2 of 3
added link to src
Zauz
  • 4.5k
  • 13
  • 41

Purchase Iotas

The "source" of all Iotas is the genesis transaction. There will never be more than this amount of Iotas. When you want to purchase Iotas, you buy them from another IOTA user which will be an exchange in most cases.

Markov Chain Monte Carlo

The default tip selection algortihm is the Markov Chain Monte Carlo Algorithm. It is used to select two random tips to confirm. Tips are transactions that were never verified by any other transactions. The MCMC tip selection is not enforced and you can choose any two transaction to reference. An example of choosing a specific transaction (and not a random one) is promoting.

Milestones

Milestones are not transactions by the community but by the Coordinator. Nobody except (some of) the founders know what the Coordinator is or where it is located. All we know is that it makes transactions, called milestones, every few minutes and signs them. All transactions that are directly or indirectly confirmed (= referenced) by milestones are confirmed.
To see why milestones are necessary take a look at this question.

Confirmation

At the moment it is very simple to determine if a transaction is confirmed or not. If it's referenced (directly or indirectly) by a milestone, it is confirmed otherwise it isn't. In the future a transaction will be confirmed when it is referenced (directly or indirectly) by all tips.

In the picture, all blue transactions are confirmed, all red transactions aren't (yet). The green transactions are milestones. The darker blue transactions were confirmed by the first milestone, the lighter blue transactions were confirmed by the second milestone. A milestone also has to (directly or indirectly) reference all previous milestones.

Snapshots

All full nodes store all transactions since the last snapshots. Snapshots are unrelated to tip selection. When we do a snapshot, we just remove all transactions from the tangle and add up all balances of all addresses. The new tangle is much smaller and the full nodes have to use less storage.

Take a look at this to learn more about tip selection and making transactions in IOTA.

Zauz
  • 4.5k
  • 13
  • 41