Analysts have found that IOTA is trading well above any real value it might have. The project is said to have no real product market fit and the network is centralized and unstable. Additionally, the approach taken by the IOTA team, like knowingly allowing critical vulnerabilities to exist in the software, presents many reasons to be highly concerned.
IOTA, the network behind the 11th most valuable cryptocurrency in the world by market cap (MIOTA), has no justification for its current price levels according to a detailed new report. The 12-page analysis of IOTA has been issued by a long term $100 million cryptocurrency investment firm based in Texas, Multicoin Capital.
The analysts found a myriad of issues with the project, its technology and the team behind it. Their final conclusion is that 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 lists many problems with the project, beginning with the fact that it has not yet found a real product-market fit. The use cases section of the IOTA documentation is sparse and unspecific, and total relevant market is “currently quite small and likely does not present enough of a hurdle to justify users’ switching costs.”
Costly hardware changes will have to be implemented in IoT devices to allow them to transact on the network. This means that the go-to-market strategy is dependent on its own success, and there is no backup plan according to the report.
The analysis also determined that the IOTA network currently relies on a centralized, closed-source “Coordinator” to protect it from attacks and the team has not given clear guidance on when and how this will be fixed. The IOTA network has been unusable many times, and has also experienced periods of downtime. The team has had to shut off the Coordinator due to bugs or attacks, rendering the network unusable.
The most concerning issues found by the analysts are the critical software vulnerabilities in IOTA’s hash function and the team’s response to it. IOTA claimed that the vulnerability was known and intentional as a “copy-protection” mechanism to discourage scam copies. They claimed the Coordinator protected against the exploit, but this is impossible to verify, as it is closed-source the report explains. ”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.”