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Exploring IOTA 2.0 Smart Contracts in a Private Network: Developing a Prediction Market

Exploring IOTA 2.0 Smart Contracts in a Private Network: Developing a Prediction Market

Abstract — Smart contracts are being introduced to IOTA, which has proposed an interesting take on distributed ledgers by proposing the Tangle. The Tangle promises to provide a more scalable transaction infrastructure with lower fees, potentially overcoming limitations of Ethereum and other blochain-based ledgers. Due to the current alpha state of IOTA smart contracts, the official documentation lags and it is a bit of challenge to get a working setup. To help interested developers and the IOTA community to more quickly try out smart contracts, this article describes how to set up a private IOTA network with the latest state of the software and demonstrates a workable prediction market smart contract developed in Rust.


Smart contracts are codified contracts using rules and algorithms that can automatically trigger and incur electronic transactions of cryptocurrencies like Ether. The expected economic impact of smart contracts is very large as they allow for improving the efficiency of many existing business models and they also allow for completely new business models. For instance payouts of insurance contracts can be automated using smart contracts or autonomous cars could also pay tolls and parking fees automatically.

While smart contracts are already well known amendments from blockchain approaches like Ethereum, these approaches suffer from shortcomings like low throughput, and high transaction costs. For these reasons, the IOTA foundation had set out to first propose a new and more scalable transaction system based on the so called “Tangle”. Secondly, IOTA version 2.0 is currently under development, and it includes an approach to smart contracts. Smart contracts under IOTA 2.0 are promised to be built on an infrastructure that both scales well, and incurs low transaction costs.

Before the background of a promising new approach for...

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