Multicoin Capital – a Texas-based cryptocurrency investment firm – claims that a slew of issues are present in IOTA, the network responsible for the 11th most valuable global cryptocurrency, MIOTA. The $100 million long-term investment firm claims that IOTA’s current cost level is unjustifiable. Multicoin Capital released a twelve-page analysis that details the issues they found on IOTA’s technology as well as the team responsible for its creation. The report concludes that IOTA’s current network, the considerable technical risk it carries, and the enormity of the flaws found in its protocol makes IOTA’s current price “sharply overvalued.”
Main problems IOTA carries include its inability to have a product-market fit in the real world. Similarly, IOTA’s documentation offers no specification and is sparse. Its relevant market is described by the report as “currently quite small and likely does not present enough of a hurdle to justify users’ switching costs.” Users who want to utilize IOTA to make transactions need to make expensive changes to their hardware. The report emphasized that IOTA’s go-to-market strategy relies on its own success. Plus, no backup plan exists if success is not attained. According to the report, the IOTA network depends on a “Coordinator” – a closed-source centralized protection designed to prevent attacks. The IOTA team offers no guidance on how to fix specific issues despite the network’s evident unusability and downtime. Previously, the Coordinator needed to be shut off because of attacks or bugs thus making the network, not at all usable.
Critical software vulnerabilities were also seen in the network’s hash function. Also seen was how IOTA’s team responded to such problems. IOTA described the vulnerability as intentional claiming that the vulnerability functioned as a “copy-protection” to avoid scam copies. How the Coordinator protects IOTA’s network from such issues are also difficult to verify due to its closed-source nature. The report claims, ”In doing so, they knowingly allowed vulnerabilities to exist and violated the ethos of open-source software. The team has refused to disclose whether other known vulnerabilities exist.”