We are living in the age of the Internet of Things (IoT) where resources, data, and services are increasingly being traded between machines. As connected devices continue to proliferate, the interoperability and sharing of resources—everything from information, storage to electricity and sensor data—are a vital part of the machine-to-machine economy.

While many look to blockchain hoping it will be the technology to provide the underlying support for the machine economy, it is not very scalable. That is what the creators of IOTA wanted to solve. Although better known as a cryptocurrency, IOTA was intended to be something much more ambitious—to be the backbone of IoT.

Instead of using a blockchain, IOTA is based on a distributed ledger technology called a Directed Acyclic Graph (DAG), or Tangle, that enables data and money to be transferred via its network. Unlike blockchain, for every transaction that is added to the Tangle, two others are validated, which means the Tangle network doesn’t slow down with high transaction volume. The technique makes IOTA capable of handling large volumes of transactions per second.

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