In the ever-evolving world of cryptocurrency, understanding the fundamentals of a particular blockchain platform can be the key to unlocking its potential. Enter Tezos, a unique player in the blockchain arena, renowned for its self-amending ledger that aims to overcome the common hurdles faced by its predecessors. What is Tezos crypto? It’s not just another digital currency; it represents a significant leap forward, incorporating proof-of-stake consensus, smart contracts, and decentralized applications into a single, seamless ecosystem. This introduction to Tezos will demystify the technology behind this innovative blockchain, explaining why it’s capturing the attention of investors and developers alike.
Our journey through the world of Tezos will cover its operation, highlighting its proof-of-stake mechanism, which stands in contrast to the more traditional proof-of- work systems. We’ll explore the key features that set Tezos apart, including its ability to evolve by upgrading itself without the need to fork. The article will delve into the history of Tezos, shedding light on its origins and development over the years. Furthermore, we’ll examine the unique aspects of Tezos that contribute to its future outlook in the competitive marketplace of cryptocurrencies. By providing a comprehensive overview, this guide aims to equip readers with a thorough understanding of Tezos and its potential impact on the future of decentralized technology.
What is Tezos?
Tezos is a blockchain network that supports the digital token Tez, also known as tezzie. It is designed to facilitate user participation in decentralized finance (DeFi), decentralized applications (dApps), and non-fungible token (NFT) projects . Unlike other blockchains, Tezos uniquely prevents hard forks through a blockchain-based governance mechanism. This mechanism allows protocol upgrades to be adopted and implemented following a voting process that is proportional to users’ economic stakes in the network .
The governance model of Tezos is based on economic stakes and is structured to avoid forks, ensuring a stable and continuous development environment . This is achieved through its proof-of-stake mechanism, which not only validates transactions but also uses significantly less energy compared to the traditional Bitcoin mining process .
Tezos stands out due to its ability to adapt and evolve. The network is built with a modular architecture that allows for regular upgrades, enhancing functionality over time without major disruptions. This adaptability makes Tezos a robust platform for the ongoing Web3 revolution, where it supports a decentralized, user- governed internet . By leveraging languages like OCaml and Michelson, Tezos ensures safety and code correctness, which are crucial for high-value use cases at both the protocol and application layers .
Furthermore, Tezos facilitates active community governance. Users can participate in the network by evaluating, proposing, or approving amendments, fostering a collaborative environment that drives innovation . This participatory approach is supported by Tezos’s delegated proof-of-stake mechanism. It allows users to delegate their stakes if they do not wish to participate directly in the consensus process, thus maintaining decentralization and security across the network .
In terms of scalability, Tezos can handle a moderate transaction volume and is continuously working towards enhancing its capacity to support larger scales as needed . The native token of Tezos, Tez or XTZ, known as tezzies, is integral to the network’s functionality. It not only powers smart contracts but also enables on-chain governance, allowing token holders to participate in the decision-making process .
Tezos’s commitment to continuous improvement and community-driven governance positions it as a leading blockchain for smart contracts and a viable platform for building the future of the digital and decentralized world .
How Does Tezos Work?
Network Shell
Tezos operates a “Network Shell” which is crucial for its self-amending cryptographic ledger capabilities. This shell is responsible for the fundamental functions of a distributed software application, including peer-to-peer communication that allows nodes to exchange information, storage functionality for blocks, operations, and the current state of the chain, and a synchronization heuristic that starts nodes and keeps them in sync with the network. Additionally, the shell includes a validator that checks that blocks are valid with help from the rules in the economic protocol .
Network Protocol
The network protocol, specifically known as the “Gossip Protocol,” facilitates the way transactions are displayed across the network between nodes. This includes downloading the blockchain, broadcasting blocks to networks, and detecting peers. The protocol is also responsible for interpreting the operations in each block
and provides the logic that identifies erroneous blocks. Updates to the protocol can change this logic through a voting process, using dedicated voting operations such as protocol proposals or protocol upvotes .
Liquid Proof-of-Stake (LPoS)
Tezos utilizes a unique consensus mechanism known as Liquid Proof-of-Stake (LPoS). In this system, a validator is referred to as a “baker.” Unlike Delegated Proof- of-Stake (DPoS), in LPoS, any user with sufficient coins can become a validator. If a user does not have enough coins, they have the option to delegate to another. This system enhances governance liquidity rather than focusing solely on network scalability. The process of mining or validating is called baking, where the algorithm selects a baker from a group of eligible nodes based on higher stakes and reputation. The selected baker creates a block, which is then sent to 32 other nodes from the bakers’ pool for attestation. If most bakers attest the block as good, it becomes a part of the Tezos blockchain. Bakers receive rewards for adding a block, while other nodes receive rewards for attesting the block. If a node identifies the block as bad, they attest it as such, and the block is rejected, resulting in the chosen baker losing a portion of his initial stake as a penalty .
Key Features of Tezos
Self-Amendment
Tezos differentiates itself with a self-amending blockchain mechanism, allowing the protocol to upgrade without hard forks. This process involves a series of voting periods where stakeholders can propose, select, and activate upgrades, ensuring the system evolves with minimal disruption.
On-Chain Governance
The on-chain governance system in Tezos involves all stakeholders in the decision-making process, allowing for a democratic and decentralized approach to protocol upgrades. This system is designed to prevent the divisiveness of hard forks by enabling stakeholders to vote on amendments and new proposals through a structured cycle .
Smart Contracts and Formal Verification
Tezos supports smart contracts using the Michelson language, which allows for formal verification. This method mathematically proves the correctness of the code governing transactions, enhancing security and reliability. The platform’s ability to run smart contracts verified in this way makes it suitable for high-value applications and contributes to the robustness of the blockchain.
Proof-of-Stake (PoS)
Tezos utilizes a Liquid Proof-of-Stake (LPoS) consensus mechanism, which is less energy-intensive compared to Proof-of-Work systems and allows for more scalability and efficiency. Stakeholders can participate in network security and governance without needing to maintain mining hardware, making it an eco-friendly alternative.
Delegation
In Tezos, delegation is a key feature where stakeholders can delegate their baking rights to validators, known as bakers, without transferring token ownership. This system enhances network security and allows users to earn rewards by participating indirectly in the validation process. Delegation is designed to be safe, with stake not being locked or frozen, providing flexibility for token holders.
The History of Tezos
Founders and Origins
Tezos was first conceptualized in 2014 by the husband-and-wife team, Arthur and Kathleen Breitman. Arthur, while employed at Morgan Stanley, penned two foundational papers under the pseudonym “L. M. Goodman,” a nod to the journalist who mistakenly identified Bitcoin’s creator . The development of Tezos began earnestly in 2015 when Arthur Breitman founded Dynamic Ledger Solutions, Inc. (DLS) in Delaware, taking on the role of chief executive . During this period, he collaborated with the French firm OCamlPro to develop the initial protocol and infrastructure for an ICO, without notifying his then-employer Morgan Stanley as required by the Financial Industry Regulatory Authority (FINRA), eventually resulting in a $20,000 fine .
Initial Coin Offering (ICO)
The Tezos Foundation, established in Zug, Switzerland on April 17, 2017, by the Breitmans and Swiss law firm MME, facilitated one of the largest ICOs on July 1, 2017. The ICO successfully raised $232 million in Bitcoin and Ethereum, marking it as one of the most significant fundraisings of its kind at the time . The funds were managed by the Tezos Foundation rather than DLS, leading to significant governance disputes .
Challenges and Resolutions
Shortly after the ICO, a power struggle ensued between the Breitmans and Johann Gevers, who was part of the foundation’s board. The conflict centered around control and financial management, significantly delaying the project’s progress and leading to multiple investor lawsuits alleging fraud and unregistered securities sales . By 2018, Gevers resigned, receiving a $400,000 settlement, and the foundation’s board was restructured. Subsequently, Tezos was officially launched in September 2018 . In 2020, the founders settled the lawsuits with the Tezos Foundation agreeing to pay $25 million .
Recent Developments
Arthur Breitman took a more direct role in the foundation’s council in 2021, signaling ongoing commitment to the project’s governance and development. The blockchain has continued to evolve, with significant protocol upgrades aimed at enhancing scalability, security, and user governance, maintaining its position at the forefront of the blockchain technology landscape .
Tezos: Unique Aspects and Future Outlook
Unique Value Propositions
Tezos is recognized for its innovative approach to blockchain technology, particularly through its self-amending protocol and on-chain governance, which set it apart from other cryptocurrencies . This platform is designed to support the Web3 revolution, emphasizing user participation and governance, which are crucial for a decentralized and user-centric internet. Tezos’s ability to evolve and adapt through its on-chain upgrade mechanism allows it to integrate new functionalities seamlessly, ensuring it remains state-of-the-art . Additionally, the use of formal verification through languages like of Caml and Michelson enhances security and reliability, particularly for assets and high-value use cases at both the protocol and application layers .
Partnerships and Use Cases
Tezos has formed significant partnerships, notably with major brands like Red Bull Racing and Ubisoft, which have helped to elevate its profile and demonstrate its practical utility in the mainstream market . These collaborations not only bring visibility to Tezos but also validate its technological capabilities, such as its low- energy consumption and suitability for developing NFTs, which align with current environmental goals and market trends . The platform’s flexibility in tokenizing assets has attracted various sectors, ranging from entertainment to real estate, showcasing its broad applicability and potential for future growth.
Market Performance and Future Potential
Tezos has demonstrated strong market performance and scalability, with a growing repository of real-world applications that enhance its long-term viability . Its delegated proof-of-stake consensus mechanism not only supports network security but also incentivizes token holders through staking rewards, which are crucial for maintaining a robust and engaged community . The ongoing development and integration of new features, such as the Tenderbake and Jakarta upgrades, highlight Tezos’s commitment to continuous improvement without the disruptions typically caused by hard forks . Looking ahead, the expansion of its ecosystem and the deepening of its market penetration are likely to drive further demand for Tezos, positioning it as a significant player in the blockchain space .
Conclusion
Through this comprehensive exploration of Tezos, we’ve navigated its inner workings, from its innovative self-amending blockchain and on-chain governance to its unique consensus mechanism and robust community participation. We have illuminated how these distinguishing features solidify Tezos’s role in supporting decentralized applications, DeFi, and NFTs, while emphasizing sustainability and scalability. By examining its historical roots, structural foundations, and strategic partnerships, it’s clear that Tezos not only represents a pioneering force in the blockchain domain but also heralds a future where technology evolves in harmony with its community’s consensus and environmental considerations.
