Can the IOTA Foundation solve blockchain’s credibility crisis?

In the 2010s, IOTA was one of the most exciting European startups in blockchain tech — especially for anyone interested in industrial IoT like myself. 

However, today, its co-founder is embarrassed by blockchain's reputation, there's a graveyard of pilot projects that never commercialised, and a shift in focus towards other regions.

Today, IOTA is a token, but it is also a non-profit founded in Germany in 2017 to advance IOTA technology. I spoke to co-founder and IOTA foundation chairperson Dominik Schiener to find out more. 

IOTA's vision collides with reality

IOTA was co-founded in 2015 by David Sønstebø, Dominik Schiener, Dr. Serguei Popov, and Serge Ivancheglo. It was designed as a distributed ledger technology to facilitate — as its name suggests — transactions in the IoT ecosystem. 

Central to this was machine-to-machine trading, with a backbone of feeless transactions, tamper-proof data, and low resource demand. 

Imagine, for example, an autonomous car that can detect a service fault but also book its repair appointment at a service centre staffed by autonomous robots, drive there, and pay—all without a human involved in the transaction. 

Or electric vehicles that generate income through peer-to-peer charging or feeding power back to the grid. 

However, today Schiener considers industrial IoT adjacent rather than central to IOTA's mission: 

"It's not something that we quite frankly focus on anymore. We've kind of stopped doing those IoT use cases.

We've really focused more on these higher-level ecosystem creation projects, which include trade, digital identity, and asset organisation."

As I've written in an article about mobility and blockchain, the problem with industrial blockchain usecases has not been the tech per se —- there are plenty of successful pilots – but transitioning these to commercialisation. It's not helped by fundamentally different innovation cycles.

Schiener admits," It's always nice to give machines a wallet and allow them to trade, but the economic uses weren't there. 

Because why should a car have a wallet? It makes so much sense from a concept perspective. But, from a business perspective, it was just very difficult to get it off the ground because there were issues actually embedding it into the car."

Along with challenges of standards and interoperability that have plagued both IoT and blockchain  since time began, the influx of COVID meant less OEM investment in emerging tech (can we still call IOTA emerging tech?), and it meant a nail in the coffin for many innovation projects.  

Schiener concedes that "blockchain was also a solution trying to find problems."

"But it was the same with AI. AI was like an amazing solution, trying to find the right problems. Now, with Chat GPT, we have had this unique moment where it has become a global knowledge base.

I think with blockchain tech, we're still looking for this Chat GPT moment."

However, twelve years is a long time to wait for the golden use case to achieve mass adoption. 

IOTA co-founder admits Blockchain's credibility crisis

He also admits that blockchain has a credibility problem

"It has a 100 per cent credibility problem. I'm sometimes ashamed to call myself an entrepreneur in this space. 

You start with, 'Hey, how can this technology be used to really drive positive change in the world?'

And then you end up figuring out, "Hey, like, this technology has been used to launch new coins so that people can get rich quick.

It's like a modern lottery, and it's just kind of sad."

Schiener also admits that he would personally distance himself from consortium structures like GAIA-X and the moveID project—a group of interconnected projects creating a foundation for the future of data infrastructure in Europe, such as vehicle-to-everything standards for communication and transactions.

"Because, quite frankly, the results never really come out as we anticipate. The failure rate is just too high."

It takes a lot to pivot from the use cases on which you build your foundation, your name, and your regional focus. 

A strong pivot away from Europe to MENA and Africa 

Over the last few years, the IOTA foundation has focused on making its mark outside Europe, with particular attention on Africa, the Middle East, and the UK, as part of a broader strategy to establish itself as a global digital infrastructure and innovation ecosystem.

It's a deliberate pivot away from Europe, where, according to Schiener, over-regulation and a slow pace of innovation have made the Foundation focus on other regions. 

Schiener said:

"The support in all these other regions was just much better. Europe is very focused on regulation rather than innovation. I remember applying for innovation groups where 25 per cent of the costs would be earmarked just for grant compliance. Innovation on that level just doesn't make sense."

He notes that when the company came to Germany, "we never really had any real production cases happening there. Nobody's willing to take these risks. It's deeply embedded in the culture.

"For the country to change and move forward, it needs to adopt and embrace this technology finally."

Our focus is to use blockchain in the real world, to get it adopted by governments and by enterprises for their various use cases.

And so we'll continue to carry on this flag, and make sure that blockchain doesn't have this credibility problem, that we really show that there's use cases in the real world, like this digital product password, that will positively impact people's lives."

IOTA is currently working in partnership with TradeMark Africa, World Economic Forum (WEF), Trademark Africa, and the Tony Blair Institute for Global Change to develop The Trade Logistics Pipeline (TLIP) platform. 

TLIP aims to significantly reduce transaction costs and enhance the efficiency of cross-border trade operations — the IOTA Foundation has partnered on a pilot project in Kenya focused on the country's flower exports as well as work exporting tea to the UK, fish to Belgium, and textiles to the US.

In the UK, Mobius Technology is conducting a pilot project using IOTA's TLIP to manage shipments of chilled poultry.

Schiener likes the UK. "They are standing up to Europe."

In July this year, the IOTA Foundation launched the I3-Lab at Imperial College London, a research facility dedicated to the circular economy. The lab aims to develop and use digital tools to advance the circular economy.

However, IOTA hasn't left Europe entirely, recently announcing a partnership with Eviden and the launch of the Eviden Digital Passport solution (EDPS), "powered by IOTA" technology. 

The passport integrates IOTA's open-source, scalable and regulatory-compliant DLT and is a part of the EU's broader circular economy action plan. 

Similar to battery passports that verify the provenance, chemistry, and identity of batteries and measure their environmental impact without risk of data tampering. The EDPS can be used across various industries, such as manufacturing, fashion and textiles, and food and beverages.

In late 2023, the IOTA launched the IOTA Ecosystem DLT Foundation in Abu Dhabi as part of broader efforts to digitise global trade and make trade finance solutions more accessible. The Foundation recently released a Shariah-compliant token.

However, while partnerships fueled by substantial contributions from foundations like IOTA can catalyse innovation, they differ significantly from traditional commercial ventures. 

For instance, the IOTA Foundation invested $1.2 million in Imperial College London's lab and committed $100 million in IOTA tokens to the Abu Dhabi initiative, with plans for additional investments. Does such financial backing equate to the same level of legitimacy or commercial value as a traditional business partnership, or is it simply IOTA giving something back?

Let's face it: there's no shortage of IoT pilots and R&D efforts. Are we going full circle? Further, many companies, including Circularise, Circulor, and Everledger are already heavily embedded in digital product passports and circularity. 

Schiener attributes IOTA's securement of these government partnerships in new regions to the foundation's nonprofit status:

"We're not required to generate profits and we have been in the market for a long time."We are here to solve a problem for them. We're not here to sell them something."

However, despite their laborious documentation, he admits that previous Horizon 2020-funded projects have helped the brand's reputation abroad.  

Further, the IOTA Foundation is not saying farewell to Europe anytime soon. It has also developed a solution prototype within the European Blockchain Pre-Commercial Procurement, funded by the European Commission, to streamline intellectual property rights management using distributed ledger technology and Smart Contracts for media. 

The prototype replaces traditional negotiations with automated, transparent digital contracts. Will the prototype become a commercial product or can we add it to the innovation graveyard?

Can IOTA be the backbone of a more inclusive world?

Schiener admits that he's been in blockchain for a third of his life, since 2011.

"I really grew up with it. For me, it's all about ensuring we finish what we started with IOTA because I believe that IOTA is one of these transformational technologies.

We want to make it more transparent, more efficient, and powerful enough for people to participate in the global economy.

We started with financial inclusion, which was one of Bitcoin's main use cases at the time.

And this is what I really want to do more of. This is why we are working in regions like Africa, to give people new access to the global economy.  So we really think blockchain is there as a core trust infrastructure to erase barriers and ensure that the world is less divided than that we're actually able to collaborate and coordinate more closely with each other."