IOTA Foundation: From One to Many

Past, Present, and Future

The IOTA Foundation was established in 2017 as the primary organization behind IOTA, driving the development of the core protocol and fostering and accelerating its adoption. The Foundation quickly became an aggregator of like-minded people, all driven by the shared goal of translating a bold vision into actionable utility and providing stability and direction in an immature technological environment and unpredictable market.

The initial spark and single most important goal in starting IOTA was to overcome the known limitations of blockchain, which meant that we had to build everything from scratch. Trying to iterate on an existing blockchain architecture, to make it a little bit better, would have been easy – but that was not our quest.

To some, the whole idea of IOTA seemed impossible to achieve. For others, it was the deciding factor for joining our cause. Until today, the shared goals of overcoming the limitations of blockchains and providing real value to society through sustainable and green technology are what connects everyone in the IOTA Foundation and its ecosystem. Building a novel DLT protocol with a fully independent ecosystem meant having to rethink the very core and work extra hard to survive in an uphill battle of a highly competitive, sometimes perplexing, and even unfair market. We had to define our own path through many failures, which ultimately helped steer us in the right direction.

The IOTA Foundation’s mission was to nurture the project towards maturity by developing the open-source tech stack of IOTA from core software to developer tooling to user-facing solutions and to help get them adopted by working with industry partners. As a regulated German non-profit foundation, the IOTA Foundation was perfectly positioned to lead the adoption of IOTA by helping to educate entire industries about the potential of blockchains and convince large companies to partner with the Foundation on new use cases, Proof of Concepts, and solutions built on IOTA.

A thriving ecosystem

Since its founding, the IOTA Foundation and its purpose have evolved significantly, with its focus expanding and shifting with the improving technology stack and the changing needs and opportunities offered by the market. Today, the IOTA Foundation counts some 171 team members distributed across six departments (Engineering, Research, Market Adoption, Communications, Operations, and Legal & Regulatory Affairs).

While we can be proud of the amazing team and organization that we’ve built and the accomplishments that we’ve had with the IOTA Foundation, we must ask ourselves what role the Foundation should continue to play within the growing IOTA ecosystem. Decentralizing IOTA is not just about the technology, it’s also about its governance and the entities that drive it forward.

One thing is clear: IOTA will only succeed if we have a thriving ecosystem of stakeholders composed of enthusiasts, builders, startups, and large corporations, which are invested in the success of IOTA. The entire stack of IOTA – from core software, developer tooling, and Layer 2 solutions to frameworks, solutions, and products – needs to be built and maintained by an ecosystem of independent teams and organizations. The governance of IOTA should be fully decentralized, with no single entity being in full control and wielding power over every aspect of the protocol and its application.

What we have seen in the IOTA ecosystem over the past six months is nothing short of incredible. Just last week, over 40 teams announced their dApps, large enterprises continue to launch products integrated with IOTA, the DAO Pioneers have successfully led an on-Tangle governance vote to establish the first Treasury DAO for IOTA and a range of content creators have taken up the task of educating (and entertaining) the community on progress around IOTA. All of this has happened without the involvement of the IOTA Foundation, which is in line with how we envision the future ought to be. As the Foundation, we have to double down on supporting these community initiatives and we have to focus even more on empowering the ecosystem to drive the adoption of the protocol via their own solutions and applications of how IOTA should be used, and the problems it is capable of solving. We need to harness the beauty of permissionless innovation to its fullest.

While the protocol was still young and immature, it was vital for the IOTA Foundation to drive interest and adoption by showcasing IOTA's capabilities and by investing time and money into Proof of Concepts, prototypes, and collaborations. But building commercialized software solutions has never been part of the Foundation’s purpose or its bylaws and also far exceeds its financial capabilities, largely provided through its token endowment.

The scope of the IOTA Foundation’s current activities, projects, initiatives, collaborations, and their respective staff is unsustainable, especially in market conditions like the ones we are currently facing. Instead of running the risk of overshooting and placing the entire Foundation in a difficult financial situation, we have decided to act now to protect the interests of the Foundation, its staff, and the IOTA community at large. We are therefore expediting the plans to excubate projects and activities nearing commercial maturity, and with it their staff, in order to refocus the Foundation’s activities and slim down its expenditures.

With the upcoming Stardust upgrade and IOTA Smart Contracts, the time has come to start decentralizing the IOTA Foundation by spinning off mature internal projects and separating responsibilities, such as ecosystem support, adoption, and growth, into independent entities acting on their own accord.

The objective of this transformation is to reaffirm the core priorities of the IOTA Foundation as the research and development of IOTA and to empower the ecosystem to fully capitalize on the opportunities offered by IOTA.

From incubation to empowerment

Previously, the IOTA Foundation had to build the entire stack (including products) out of a necessity to fill the gap in our community and showcase the potential of IOTA. The Foundation was the incubation ground for most innovations within the ecosystem, and most of the progress, partnerships, and announcements were therefore mostly centered around the Foundation.

But the most important role of the IOTA Foundation has always been to research and develop the core protocol and its building blocks and to help build and support the community. The Foundation was never meant to take on the responsibility of building and commercializing solutions built on IOTA or to provide consulting services to enterprises. It was always meant to work alongside a community of builders, startups, enterprises, and enthusiasts. As a regulated non-profit foundation, we couldn’t even operate these ventures as we are severely limited in how we can earn and spend money. At the same time, these initiatives were held back by the Foundation’s strict limitations and were not able to bring in dedicated external resources and investors or sign commercial agreements, which has slowed the venture’s growth and limited adoption.

For a team that builds highly innovative and sometimes experimental tech, there is no greater feeling of accomplishment than being surprised by what people in our community envision for IOTA and what they build, or how people around the world are giving their best to contribute to the success of IOTA. The past six months have made us especially confident in the direction of the project and the scale that we have reached. Having finalized research into Coordicide, planned its integration into the core protocol, and set up means of validating it through the upcoming Shimmer network, as well as upgrading the protocol to a mature state that provides stable utility for its applications, it is no longer just the IOTA Foundation doing the building. Today we have thousands of dedicated community members and hundreds of organizations who are invested in the success of IOTA.

With the community rapidly growing and taking more ownership over IOTA, the role of the IOTA Foundation has to now change from incubation to empowerment. The Foundation is meant to empower others to build on top of IOTA, and not to build applications itself.

One to many

We have started the process of spinning off mature internal projects and setting up dedicated entities to take over some of the responsibilities which are currently being handled by the IOTA Foundation. The IOTA Foundation is growing from one to many.

We are convinced that “decentralizing” the Foundation through independently operated entities will accelerate value creation for IOTA and its ecosystem. Instead of trying to accomplish too many things at once with the Foundation, we will allow dedicated entities to focus on their respective priorities and better allocate resources.

What follows is an overview of what this decision means for the IOTA Foundation, the newly formed Tangle Ecosystem Association, and spin-offs and independent entities:

Defining the future role of the IOTA Foundation

Among the IOTA Foundation’s current responsibilities, the most important is the research and development of the core protocol. No other entity in the IOTA ecosystem can replicate this function, and continuing R&D is essential for our ecosystem to continue growing and for IOTA to succeed.

Moving forward, the primary purpose of the IOTA Foundation will be the scientific validation and the development of the core protocol and its building blocks. The Foundation will focus primarily on Layer 1, but will also provide the necessary tools and SDKs for solutions to be built.

As a regulated non-profit foundation based in Germany, the IOTA Foundation enjoys a special status, especially with governments and regulators. As such, another essential function of the Foundation will be to work even more on governmental and regulatory affairs to represent the interests of IOTA and the entire crypto ecosystem. The objective is to put in place smart regulation (with the help of the Foundation and its team) that does not hinder the innovative potential of crypto.

In summary, what this means concretely is:

• The IOTA Foundation will focus primarily on the research and development of the core protocol and its building blocks (such as developing tooling, libraries, etc.).
• The IOTA Foundation will increase its efforts around the developer experience of IOTA.
• The IOTA Foundation will hand over building solutions or user-facing products to independent entities in the IOTA ecosystem.
• The TIP protocol governance will be the main way to improve and change the core protocol. The IOTA Governance Forum will become the main hub to drive forward the governance of IOTA.
• The IOTA Foundation will increase its efforts around regulatory affairs to ensure that IOTA, crypto, and DLT in general will be treated appropriately in upcoming regulations without harming innovation or hindering its potential.
• The IOTA Foundation will hand over most of its commercial relationships and partnerships to entities in the ecosystem. Any new opportunity that arises will be forwarded to the ecosystem. The Foundation will continue to maintain governmental and strategic partnerships that will greatly benefit IOTA (e.g. TMEA).
• All current adoption projects will be spun out into separate entities or handed over to partners (see below).

Tangle Ecosystem Association

A newly formed Tangle Ecosystem Association, based in Switzerland, will support the growth of the ecosystem by managing the token treasuries of the Shimmer, Assembly, and IOTA networks. The Association will have different committees that independently define and decide on the ecosystem support and investments to be made e.g. Marketing & Education, DAO Advocacy & Support, Ecosystem Grants, Culture, etc. This Association will be structured in a way that includes the involvement of the community in key decision-making and in the various committees.

This entity is currently in the process of being fully established. As we make progress on the legal side, we will share more of the exact purpose and functioning of the Tangle Ecosystem Association with the community. The current goal is to have the entity registered and approved in time for the launch of Shimmer.

Spin-offs/independent entities

The teams within the IOTA Foundation that have been working on projects and solutions with external partners will officially be spun out into separate, independent entities. While many of them will start out as startups, they already have significant assets (including teams, partners, and technology) to work with, and the IOTA Foundation will provide the maximum support to make these startups successful.

The process of spinning out these entities started six months ago. Many projects are well on their way to registering legal entities and looking for outside investments. However, the changing market conditions in crypto and the wider economy have only forced us to accelerate this plan, which was set in motion to preserve the IOTA Foundation’s resources as much as possible.

We are currently in the process of evaluating and further developing these spin-offs and are finalizing agreements with partners to take over some of the current responsibilities of the Foundation. Instead of making any pre-announcements now and potentially creating false expectations, we will share more information once projects have been successfully spun out of the Foundation and the agreements have been signed.

Conclusion

The IOTA Foundation is undergoing a transformation from incubation to empowerment. As we roll out Shimmer with the Stardust protocol upgrade, we are also reaffirming our core priorities. Consistent with our goals, certain mature internal projects will be spun off as independent entities and their current responsibilities will be handed over to partner organizations. Through this decision, we want to accelerate the growth and adoption of IOTA and further decentralize its governance. We will keep the community updated as we progress with the spin-offs.

While this is an important milestone in the maturation of IOTA, there is no denial around the fact that the IOTA Foundation has to strengthen its focus and reduce its scope now to maximize its run rate for the uncertain market conditions we operate in. It saddens us to share with you that some team members of the IOTA Foundation will not be part of this transition. It was a very difficult decision we had to make, and we offer our sincerest gratitude to those who have been part of the journey.

Over the last few years, all of us together have built an absolutely amazing community and purpose-driven project. We have matured and progressed individually and as an organization. Together we have removed all the things that have held us back, have overcome some of the most difficult challenges, and have positioned IOTA with a much-improved identity and a strong technical base. We can be incredibly proud of what we have achieved so far.

We are antifragile: No matter the adversary, we will always prevail and find our way to success.