Secure. Upgradable. Built to last. About 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.
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 futureproofed 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.
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.
The consensus algorithm used by Tezos is called a Liquid-Proof-of-Stake or LPoS. This is a chain-based PoS algorithm and much different from DPoS. This system has three distinct functions. First is Block creation or Baking. In which there is staking and baker selection rules. Second function is delegating coins to Bakers to earn a fees if baking rights and rewards are received by that particular baker. Thirdly, selection of canonical chain is determined by the number of bakers endorsing that particular chain. For this the bakers get some endorsing fees. Such endorsing rights also demands some staking from bakers in order to keep the endorsement honest.
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.
Arthur Breitman was the man who wrote the Tezos white paper — and in a nod to Satoshi Nakamoto, he wrote his works under the pen name L. M. Goodman. He argued that one of Bitcoin’s biggest failings was the lack of a governance process that invited contributions from the community who use the network — as well as the fact that new tokens couldn’t be issued through this blockchain. He and his wife Kathleen founded a start-up called Dynamic Ledger Solutions which was tasked with writing the code that would underpin the Tezos protocol. This company was subsequently purchased by the Tezos Foundation to ensure that it owned all of the intellectual property rights relating to the network.