DEFINITION of 'Tangle (Cryptocurrency)'

Tangle is the transaction storing and processing mechanism of IOTA, a cryptocurrency network that was developed to enable fee-less micro-transactions for the growing ecosystem of Internet of Things (IoT) devices.

BREAKING DOWN 'Tangle (Cryptocurrency)'

One noticeable disadvantage of blockchain-based cryptocurrencies like bitcoin is the concept of a transaction fee that is levied for all transactions occurring on the network irrespective of the transaction value. Unfortunately, the working mechanism of blockchain based cryptocurrencies inherently requires the transaction fees to be levied, as that serves as the incentive for block creators (miners), and those who validate and approve the various transactions. This set of participants is necessary to keep the blockchain active, agile and functional.

Tangle is Described as the Successor of Blockchain

As the number of small-sized “micropayments”, like those involving small fractional amounts, is expected to increase significantly in the near future, these transaction costs will make the use of blockchain-based cryptocurrency impractical for such small payments. High transaction costs have already lead to the problems of Bitcoin Dust, where fractional amounts of bitcoins are lying idle as they cannot be transacted due to high cryptocurrency miner fees.

Enter IOTA, which is a distributed public ledger that uses a specific data structure called the Tangle, a directed acyclic graph (DAG) structure, to store the transactions occurring on the public ledger. It does not incorporate blockchain technology, thereby attempting to address the issue of transaction costs by using the Tangle storage system.

The working mechanism of Tangle requires a new transaction to approve the previous two transactions. Essentially, Tangle forces a transaction issuing-participant, or node, to contribute towards the agility and security of the network by making him/her approve earlier two pending transactions. The nodes also ensure that there are no duplicate transactions leading to double spending, and there are no conflicts among the various transactions as per the Tangle transaction history.

In case of conflicts, the nodes are expected to ideally reject a transaction. The nodes are free to approve all kinds of transactions, and may approve faulty ones as well. In case a new transaction is issued by a node that approves an erroneous transaction, it will not be approved by other nodes, thereby maintaining network integrity. Due to this mechanism of additional approvals, the genuine transactions are approved by the system with a higher level of confidence.

Technically, the following workflow occurs on Tangle. To issue a transaction, a node chooses two other transactions to approve based on a predefined algorithm. In case the two transactions are conflicting, they are rejected by the node. In case the two transactions are non-conflicting they are approved by the node. For a node to issue a legitimate transaction, it is required to solve a cryptographic puzzle similar to the implementation of the Bitcoin blockchain. It achieves so by finding a nonce value whose hash is concatenated with data from the approved transactions in a particular form. It is different from the Bitcoin protocol, where the hash is required to have at least a specified number of leading zeros.

This workflow ensures that the resource- and energy-intensive mining fee is eliminated from the transaction. It makes IOTA a fee-less system suitable for micropayments, including automated payments between trusted parties – like payment of small amount parking fee by the car driver to parking space operator.

In the whitepaper, Tangle is described as the successor of blockchain - “The tangle naturally succeeds the blockchain as its next evolutionary step, and offers features that are required to establish a machine-to-machine micropayment system. (For more, see What is IOTA?)

  1. Lightweight Node (Cryptocurrency)

    Lightweight nodes are computers that perform the basic functions ...
  2. Full Node

    Full Nodes are computers on a blockchain that maintain the core ...
  3. Master Node (Cryptocurrency)

    Master nodes are full nodes that incentivize the node operators ...
  4. On Chain Transactions (Cryptocurrency)

    On-chain transactions occur on the cryptocurrency blockchain, ...
  5. Distributed Applications (ĐApps)

    Distributed Applications are software applications that are stored ...
  6. Consensus Mechanism (Cryptocurrency)

    Amid the dynamically changing status of the blockchain, a consensum ...
Related Articles
  1. Tech

    Blockchain Wars: IOTA's Tangle Takes on Ethereum

    IOTA's blockless ledger Tangle wants to position itself as a viable alternative to Ethereum's blockchain.
  2. Tech

    What is a Cryptocurrency Public Ledger?

    Investopedia looks at what is a cryptocurrency public ledger and how it operates.
  3. Tech

    Three Strikes Against Bitcoin's Lightning Network

    Bitcoin's lightning network is expected to be a big leap forward for the cryptocurrency despite some drawbacks.
  4. Tech

    What is a Distributed Ledger?

    Blockchain technology has come a long way from the obscure corners of the web it was once confined to. But what is it? And what about nonces, hashes and ledgers?
  5. Tech

    Bitcoin Transactions Vs. Credit Card Transactions

    We provide an overview of the differences between bitcoin and credit card transactions, and the advantages of using one over the other.
  6. Tech

    Will Rising Transaction Fees Bring Down Bitcoin's Price?

    Bitcoin's escalating transaction fees have raised eyebrows but experts say they won't hurt bitcoin's price.
  7. Tech

    'Zero Knowledge Proofs' Could Boost Blockchain Adoption on Wall Street

    The complex mathematical proof encrypts transactions, making client and transaction privacy possible.
  8. Tech

    Bitcoin Unlimited Thwarted, Again!

    Bitcoin Unlimited is vying for supremacy in the Game of Bitcoins, but it's got some problems.
  9. Tech

    Is Apple Planning to Use Blockchain?

    Apple filed a patent application for a timestamp system that uses blockchain technology.
  10. Tech

    Is Bitcoin's Lightning Network a Game Changer?

    The Lightning network promises faster transaction speed and micropayments on bitcoin's blockchain.
  1. What do T+1, T+2 and T+3 mean?

    For security transactions, T+1, T+2, and T+3 refer to settlement dates which occur on a transaction date plus one, two and ... Read Answer >>
  2. What's the difference between cash-on-delivery differ and delivery against payment?

    Find out more about cash on delivery and delivery versus payment transactions and the difference between these two types ... Read Answer >>
  3. What's the difference between the general ledger and a general journal?

    Keeping records for most organizations require a double-entry bookkeeping system, which revolves around transactions in the ... Read Answer >>
Hot Definitions
  1. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  2. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  3. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  4. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  5. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  6. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
Trading Center