Commonly referred to as blockchain, distributed ledger technology (DLT) is about to live up to the hype.

At Software AG, we truly believe that blockchain and related DLTs have a much brighter future than Bitcoin and have the potential to significantly change the future. However, we are also acutely aware of the emerging doubts. These include the amount of energy needed to run most DLTs and the lack of actual operating use cases in a production environment.

So, we started a thorough investigation about two years ago which culminated in our decision to become one of the founding members of IOTA’s Tangle EE working group.

IOTA is a new type of foundation developing the next generation of protocols for the connected world. It is the world's first open-source distributed ledger being built to empower the Internet of Things with fee-free microtransactions and data integrity for machines.

Here is why we joined:

Strategic Alignment

First, IOTA has a clear domain focus on machine-to-machine (M2M) and the Internet of Things. The IOTA Foundation truly understands that the dynamics of the IoT device realm demand a different approach than classical blockchains typically exhibit. After all, you can’t have miners, nor ask for transaction fees in such a setting - it would kill any such endeavor.

IOTA also recognizes the power of an ecosystem approach (as opposed to the typical hub-and-spoke deployments) as evidenced, for instance, by their industry marketplace. As one of the initial contributors to the pan-European Gaia-X initiative, we comprehend and appreciate the strategic value of such initiatives.

Technical Maturity

While no DLT technology has yet successfully implemented a large-scale productive solution to solve the blockchain trilemma - simultaneously achieving decentralization, security, and scalability - IOTA’s Tangle, its special form of linked list of immutable transactions, is one of the most advanced technological approaches.

Add this to IOTA’s native token for the seamless transfer of value between machines, devices, and systems, its messaging capabilities, smart contracts and outsourced computing facilities (optimized for being embedded in hardware), and we think IOTA’s technology infrastructure is poised to become the IoT engine of the future.

Governance Structure

From our very first encounters, the members of the IOTA Foundation proved to be extremely receptive, easily approachable and highly supportive (with special kudos to Holger Köther). People may change or leave, though, therefore the governance structures of IOTA are equally important to us in the mid- to long run.

Here, the Tangle EE Working Group as an open governance structure embedded into the Eclipse Foundation provides assurance that no single person or individual entity will be able to highjack and abuse this endeavor (unlike what is happening in other blockchains).

Software AG and IOTA

So, how do we envisage integrating IOTA into our products? For our Cumulocity IoT platform, we expect to make use of native blockchain and token-related capabilities for device identity, data provenance, integrity and security – and for micro-transactions and micro-payments in the M2M economy.

By extending our webMethods integration offerings with suitable IOTA capabilities we intend to bridge the on-Tangle world with the off-Tangle world (e.g., typical applications like ERP or CRM). This allows the seamless execution of end-to-end business processes in a minimum trust environment. (As an aside, this also provides an efficient solution for mediating between different blockchains).

With IOTA we can help companies secure device and machine communications, improve process quality and efficiency, enable automation beyond a single workstation eventually extending to the full supply chain - and create entirely new peer-to-peer (including M2M) ecosystems.

Because IOTA is an early stage technology with network effects and increasing returns, we will not base our corporate strategy on any of the future. Business equilibrium currently is too unstable for anyone - customers, consultants, or vendors - to be able to reliably forecast or predict the future. Recognizing this co-evolution of technology vendors and adopters, we plan to advance our efforts to integrate IOTA into our products through selected co-innovation projects with lead users.

Rooted in trust in device transactions and data, IOTA will thus help organizations elevate the potential of DLT and blockchain to the highest possible level.

To learn more about IOTA click here. To stay current with our strategic efforts and projects, just follow me on Twitter.