Tezos, designated XTZ, is a blockchain network connected to a digital token known as a Tezzie or Tez. The tokens are not broken down because the network uses a proof of stack consensus protocol. The network is an open-source platform designed for the creation and hosting of applications and assets. Stakeholders are responsible for managing upgrades to the primary protocol, including changes made to the management process.
Tezo’s ICO raised $232 million in 2018. However, due to legal and management issues, there have been delays until the end of 2019, but Tezos has regained momentum in early 2020 and is trading at $2.90 when writing this report.
In the early blockchains like Bitcoin and Ethereum, important development and design decisions were highly centralized and placed in core development teams and miners’ hands. This resulted in a lack of flexibility and caused major setbacks when the blockchains were forked into two different projects. Thus Ethereum Classic turned out to be a splinter group with a different philosophy after the DAO fiasco.
Therefore, Tezos decided to create a network in which the decision-making process is inherently present so that the stakeholders always make major decisions together. Governance rules were created for the stakeholders, allowing them to approve or reject changes and upgrades to the network without relying on hard forks. Any developer who wants to make a specific change can propose a protocol upgrade. This also creates incentives for stakeholders to participate in the development and upgrade process by democratizing blockchain governance and decision making.
Tezos has thus taken the next logical step by solving a major problem of early blockchains. Thanks to the governance rules built into the blockchain network, democracy decides where the project goes.
Tezos has a pretty unique architecture that uses something called Network Shell. It is an agnostic native middleware that has allowed the development team to create a modular blockchain network that can change, update, and add to itself by following a certain set of rules. In general, blockchain consists of three layers — the network layer that enables the communication between nodes and peers, the transaction layer that specifies the transaction validation protocol, and the consensus layer that is self-explanatory.
Tezos has combined the consensus and transaction logs into a single layer called the blockchain layer. The Network Shell enables seamless communication between the blockchain and network layers, while the network layer remains agnostic to the other two layers. This inter-layer communication enables the parties involved to democratically control upgrades and changes to the blockchain network.
The on-chain governance enabled by the blockchain network’s unique architecture allows Tezos to make upgrades and changes without having to go through a hard fork. Each proposed change is voted on to decide whether or not the majority of stakeholders accept it. The voting process itself can be changed if necessary. In the long run, this process allows the blockchain to maintain its core values while making the necessary upgrades without creating new blockchains that fragment support and resources.
Unfortunately not. At least not yet. Compared to the established cryptocurrencies, some of which have been around for almost a decade, Tezos and the XTZ token are a very young project. Currently, Tezos is in an early stage where only project supporters and traders buy the coin. Supporters are people who believe in the project and show their support by buying a stake. Traders are only looking for short or long term financial gains.
It should also be remembered that Tezos is not primarily an alternative digital currency, but a blockchain like Ethereum, which aims to run smart contracts and applications on a self-changing protocol. The difference in perspective means that Tezos is a token that focuses on supporting blockchain operations rather than being a real currency.
At present, the transaction fee does not represent a major incentive for the network actors, so that the transaction costs are generally zero. The financiers or stakeholders usually accept transactions free of charge. However, if you buy XTZ tokens from a cryptocurrency exchange or trading platform, you may have to pay different types of service fees, commissions, and fees. These fees usually depend on your country of residence, the number of coins you wish to purchase, the exchange fee structure, and the payment method.
For example, if you pay with bank deposits, the fee is generally lower. However, debit and credit card purchases can be quite expensive.
As a decentralized blockchain, Tezos offers all the conventional advantages and brings several unique features.
In this way, the Tezos network can update the protocol itself without going through a hard fork or forcing the network into several blockchains. This is extremely important for blockchains, as hard forks can fragment the community, fragment resources, alter stakeholders’ rewards, and dilute any benefits it has accumulated over time. Self-management enables seamless coordination and implementation of future changes and updates.
Each actor of the Tezos Blockchain has the right to participate in the management of the network. There is an electoral cycle that provides a systematic and organized method for stakeholders to reach a consensus on proposed changes and additions to the Blockchain. The application of a self-change process with on-chain governance also allows Tezos to improve its electoral process for better governance in the future.
Changes proposed by developers may also include payments to individuals or groups working to improve the protocol. A stakeholder can accept these proposals to provide the necessary funding. This robust funding process not only decentralizes network maintenance but also encourages participation. In the long term, it can help Tezos build a dynamic, open, and passionate community of developers who have sufficient incentives to make valuable contributions to the network.
Formal Verification & Smart Contracts
With the Tezos Blockchain, decentralized applications and Smart Contracts can be set up that can neither be censored nor prohibited by third parties. Besides, Tezos enables a formal verification process that increases these applications’ security through mathematical methods. The mechanism can also be used to identify and correct errors before they have a significant impact.
Proof of Stake
Proof of Stake or PoS is the protocol by which several stakeholders in Tezos reach a consensus on the blockchain state. Unlike other PoS protocols, each stakeholder can be part of the consensus process and has a right to be directly rewarded by the protocol itself if they make a valuable contribution to the network’s security and liability. Besides, the PoS protocol is not resourcing intensive and has a low barrier to entry to become part of the process.
Tezos is a new cryptocurrency, and it is difficult to say how it will evolve when it comes to privacy and anonymity. Given that anonymity is not the blockchain’s selling point, it is expected that users will receive the same level of privacy as they normally do with other blockchains like Ethereum and Bitcoin. Although they are quite anonymous, your public addresses and transaction amounts are visible and leave a digital footprint. Any government organization or individual with sufficient expertise can trace the information back to you and reveal your identity. You have a degree of anonymity on the Blockchain, but it is not absolute.
If, on the other hand, you buy XTZ from a trusted exchange or trading platform, you must provide your personal information for identity verification. Exchanges are required to do this due to increasing regulation. These online services must meet KYC (Know Your Customer) and AML (Anti Money Laundering) requirements to operate their business.
Tezos uses a decentralized blockchain network, which means there is no central database to hack into to make changes or destroy information. Even if a hacker finds a way, no changes can be made without the consensus of those involved. Also, being decentralized means that there is no central authority that can exercise absolute control over the blockchain. It also uses cryptographic encryption to keep user information safe and secure.
Tezos was co-founded by Kathleen Breitman and Arthur Breitman, who have been building the core platform since 2014 with a small team of dedicated developers. Currently, the Tezos Foundation, based in Switzerland, manages the project and deploys the financial and strategic resources accordingly. Its main objective is to promote the Tezos protocol by payment of grants and other raising capital methods. The Foundation is further subdivided into departments, including the Board of Trustees, the Executive Committee, the Audit Committee, the Investment Committee, the Technical Advisory Committee, and the Nomination and Compensation Committee.
In terms of technical development, Tezos has several members on Gitlab, and there have also been significant contributions from the OCamlPro team, who have developed several tools for the project, including TZScan. Some development teams are scattered around the world; for example, many Korean universities contribute directly to the project. There is no central leader here to maintain the democratic style of the blockchain.
Tezos had one of the most successful ICOs of all time, raising more than $232 million in just two weeks. Major investors include Dalma Capital, Limitless Crypto Investments, Boost VC, Cypher Capital, and Enabling Future. Several individual angel investors, including Andreas Schwartz, James Sowers, Zachary Cefaratti, and Kenneth Bok. When it comes to financial and strategic investments, Tezos has gained a lot of support because of its highly democratic, self-governing blockchain. Many crypto enthusiasts believe that what Tezos does is much closer to the philosophy of Satoshi Nakamoto.
You cannot remove Tezos because it uses the Proof of Stake protocol to verify transactions. You must purchase XTZ to prove that you are involved in the project. You have two options: Either you delegate these tokens to someone interested in contributing to the blockchain or set up a node and participate yourself if you have 10,000 tokens. For delegating or staking, you will receive about 5.5% interest. The transaction fee is not a significant source of income with this method.
If you want to keep your Tezos tokens safe, you can use wallets with cryptocurrencies. These are either physical devices or software applications that keep your tokens secure. Here are some of the best wallets you can use to store your XTZ tokens:
- Galleon Wallet (desktop wallet for Windows, macOS, and Linux)
- AirGap (Mobile Wallet for Web, Android, and iOS)
- Kukai (Web Wallet)
- ZenGo (Mobile Wallet for iOS and Android)
Currently, Tezos is one of the most intriguing and promising crypto-currency projects because of its on-chain governance, and other features that many believe are consistent with Satoshi Nakamoto’s block-chain philosophy. This is one reason why the project attracted so much attention and received more than $232 million in ICO funding. Now that it has overcome the management and legal issues that have stalled progress over the past year, it is expected that the token will make rapid progress.
However, cryptocurrency prices are very volatile and can experience sudden drops and rises that are difficult to predict. If you wish to invest in XTZ, it is, therefore, advisable to do so while diversifying your investment portfolio to manage your risk. Only invest what you can afford to lose.
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