Tezos Is A Self-Upgradable And Energy-Efficient Proof Of Stake Blockchain.

What Is Tezos (XTZ)?

Tezos is a blockchain network that’s based on smart contracts, in a way that’s not too dissimilar to Ethereum. However, there’s a big difference: Tezos aims to offer infrastructure that is more advanced — meaning it can evolve and improve over time without there ever being a danger of a hard fork. This is something that both Bitcoin and Ethereum have suffered since they were created. People who hold XTZ can vote on proposals for protocol upgrades that have been put forward by Tezos developers.

To learn more about this project, check out our deep dive of Tezos.

This open-source platform bills itself as “secure, upgradable and built to last” — and says its smart contract language provides the accuracy that is required for high-value use cases. According to Tezos, its approach means that it is futureproof and will “remain state-of-the-art long into the future,” meaning it can embrace developments in blockchain technology.

The technology underpinning Tezos was first proposed in a white paper that was released in September 2014. After a series of delays, the Tezos mainnet launched four years later.

How Does Tezos Work?

The Tezos blockchain enables many features common to cryptocurrencies.

Developers can use its software to run custom programming logic (smart contracts) and design new programs (decentralized applications) meant to replicate products and services. 

Yet, its voting features required a different design.

More specifically, the Tezos blockchain would be broken into two parts:

  • Shell – The code that amends itself based on user voting, it is also responsible for interpreting transactions and administrative operations
  • Protocol – The code responsible for sending proposals to the shell for review. 

The Tezos LPoS Blockchain

To keep its network in sync, Tezos uses a variation on classic proof-of-stake (PoS) consensus called liquid proof-of-stake (LPoS). 

Similar to traditional PoS mechanisms, LPoS is an algorithm used by computers running the Tezos software to secure the network, validate transactions and distribute newly minted XTZ.

In order for the participants (“nodes”) to participate in governance, they need to stake XTZ in a process Tezos calls “baking.” To become a baker, a node needs 8,000 XTZ (also called a roll). 

Users can also delegate their tokens to other bakers, allocating votes to other users so they can earn XTZ rewards on its live blockchain.

Bakers are incentivized to perform honestly, because users have the flexibility to easily switch between the bakers they delegate XTZ to, depending on their voting preferences.

Tezos Upgrades

Bakers take part in the governance of the blockchain by voting on proposed code changes. 
The voting process consists of four distinct voting periods, each separated by roughly 23 days.

  • The Proposal Period – Any baker can submit a proposal to amend or upgrade the Tezos blockchain. Proposals with the most votes move on to the next period.
  • The Exploration Vote Period – Proposals that reach a super-majority (80% of votes in favor of the proposal) move on to the next period
  • The Testing Period – The proposal then moves to a temporary test chain (48-hour fork) curated to verify if the change works and is safe for the network to adopt. 
  • The Promotion Vote Period – Bakers vote to determine if the proposal will be implemented. Proposals go through if the vote reaches a super-majority in favor. 

Bakers can also attach invoices to their proposals. If the proposal is approved after all four voting periods, the protocol will mint the specified amount in the invoice and pay it to the baker. 

 


Governance

Tezos’ modular architecture and upgrade mechanism minimizes disruptions while offering regular upgradability and enhanced functionality over time. Upgrades on Tezos are made possible by its on-chain governance where continuous improvements are proposed by participants on the network, voted on, adopted, and deployed without the need to rely on hard forks. So far, Tezos has undergone six network upgrades to reduce gas fees, improve token standards, increase transaction speed, and more.

On-chain governance allows holders of XTZ to submit and approve amendments to the network, including amendments to the voting procedure itself. By offering an on-chain mechanism to amend its network and seamlessly deploy upgrades, Tezos is able to adopt the best features of other blockchain protocols, staying ahead of the industry trends and capabilities.

Programming Language

Tezos is open and accessible to developers of all skill levels. New tooling and advanced compilers have created new ways for developers to build powerful applications on the Tezos network.

The protocol language, the core of the network, is written in a formally verified, functional programming language trusted in critical infrastructure such as nuclear reactors, satellites, and military defense. Objective Caml, or OCaml, was created in 1996 and is maintained by the French Institute for Research in Computer Science and Automation (INRIA). OCaml comes from the software verification research community and emphasizes formal verification, a mathematical “proof-of-correctness” that verifies that a computer program will fulfill its specification.

At the application level, Tezos uses a formally verified low-level language called Michelson. While Michelson emphasizes formal verification and was chosen to make it harder for developers to unintentionally introduce bugs into their smart contracts, everyday developers can still build in more familiar languages such as SmartPy (inspired by Python); LIGO (inspired by Camel with a Pascal-like syntax); Morley (framework), and tzGo (inspired by Golang).

What Makes Tezos Unique?

Although staking is common across blockchains, Tezos has a unique twist on this process. Participants can get involved with the network’s governance through “baking,” where they effectively stake 8,000 XTZ. This creates a financial incentive to act honestly.

Bakers are then tasked with voting on proposed changes to the blockchain’s code in a four-step procedure that takes approximately 23 days. Proposals that receive support from the vast majority of participants are put through their paces on a testnet for 48 hours and are fully implemented if they are backed by a super-majority.

Tezos is also unique because of how it has started to be used by high-profile businesses. In September 2020, it was announced that the French banking giant Societe Generale planned to use this blockchain for experimenting with a central bank digital currency.

Big cryptocurrency exchanges such as Binance and Coinbase have also unveiled support for Tezos staking, meaning users can receive rewards based on the XTZ that they hold. This is not a feature that’s seen too widely across digital assets.

How Many Tezos (XTZ) Coins Are There in Circulation?

Our data shows that 743,862,304 XTZ are in circulation at the time of writing.

A token sale for Tezos was held back in July 2017 — and during this ICO, a total of 65,681 BTC and 361,122 ETH was raised. At the time, this was worth $232 million, securing its place as one of the largest initial coin offerings ever held.

While 80% of this initial supply went to investors, 20% was split equally between the Tezos Foundation and Dynamic Ledger Solutions.

The mainnet’s launch was delayed by a series of lawsuits from some disgruntled investors, who argued that XTZ amounted to unregistered securities.

Understanding Tezos

Like Bitcoin and Ethereum, Tezos is a decentralized ledger that makes use of blockchain technology. Like Ethereum, Tezos is designed to make use of smart contracts. The term “Tezos” is ancient Greek for “smart contract,” according to the developers.

However, Tezos goes beyond previous offerings. It takes the smart contract concept one step further by letting participants directly control the rules of the network.

Tezos is intended to be an evolving network. This flexibility is seen as a crucial aspect of its system. In particular, the lack of flexibility and scalability in Bitcoin has saddled it with numerous difficulties and growing pains. Ethereum has grown in large part because of its flexibility, and Tezos continues in that direction.

Official Blockchain Of Manchester United

 
  • Tezos branding will appear on the uniform worn by the soccer team’s players while warming up before matches, starting with their home game against Southampton on Saturday, the club said Thursday.
  • Terms of the partnership were not disclosed, though initial reports last week suggested Tezos would be paying in excess of GBP 20 million ($27 million) a year.
  • The club also plans to introduce several fan experiences built on the Tezos blockchain.
  • These may include the minting of non-fungible tokens (NFTs). Tezos last year partnered with McLaren Racing to build an NFT platform, listing tokens that illustrate the team’s history and heritage.
  • Sponsorship deals between sports teams or events and crypto firms have become more frequent in recent months – crypto exchange FTX and Crypto.com have both been active over the past year. In October Binance, the largest crypto exchange, signed a $30 million sponsorship agreement with Italian soccer club Lazio, and in England’s top-tier Premier League, Watford secured a deal with Stake.com that added the dogecoin logo to the players’ shirt sleeves.

5 Things To Know Before You Buy Tezos (XTZ)

1. It recently announced a deal to provide tokenized assets for three Swiss firms

At the end of August, Incore Bank, Inacta, and Crypto Finance Group announced they would use Tezos to develop DAR1 tokens. These new tokens will use smart contracts to comply with anti–money laundering rules and improve governance. Incore Bank also announced it would launch staking services for the Tezos network.

This deal supports Tezos’s argument that its smart contract language is especially well suited to financial agreements. It says its Michelson language ensures funds won’t get lost or frozen due to bugs in the code.

2. It calls itself a self-amending blockchain

Tezos says its self-amending chain is one of the things that make it unique — its blockchain is “designed to evolve.” The idea is that people who own Tezos can propose and vote on-chain to approve any changes, without the need for in-person discussions. Approved updates will then be implemented automatically. It’s an unusual governance model that — in theory — reduces the likelihood of divisions within the community.

In contrast, off-chain governance involves more discussion at conferences, or via forums and mailing lists. Decision making can become slower and more acrimonious.

3. You can stake XTZ and earn interest

Tezos is listed on many of the top cryptocurrency exchanges. This means it’s easy for U.S. investors to buy and sell the token safely. In addition, investors can stake their tokens (either through their exchange or wallet, or directly with the Tezos network) to earn interest.

Unlike Bitcoin (BTC), Tezos uses the more environmentally friendly proof-of-stake model to validate transactions and keep the network secure. If you stake your XTZ, you tie up your coins so they can power the network. According to Staking Rewards, a data provider, almost 77% of XTZ tokens were staked at the time of this writing, earning an average of 4.66% APR in rewards.

4. XTZ has gained around 170% since the start of this year

Tezos posted strong gains this year, though the price has not grown as much as that of other major cryptocurrencies. For example, if you’d bought $100 worth of XTZ on Jan. 1, it would be worth about $270 today. If you’d instead bought $100 worth of Ethereum (ETH), it would now be worth about $520.

Cryptocurrencies are extremely volatile investments that can see significant gains as well as considerable losses in what can only be described as a roller coaster. If you are investing in the hope of another 170% gain in the short term, you may be disappointed.

Instead, look at whether you think Tezos will perform well in the long term. As with any investment, it’s important to take time to research the fundamentals and understand what problems it wants to solve. There are no guarantees, but this approach means you can be more confident it will do well over time — and you won’t have to worry as much about day-to-day price fluctuations.

5. It is trying to put its initial scandals behind it

We touched on Tezos’ governance model above, but we didn’t mention the internal struggles that hampered its early development. After a hugely successful initial coin offering in 2017, an internal dispute between the coin’s creators (Arthur and Kathleen Breitman) and the Tezos Foundation led to significant delays in the platform launch.

The promised XTZ tokens took almost a year to materialize, prompting investors to take legal action. And it was only last year that the Tezos Foundation reached a $25 million settlement, $16.5 million of which went to investors who lost money.

The settlement should mean Tezos can finally draw a line under the scandal. The challenge is that while it was solving its internal issues, other cryptocurrencies — like Cardano (ADA), Solana (SOL), and Polkadot (DOT) — were developing their technologies. A year is a very long time in crypto. It also brings the token’s on-chain governance model into question as the failure in Tezos’ real world governance had such a big impact on the coin’s development.

Tezos (XTZ): The True Digital Commonwealth

Gemini-Cryptocurrencies Tezos- The True Digital Commonwealth

Tezos’ Use Of Formal Verification For Smart Contracts

The inherent advantages of Tezos stem from how it is built with functional programming languages. These are coding languages where the programs are constructed using mathematical functions — as opposed to imperative programming languages, where the developer writes specific step-by-step instructions.

Due to their better security and speed, functional languages are becoming increasingly popular in missioncritical industries — such as the aeronautics, nuclear power, and financial services — where the costs of mistakes are high, so require the mathematical precision of a functional programming language.

Functional coding languages allow for all smart contracts on the Tezos blockchain to be mathematically proven and verified, which is called “formal verification.” This mathematical guarantee of a program’s fidelity serves to bolster security and increase the speed of smart contracts.

How Tezos Baking Works

Baking is the signing and publishing of blocks to the Tezos blockchain. Only users with a minimum number of 8,000 XTZ (also known as “1 roll”) can qualify as bakers. Bakers must also have the appropriate hardware, software, and expertise. They act as the decentralized developers for the Tezos cryptocurrency network and work with the rest of the development teams to resolve any issues in the code. To qualify, aspiring bakers must provide a security deposit, which would be forfeited if the baker were to behave unethically. In return for their work, bakers are rewarded with XTZ coins, also known as “baking rewards.” This process serves as an incentive for bakers to continue their Tezos baking.

Tezos has a unique consensus mechanism, called Liquid Proof of Stake (LPoS), whereby non-qualified users who do not have enough coins or expertise to be developers can delegate (or “stake”) their coins to qualified bakers. Through staking, any coin holder with any quantity of coins can assign the rights to their Tezos coins to a baker via a smart contract. In return, the baker shares in the ensuing returns. This process enables any XTZ coin holder to apply to participate in the protocol’s governance mechanism.

Via these features, the Tezos system offers all of its holders the incentive to participate in staking, and thus in the growth and development of the network. In fact, in 2020 as much as 80% of XTZ coins were staked at any given time, with a comparable percentage of XTZ owners participating in voting.

Advantages And Disadvantages Of Tezos (XTZ)

Tezos offers investors a number of advantages that set it apart from other crypto. But there are some potential downsides to this crypto as well.

The PoS consensus mechanism is a more energy efficient way to create new coins, and using a liquid PoS, as noted above, allows for greater participation from all stakeholders in the community. And users can delegate their stake to bakers to earn partial rewards.

The process of proposing changes to the protocol and voting on them is also more democratized on the Tezos platform than on some others.

Because Tezos is a programmable blockchain, it allows for the use of smart contracts, NFTs, and other DeFi features.

But while Tezos bills itself as a programmable blockchain with smart contract capabilities, it faces competition from bigger players like Ethereum, Cardano, Solana, Polkadot.

As a result, XTZ is not seeing widespread commercial adoption relative to some other forms of crypto.

And owing to the fairly high Gini coefficient, which indicates overall wealth concentration in a certain system or economy, XTZ tends to be concentrated among a smaller percentage of users. While this is a common issue on many crypto platforms, it can indicate a potential security risk.

Advantages

Disadvantages

• Uses an eco-friendly proof-of-stake consensus mechanism.

• Tezos faces stiff competition from emerging smart contracting platforms.

• Permits delegating of XTZ to earn partial rewards.

• Tezos is not seeing widespread commercial adoption

• Bakers can propose and vote on changes to the Tezos protocol through a formalized system.

• Tezos has a high Gini coefficient, indicating a potential security risk.

• Tezos is a programmable blockchain that allows for the creation of smart contracts and NFTs.

Future Of Tezos

The future of Tezos was once again looking bright in February 2020. Though the rapid rise in the price of tez suggests caution in the short term, record highs resolve some problems. In particular, all of those who want their money back could simply sell their tez on the market for a profit.

The future of Tezos remains positive. As with any cryptocurrency, rapid rises in the price suggest caution in the short term, while record highs resolve some problems. In particular, all of those who want their money back could simply sell their tez on the market for a profit. As of Sept. 4, 2021, Tezos is on 256,710 watchlists on CoinMarket cap.

More importantly, Tezos proved its staying power by surviving the bear market and reaching new highs. As cryptocurrency skeptic Warren Buffett once put it, “Only when the tide goes out do you discover who’s been swimming naked.” It seems that Tezos is better suited to the future than many believed. However, the ultimate fate of Tezos will depend on the value of its technological innovations and its ability to gain support.

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