What is Tezos?
Tezos is an all new smart contract platform built from the ground up. It is not forked from any other blockchain projects like Bitcoin or Ethereum. It is a self-evolving blockchain meaning that it can amend itself through a process of on-chain governance without the need to hard fork the code. As a smart contract platform, developers can build decentralized apps (dapps) on top of it. Other popular competitors in the smart contract platform category are blockchain projects like Ethereum and EOS.
XTZ, also called tezzies, is the native cryptocurrency for the Tezos blockchain. Unlike most projects, they never had an ERC20 token even during the early days. They started off with their own native blockchain currency already. XTZs has multiple functions primarily acting as a gas for the Tezos network. XTZ holders can also stake their tokens to help secure the network and be rewarded in the process. Lastly, XTZ can be used to vote for different proposals for upgrading the network. Right now, there are already multiple exchanges that allow XTZ staking directly on their exchanges.
The idea behind Tezos was conceived by Arthur Breitman and Kathleen Breitman. The whitepaper was published in 2014. It was only in 2017 that Tezos launched their ICO project. Their ICO was uncapped and they ended up raising over $200 million in both Bitcoin and Ethereum making it one of the projects that has raised the most capital.
After their very successful ICO campaign, Tezos was briefly plagued by infighting between the founders and the president of the foundation entrusted with securing the funds. Arthur and Kathleen created a swiss Foundation to control the funds received during ICO. Johann Gevers was assigned as the president of the Tezos foundation because of his close relationship with the founders even before the ICO took place. However, after the ICO, Johann quickly took control of the assets. This locked the Breitmans out of the funds raised. Good thing they were able to still retain control of the code under their company Dynamic Ledgers Solution. It was only in February of 2018 that they were able to regain control. Gevers was booted and was replaced by Ryan Jesperson who still serves as president of the foundation to date.
What sets Tezos apart?
No Hard forks
Usually, when upgrades to a blockchain are proposed, users and validators will have to vote on whether or not these changes will be implemented. Once it has been voted and accepted, a hard fork set at a certain date will occur. All users who accepted will switch and support this upgraded blockchain applying the new changes. However, users still have the option to keep using the old version thus creating a divide within the community. This creates a possible set of governance issues when it is not clear which ledger or version will move on to be the leading version. With Tezos, rules are self-amendable. As a result, upgrades to the protocol can be done in a harmonious manner without the need for hard forks leading to a safer and more secure chain that enterprises can rely on. These rules are all easily voted on by stakeholders to see whether it will be implemented or not. Once accepted, the changes are enforced programmatically.
Formally Verifiable Code
Since anyone can propose upgrades to the network, it is important for the network to maintain its robustness and make sure no key properties are affected. Tezos uses formal mathematical proofs to avoid changes in its main codebase. It uses a robust programming language such as Ocaml which is a functional programming language developed by the INRIA since 1996. Later on, another programming language called Michelson was created to write smart contracts on the Tezos blockchain. Michelson is a new smart contract programming language designed to facilitate formal proofs.
On Chain Invoicing
While Tezos is a smart contract platform just like Ethereum, one key difference is in how the protocol is upgraded. Developers on the Tezos blockchain can propose upgrades and attach an invoice to the proposal. Once the change is approved and added to the chain, the developer will get paid in XTZ. This decentralizes the upgrading of the network since any developer can propose and help upgrade the network. They are also free to work on what they want instead of being dictated what to work on in a traditional employer-employee setting. Other blockchain networks usually involve developers asking for grants from the foundation before developing any upgrades which can be time consuming.
How does Tezos Work?
Liquid Proof of Stake
Bitcoin pioneered a consensus mechanism called Proof of Work. This involves miners providing hash power to help secure the network by solving random cryptographic puzzles. However, this can be a huge waste of energy. Proof of Stake is the main alternative to the Proof of Work consensus mechanism. This involves stakeholders putting up a stake and validating nodes. They are incentivized to act in a good behavior otherwise the stake they put in would be slashed or destroyed. However, it still comes with issues of decentralization since those with more resources are able to stake more. Having the entire community stake is also unscalable.
Tezos employs a novel consensus mechanism called Liquid Proof of Stake. Just like Proof of Stake, users are required to put up a certain number of XTZs to participate in the consensus of the blockchain. A node will require 8,000 XTZ. However, users with less can opt to delegate their XTZ to other bakers and join in the process of “baking” which is how staking is called in the Tezos network. In this baking process, Bakers get publishing rights based on their stake. Each block is baked by a random baker and validated by 32 other random bakers. Once the block is confirmed to be valid, it is then added to the blockchain. The baker then gets rewarded with XTZ and can distribute the rewards to those that delegated their XTZ to them while taking a small fee.
|Price of XTZ||$2.85|
|Avg. Block time||1 minute|
|Reward per block||16 XTZ|
|Circulating supply||709,048,845 XTZ|
2014 – Tezos Whitepaper was published
2017 – Tezos ICO was held
Feb 2018 – Johann Gevers stepped down as president of Tezos Foundation ending the deadlock
June 2018 – Tezos initial release date
July 2018 – Tezos allowed third party validators to bake Tezos blocks
March 2019 – First On-chain upgrade called “Athens” was successfully implemented.
2019 – Several investment banks and property managers chose Tezos to launched their STOs
Where can I buy XTZ?
How to properly store XTZ?
Ever since it’s launch, XTZ has always run on its main network. This means that it has a different type of address compared to other blockchain projects (e.g. Ethereum’s ERC20 format). For Tezos, wallet addresses start with tz1 followed by a string of 33 alphanumeric characters.
Hardware Wallets – auto generated
Online Wallets – auto generated
Real world use cases (Who’s using it?)
There have been a huge wave of companies looking to capitalize on the Tezos Blockchain. In July of 2019, BTG Pactual, Latin America’s largest standalone investment bank, and Dalma Capital, a prominent Dubai based asset management firm, will using Tezos to hold their STOs (Security Token Offerings) with a deal pipeline well worth over $1 Billion. Securitize and Elevated Returns, a financial group focused of digitizing assets, will also tokenize more than $1 Billion worth of real world assets. These companies have chosen Tezos because of its ease of use when it comes to smart asset creation, including smart contracts or special token projects like STOs. Other partners that will be using the Tezos chain can be seen on Tezos Foundation’s page. Industry Adoption
Pros and Cons
- Self Amending protocol and no hard forks
- Better stability for enterprise use
- Better decentralization utilizing LPoS
- Formally verified code
- Strong community support
- There are still some class action lawsuits against Tezos
- Current transactions per second is around 40 tps
Blocks are produced every 1 minute
The average transaction fee runs around $0.00232
Block Rewards Reduction
There is no set block reward reduction. If this happens, it has to first be proposed and approved.