The source code of The Coordinator has not been released, making it impossible to audit it for vulnerabilities, correctness, or fairness.

Since all transactions must be approved by a single server, run by a single entity, IOTA is not decentralized. Additionally, The Coordinator is a single point of failure, and has been shut down intentionally by The IOTA Foundation to halt activity on the network.

The Coordinator exists to prevent denial-of-service attacks and double spends. The IOTA Foundation claims that at some point the coordinator can be phased out, but these claims are not credible due to the intractable nature of these issues.

IOTA is fully centralized. All IOTA transactions must be approved by a server run by The IOTA Foundation called "The Coordinator".

The functionality of the network depends on transactions getting confirmed in a timely fashion, even in the presence of malicious or selfish nodes. The IOTA developers claim that nodes will converge on a tip-selection strategy which confirms new transactions quickly, however this has not been proven to be the case.

The choice of which transactions to reference is a matter of local policy, and thus nodes have enormous leeway in the shape of the graph that they construct, and which tips they select.

And, since vast majority of hardware fabrication facilities and technology are based on binary logic, a ternary computer more efficient than its binary counterpart will likely never materialize.

However, in practice this gain in efficiency is more than offset by the overhead incurred by the need to translate ternary into binary for execution on commodity hardware and software.

Several algorithms in IOTA are implemented using balanced ternary, as opposed to binary. Balanced ternary is slightly more efficient, in theory, than binary, due to radix economy .

1.4. Non-fungible Tokens

A transaction’s position within the DAG, and other factors, may make that transaction’s outputs more or less valuable than other transactions.

Because of this, nodes will likely have to enforce additional local policies on which transactions to accept, which negatively impacts the fungibility of IOTA transaction outputs.

Outputs that have been included in a Coordinator milestone are more valuable than those that haven’t, since The Coordinator is the current arbiter of truth in the IOTA system. Thus, if The Coordinator refuses to approve a transaction, its outputs are effectively worthless.

Similarly, transaction outputs that appear in a snapshot are more valuable than those that do not. Additionally, whatever entities control what transactions are included in a snapshot have enormous power are an additional centralization factor. For an example, if transactions are deemed to be "spam" and are not included in an snapshot, their outputs will be worthless.