transactions. And so through that, you can also do fee-less transactions, obviously, and you can determine how many tokens you actually need in order to enable your use case. So I think the way that IOTA is evolving is that similarly to the spectrum today, in the spectrum today, we also have different frequencies. And we also have different owners, which is largely telecom companies, but it's also investors.

The same is going to happen with IOTA, where large companies that want to utilize the network are also going to acquire IOTA tokens because that enables their utility. And we already have a few companies that have done exactly that, where they acquired IOTA tokens because it enables their use case. So that is really the way that we are evolving as a protocol. Okay, I see. So if you want to participate in the network, then I guess there's two ways. One is, you know, you put in lots of compute power and you start validating transactions and therefore you acquire, you accumulate tokens and then you can also have your own transactions be validated or you put in FIAT and you buy IOTA tokens somewhere in some exchange and you can do it that way. Yeah, exactly. Okay, cool. That makes sense. And I was wondering if you could talk also a little bit

about, obviously not all the details of the protocol since, as we already mentioned, this is the kind of thing that you need to analytically study. But if you could describe at a high level how this new decentralized protocol is going to work, because I guess this is going to be quite an interesting point for people who are into crypto. You mean how Cordisite is going to work? Yes. Yeah, exactly right. So it's still based on the same principle where you have to confirm transactions in the history. But when it comes to Cordisite,

there is several key concepts that really make it work. What I find right now with this mana concept was the rate control of the system. And the rate control obviously determines how many transactions you can issue and how many transactions can be issued in the global network. So that is one important component of Cordisite. And this also helps to prevent spam. And I would say the key component of Cordesite is this new consensus algorithm,

which is called Fast Probabilistic Consensus. And there you're basically also voting on transactions. You're voting on the validity of transactions. And there's always some more complex algorithms behind that, but that's the basic principle behind Quartisite, that you vote on the validity of transactions, and through that, the entire network is able to come to an agreement on whether it's true or whether it's not true,

and whether a transaction should be confirmed or not. Okay, it sounds interesting. or whether it's not true and whether transactions should be confirmed or not. Okay, it sounds interesting. I wonder how this voting works in practice for someone who's participating in the network. Do end users, to focus on this aspect, do end users get to choose some kind of policy on how their nodes are going to vote? Do they have to actually intervene and decide for themselves whether to validate the transaction or not? Or how will that work?

Yeah, of course. It's an interesting question, right? I think our job is to solve the user experience problem and make the usability of IOTA as simple as possible for for everybody because i don't think that everybody is going to set up a node right so it's not going to set up a server where they run the iota software so only those node operators that also understand the tech i would say or that want to operate their own node, they are participating in the consensus of the network,

and they are the ones that have to execute these algorithms to secure the network. So it's not everybody doing it, but it's only those nodes that are actively confirming transactions in the history and contributing. All right. For those node operators, how will this work? So how do they get to define their policies on validation?

Well, one important thing is that in order for this to work, everybody needs to use the same sort of policies, the same sort of algorithm, which determines whether a transaction is valid or not. Because if not, you're basically moving into a situation where a portion of the network has a different understanding of what is valid and what is not valid. And that's why we need to make sure that everybody has the same understanding. At the end of the day, a protocol is just a standard, right? The standard of what all of us agree to. And the same is true with the consensus protocol

where all of us need to agree on what is true and what is not true. And so that's really why these algorithms are the same. Okay, okay. Yeah, that's basically what I was trying to figure out because, I mean, the way I interpreted that initially was that, well, okay, so if you can decide on your policy for validation, that leaves room for different criteria, basically. But if it's not the case, then okay, it's more clear.

Yeah, exactly, exactly. Okay. Yeah, exactly. Another thing that you mentioned previously and I wanted to ask about as well was collaborations the IOTA Foundation has in different proof of concept or perhaps you can clarify that, other projects that are not proof of concept but actually in operation. And some of those that I'm aware of is you have a working group with the Eclipse Foundation and you also have a project called Alvarium on which you work with Dell. And I was wondering if you could say a few words about those two specific projects or

any other projects that you feel are worth mentioning and so to get a better idea of what people are using IOTA for in the real world right now. Yeah, of course. I would say the most established projects that we have today are in supply chain, where we are focused on transparent supply chains right how to store data that is accumulated along the transportation of goods how do we secure interaction points with customer authorities and so on on iota make this data shareable so we work very closely for example with zebra technologies there which is the market leader in barcode scanners so so they're like a perfect partner there we also have a so so there we actually focus on real products right it's not just approval concepts

we also have a very large test bed in east africa with trademark east africa where we focus on securing the transportation of good from from the source right from, from a farmer towards support authorities. So that's a very exciting testbed that we have there. And in addition to supply chain, we also have a very strong focus on digital identity right now, because I think there IOTA makes a ton of sense. So we are very much focused on the vaccination passport right now how iota can be a key enabler and for that and i'm very sure that over the next few weeks we're going to hear some very exciting announcements about that and how iota is going to play a role there and as you mentioned we work closely with with dell um on project albarium and project

albarium is basically how do we secure data from the source from an IoT device? And how do we give this data a sort of confidence score, right? How confident are we that the data has not been tampered with? And how confident are we that the data is secure enough to be utilized

or to be monetized, to be shared with others? So that is why it's a very exciting project because we are doing that together with Dell, but we are open sourcing the project and we're already talking with Intel and with other large companies to really develop this as a proper standard

and as a proper product. And that is really evolving in that regard. But we also have other projects that we're still continuing, like, for example, with Jaguar Land Rover, where it is about the car e-wallet or smart cities and stuff like that. And I think in this next iteration of IOTA, where we are focused on being production ready,

the use cases are only going to increase. And we're only going to really see real products being built on IOTA because the interest is there. I think the technology was just lagging behind so far, but that is exactly where we are catching up now

with the new network upgrades. Okay. I have a number of follow-up questions. I'll try to get them in order. So let's start with the timeline. And I know that some of these projects that you also mentioned have been actually ongoing for a while. And I wonder how far ahead you are.

And I guess it becomes clear to me, at least, by your answer, that you are rolling out a new version of your technology and therefore you're going to have to upgrade your existing projects to the new rollouts when that happens. So I wonder if you have a timeline for this new version. Yeah, the new IOTA version is already live in a testnet. So it's already there. And the goal is to get it live on the mainnet this month. So end of March.

And that's very exciting, right? Because it is something that we've been working on for better, like the last year now. So it's a lot of time that we've invested into it. So that's very exciting and when it comes to cordycide we have to incentivize testnet that is hopefully going to launch in april or may so then you like you will really be able to experience this new version of iota and be able to participate um in it and other than that the goal is to have cordicide on on iota by the end of the year so that's sort of the timeline that we're looking at so this year a lot is happening as you can guess yeah and and not just not just the protocol is maturing and becoming production

ready but also the use cases and also the the frameworks and products that are being built with iota are maturing as well so i think we'll see some frameworks and products that are being built with IOTA are maturing as well. So I think we'll see some very exciting products that are built on IOTA and launch very soon. Okay, so one question I had with regards to many of those projects that you mentioned. I guess you you are working on permissioned change for those products and not public change, is my guess correct? No, our primary focus is definitely on permissionless, on how to utilize the main IOTA network because that enables the interoperability and that also ensures the security. But we also allow companies to launch their own private networks. But we really focus on the permission as well.

Okay. I kind of assumed that you would also have permissioned use cases because for use cases like yours, specifically in IoT, when you want to use it in a factory or in a logistics chain or in cases like that? I would imagine that people would probably prefer a permissioned network. I definitely think they have preferred permission networks so far, but I'm very sure that from the interest that we're getting so far from big companies, that many of them are understanding more and more

that the permissionless networks are more secure and also really empower them to not have any vendor lock-in. And so the interest for the permissionless network is definitely increasing. Okay, okay. That's interesting. And actually, I think to the best of my knowledge, I'm not the world's leading expert in crypto,

so I may be missing something, but to the best of my knowledge, I think you're the only one that is actually advocating and has also user interest in that scenario. So permissionless for use cases like factories and logistics chains. Totally, totally, yeah. That is the only way that you can realize the machine economy, right? Because you want to have an open network.

You don't want to have a fragmented ecosystem where there is different private networks because that's not the way that you actually enable the ecosystem to work right true i mean yeah in in many in many ways a kind of closed permissioned blockchain or distributed ledger network doesn't make that that much sense. I mean okay you do get the non-repudiability and all of these aspects but if it's a closed network it kind of defeats the purpose. I mean you could very well have done it with I don't know a database, a distributed database as well. Exactly, exactly. Okay, interesting. So I guess that's a good way to go to another question that I wanted to ask which has to do with oracles. So again for the people, for the

benefit of people who may be listening are not necessarily familiar with all the crypto terminology and Oracle is basically a gateway between a distributed ledger and the outside world which can get data from external sources into the network. And I know that the first time I recall seeing a mention about an oracle in the IOTA network was back in 2016 and last time I checked, we were actually doing a little bit of background research for this discussion, I saw that you seem to be having it or, I don't know, you can enlighten us on the exact status but there seems to be something in terms of an Oracle today in the IOTA network. So what is that exactly and where is it going? Yeah, no, absolutely.

I think Oracle is really a crucial part to enable the distributed ledger networks, right? Because we need to get this outside data into this distributed network and oracles enable that right and we need to be able to trust the data that we get that it's secured and it's been verified and then we're confident in it because else we have garbage in garbage out

right yeah and what we are focused on iota because we have such a strong IOT focus, we are really perfect for these Oracle use cases. So I think last month we released our version of Oracles and we now are implementing it on IOTA so that it can also be utilized by other distributed ledger networks.

Actually, if you think about Project Alvarium, that is exactly what it is. It's like an industrial oracle, right? We want to secure data from a source and we want to make it, we want to represent it in a distributed ledger so that it can be utilized by smart contracts or by other companies.

So that's really how it's going to evolve okay okay so yeah please please go ahead i thought you were yeah no no no i think i think for us it's a very important product and so you can definitely expect this to be something that that we are going to do to like build out further so that it can benefit the IOTA ecosystem but can also benefit the broader crypto ecosystem. Okay, so again a number of questions there. In other networks, so in Ethereum for example, oracles is not something that the core network developers build typically. So you have other third parties that come in and kind of build out systems that play that part. In your case, so far, at least it seems to be different, but I wonder if you envision it working in a similar way. So is building your own Oracle a strategic decision

or is it a way to bootstrap and you would like to see others do that as well? It's more strategic decision to kick-start the ecosystem but our focus is really to have different Oracle implementations and different solutions out there, right? Because we want to empower a Chainlink or an API 3 to build on IOTA and to offer their articles on IOTA. So it's not an exclusive kind of thing. I think it's really primarily right now

because we are working with Dell on Project Alvarium that it makes a lot of sense to do this as well and to offer it in the ecosystem right now, but it's not going to be something exclusive. Okay. And the other question I had was, well, on the issue of interoperability, actually. So you mentioned that one of the long-term goals of the oracles

you have is to interoperate with other systems as well. I guess Ethereum or Bitcoin or any other. How would that work? Do you have a kind of vision or outline for for that yeah so i i really see iota evolving into a protocol that builds bridges with other crypto networks as well so for one we're doing that with oracles where our data can be secured through iota because obviously we we are focused on iot and this data can then be shared with other distributed ledgers and can be utilized by them. But even more so, we are really also focused on building bridges with assets, right?

So that you can transfer other digital assets from other protocols to IOTA and represent them in the IOTA network, or you can transfer assets from IOTA to other distributed ledgers. So we are really, really focused on that right now to build bridges.

And that's why we are also continuing with smart contracts on IOTA so that we can build out these bridges. Yeah, actually, those two are, I would say, quite closely connected. I mean, you do need oracles to build smart contracts. And smart contracts, if I'm not mistaken is also something that you released in alpha very recently like a few days ago if I'm not mistaken. Yeah exactly so smart contracts on IOTA is also super important we've been working on this for

the last one and a half years now I would say and it's a completely new approach where it's no longer about having this world computer as as any theorem where every node in the network executes every smart contract but it's more about having this this sharded network where there is um nodes or validators that confirm specific smart contracts that they only want to. And through that, we are able to achieve much higher scalability and much, much lower fees than other networks. So we released the alpha version of it. And this, I think two weeks ago now.

And the focus is to really have this ready for Quartisite as a production-ready software so that it is able to leverage IOTA and is able to really increase the use cases of IOTA. Okay, again interesting topic and lots of follow-up questions. So you mentioned sharding and again for the benefit of people who may be listening sharding is basically a technique through which you segment a network into sub-networks, virtual or physical, depends on how you approach it. So how is sharding going to work? First of all, is it something you employ, is it a broader concept that you employ in the IOTA network overall or are you only going to utilize

it in the context of smart contracts? And second part of the question, how is that starting going to be implemented? I mean what kind of policies are you going to apply? Is it going to be in terms of geographical location? Is it going to be in terms of semantic proximity or something else? Yeah. No, I would say sharding is really core to our research because you're only able to really scale distributed ledgers if you have sharding.

So we've been working on sharding for a long time and we have a very concrete concept right now on how to do sharding for a long time, and we have a very concrete concept right now on how to do sharding for data transactions. So I think over the next few weeks, we're going to publish the paper on data sharding on IOTA. Obviously, doing sharding for value transactions, the IOTA token is more complicated than that. I can't really comment on how it will exactly work right now because I would also have to check with the team on that. I can't really comment on how it will exactly

work right now because I would also have to check with the team on that. But I would say sharding makes the most sense if you do it based on economic interest. So you could do like a smart city shard, or you could do even more fine granular than

that, or you could even have sharding for specific companies. So for example, maybe Walmart might have their own shard fine granular than that. Or you could even have sharding for specific companies. So, for example, maybe Walmart might have their own shard and stuff like that. But the most important thing is how do you go from one shard to another shard? So that you still have the same interoperability and the same flexibility as in other networks. But I would say sharding is really the next phase over the next few years that is going to come on the IOTA network. And with the current transaction throughput, IOTA can handle around 1,000 or around 1,500 transactions per second on the mainnet.

So with that, many use cases can already be realized, I would say. Okay. And then do you have any foresight as to how exactly people will be able to create the program smart contracts? Again, to give a kind of equivalent. So in Ethereum, there's a specific programming language

that people use for that called Solidity. And I wonder, you probably are going to have something similar for your smart contracts. So if you have any knowledge in the basics of the programmability of smart contracts, what is going to be like? Yeah, so I would say that our focus will actually be to be Ethereum compatible. What that means is that you can actually execute ethereum smart contracts on top of iota and and and this is where we're where you can then also launch in solidity smart contracts on top of iota right i think that's really key what we then want to do is we also want to go more into

formally verifiable languages because those really give the security to the developer that something doesn't go wrong, but they're still in the early stages, I would say. And today, the most utilized smart contract language by far is Solidity. So we're focused on adopting that right now. Okay. So yeah, I guess you're starting off with Solidity compatibility and then perhaps diverging. Yeah, exactly. Okay, yeah.

That makes sense, I suppose. Right. One other thing that you briefly touched upon previously when discussing in the context of oracles was you mentioned specifically the Alvarium project and you mentioned that as a motivation for for building your oracles and probably as a first use case. So it may make sense to revisit that a little bit and explain in a bit more detail what the alvarium project is about so that we can make the connection with oracles yeah of course so

basically it is industrial oracles as i mentioned before it is about giving a confidence score to data so that you can secure it from the source and data basically goes along a certain value chain right from the sensor to the gateway to the cloud and we need to secure it um along the way and what we are doing with with project avarum is that it's an open source project so anybody will be able to participate and we we really want to rather also set this up as a standard, to be honest, so that others can benefit from it and can also contribute to it. Because ultimately, the interest here is to build up this data economy

where data can be securely shared and can be securely monetized. And so it's taking a very exciting uh role okay so um you're envisioning this as a kind of data marketplace it sounds to me right yeah i like i think that's the natural evolution of it. So it really is going to enable this data economy, but the current iteration, the current focus is how do we provide confidence in the data that we get from our machines by giving them a confidence score. Okay.

I'm asking because, well, I know that there's other data marketplace initiatives as well, like Ocean comes to mind, because this is something I'm familiar with. They're also based in Berlin, so you probably know them as well. So I was wondering if you know them or if you see any kind of synergies with them going on.

I would say that we enable those projects to also flourish right because iota is uniquely positioned to take on the intent of things and to really become a standard and we see ourselves as an open ecosystem so that others can build on top of the protocol that we have and also utilize iota for their use case so i i really think that many of these projects will actually launch in one way or another on top of IOTA over the coming months as we become production ready. Okay.

All right. So yeah, I guess we still have a few minutes left. So I may as well, I think we may as well wrap up with, well, maybe since we covered lots of ground and lots of it quite technical I mean to the degree that we could possibly do that in in this discussion but to to wrap up I was I was thinking that maybe we could do with a little bit more high level topic so one topic that you also mentioned previously was wallets and the trouble you had

with those in the recent past. You mentioned that you're redesigning them and I guess this is something that existing users would be happy to hear and well new users,, that's actually the question. So how do you plan to roll this out and basically convince people that this is better than what you used to have? And how are people going to be able to use it in practice? So how will it work? Is it going to be like a browser plugin or do people have to use Brave for example or is it going to be standalone? Yeah, so basically it's standalone and the way that we give trust is by having a complete new architecture. So we've rewritten the entire wallet in Rust and we've modularized it more where we have like one wallet library where we have one library to keep the the the

passwords the keys safe so it really uses some very interesting standard cryptography for it and it has been security audited several times actually and right now we're actually doing the alpha testing for it so that's going very very well right now and unlike last time we don't have any third-party integrations anymore so the the the potential attack vector is also much much less okay okay so it's only going to be standalone and and i guess you're going to be supporting well all major platforms like Windows, macOS, and Linux. Yeah, exactly. Okay.

And then the other thing, which is not so obvious, but in a kind of semantic way, maybe it's connected, is since we already talked about your plans and the timeline and the last thing we mentioned was the actual wallet, I was wondering if we could wrap up by covering a little bit on the organizational and financial aspects of the foundation itself. What you have going on is obviously pretty ambitious and it will take quite some work to get there in the specified timeline.

So I was wondering if you could share things like, well, how many people are working on this currently and how are the organization's finances? Since part of the side effects, let's say, of what happened over the last few years was, I guess, losing market cap and value. So if you could cover those aspects. Yeah, no, of course.

Like today, we have about 140 people in the IOTA Foundation. So we are definitely one of the largest organizations. And the way that we are funded is, for one, with our treasury. And the treasury of IOTA is largely IOTA tokens that we are funded is for one with our treasury and the treasury of iota is largely iota tokens that we've received as a donation um but also the way that we are funded is through grants and through contributions um from the public sector right so for example horizon 2020 and if you've heard of that we we've received several grants of those i would say they make about 10 to 20 percent of our expenses for our yearly expenses so we're

doing quite well in getting um external funding as well but what we're focused on right now in this next phase of iota is also to think about which kind of for-profit initiatives can we set up together with our corporate partners or together in this ecosystem so that the foundation will be completely financially independent in that regard. So that's really a core focus of ours to be financially independent and not be dependent on the treasury anymore but it's the current situation basically. Okay, I see. So yeah, I'm pretty sure you have lots of work. It was already obvious when you laid out your technical plans but

it sounds like you also have lots of work in terms of business development, let's say, and setting up these structures that you mentioned. So it's going to be a very busy year for you. That's for sure. Yeah, it's going to be very exciting. Cool. Okay, so yeah, I think we, like I said, we covered lots and lots of ground in relatively short time.

So thank you very much for this. And I think we may as well wrap up unless you want to add some, I don't know, closing statement or something you feel we should cover and we did not. Yeah, no, I think I'll just reiterate what I already said,

that IOTA in 2021 is really a very different project from 2017. And while we've made mistakes during the early days, we were able to first of all admit to them, but also we solved them. And we have a very, very exciting roadmap for this year where we're making IOTA production ready. And where we are really focused on making IOTA one of the largest ecosystems next to Ethereum and next to Bitcoin. So I think we have a very exciting next few months ahead of us. on making IOTA one of the largest ecosystems next to Ethereum and next to Bitcoin.

So I think we have a very exciting next few months ahead of us. Yeah, it definitely sounds like that and very, very busy as well. So that makes me appreciate the time you took to discuss all of that even more. And thanks once again. Best of luck with all your plans.

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