IOTA Is Overrated: New Report by Hedge Fund Concludes

A report by Multicoin Capital asserts that IOTA is "sharply overvalued" due to a large number of flaws present in the cryptocurrency's machinations.

IOTA is one of those cryptocurrencies that appeared recently as a result of a token sale. Since its creation, it has experienced growth in a similar trajectory to that of Bitcoin and Ethereum, peaking at a value of $5.24 on December 20.

A new analysis by Multicoin Capital suggests that this cryptocurrency far surpasses its fair value and has certain unaddressed concerns that might hurt it significantly in the future. Some of the concerns include the centralization of the cryptocurrency and the fact that the team behind IOTA doesn’t make it clear on when its central “Coordinator” will disappear. They also mention that the network has gone down several times, making it impossible to process IOTA transactions.

For the cryptocurrency to accomplish its goal, it requires a massive overhaul of IoT devices, which the authors of the report don’t appear to believe will happen.

“In order for IOTA to reach its true potential, hardware changes will have to be implemented in IoT devices to allow them to transact on the IOTA network. This could easily become a chicken and egg problem: IOTA can’t grow to its full potential unless these hardware changes are made, and hardware companies won’t be incentivized to add this new hardware unless IOTA becomes the standard for IoT payments and data sharing,” the report read.

Multicoin Capital isn’t the first company to criticize IOTA.

Vitalik Buterin, Founder of Ethereum, also considers that the team behind the cryptocurrency doesn’t do enough to make sure that it will remain secure for the foreseeable future.

He said that the way that the team executes the project “goes beyond mere negligence.”

Recently, the lack of support for seed generation, IOTA users who turned to online websites in order to generate phrases for their wallets, ended up losing a combined total of nearly $4 million worth of IOTA.

The hashing algorithm that they use has also been known to lead to collision, a term used to describe when multiple inputs result in the same hash.

“Given the current state of the IOTA network, the substantial technical risk, and the overwhelming evidence of serious flaws in the protocol, we believe that IOTA is sharply overvalued at current prices,” the report concluded.