What is Tezos?
Tezos is a self-amending blockchain platform that enables seamless on-chain governance and protocol upgrades without hard forks. Tezos uses the Liquid Proof-of-Stake consensus mechanism, which is energy-efficient, promotes decentralization, and lowers barriers to participation. XTZ is the native token of Tezos, playing a vital role in the ecosystem, such as supporting network security, governance, and staking.
Table of Contents
Key Takeaways
- Tezos offers a secure and scalable platform for various use cases, including DeFi, NFTs, gaming, metaverse projects, and asset tokenization.
- Michelson is the smart contract language for Tezos, offering benefits such as formal verification and ease of auditing.
- The Tezos community and ecosystem are supported by organizations like the Tezos Foundation, TQ Tezos, and Tezos Commons, providing grants, funding, and resources for projects and developers.
- The platform has established numerous partnerships and collaborations with organizations like Microsoft, Ubisoft, and the IMDEA Software Institute to drive innovation and adoption.
- Tezos prioritizes education and offers comprehensive resources for developers, including documentation, training programs, and online forums.
- The long-term vision of Tezos is to become a leading blockchain platform for decentralized applications across various industries and sectors.
- Tezos faces challenges like increasing competition from other platforms but offers significant opportunities thanks to its innovative features, strong community, and commitment to sustainability.
Introduction to Tezos
Origins and Founders
Tezos is a groundbreaking blockchain platform that came into existence in 2017. It was founded by Arthur Breitman and Kathleen Breitman, a dynamic husband-and-wife team with extensive backgrounds in computer science, finance, and strategy consulting. The project successfully raised over $230 million during its initial coin offering (ICO), making it one of the largest ICOs at the time.
Purpose of Tezos
The primary goal of Tezos is to create a truly decentralized and self-governing blockchain platform. Its focus is on facilitating secure and scalable decentralized applications (dApps) and smart contracts. One of the unique selling points of Tezos is its ability to evolve and adapt through its innovative governance model, which allows the community to actively participate in decision-making processes and protocol upgrades.
Key Features
Tezos offers a range of distinctive features that set it apart from other blockchain platforms. Some of the most prominent features include:
- Liquid Proof-of-Stake (LPoS): Tezos uses a unique consensus mechanism called Liquid Proof-of-Stake, which allows token holders to participate in the validation of transactions and earn rewards through staking or delegation. This mechanism is designed to be more energy-efficient and secure compared to traditional Proof-of-Work systems.
- Self-Amending Protocol: Tezos is designed to evolve and adapt through its self-amending feature. This allows the community to propose and vote on changes to the protocol, effectively enabling on-chain upgrades without the need for hard forks.
- Michelson Smart Contracts: Tezos uses a custom-built programming language called Michelson for its smart contracts. Michelson is a stack-based, statically-typed language that aims to enhance security and formal verification, making it easier for developers to create secure and reliable dApps.
- Strong Governance Model: The Tezos governance model empowers its community by allowing stakeholders to have a say in the platform’s development and upgrades. This model promotes decentralization and ensures that Tezos remains agile and adaptive to the rapidly evolving blockchain landscape.
By combining these unique features, Tezos aims to provide a robust, secure, and adaptive blockchain platform that caters to the diverse needs of developers, users, and businesses alike.
Tezos Blockchain Architecture
Layered Architecture
Tezos has a modular and layered architecture, which separates various aspects of the blockchain into distinct layers. This design approach enhances flexibility, facilitates upgrades, and allows for more effective management of the platform. The three primary layers in the Tezos architecture are the network, consensus, and transaction layers.
Network, Consensus, and Transaction Layers
- Network Layer: The network layer is responsible for managing communication between nodes, propagating transactions, and maintaining the distributed ledger. Tezos employs a peer-to-peer (P2P) network with a focus on reliability and efficiency. This layer utilizes a gossip protocol for communication, ensuring that information is transmitted quickly and securely throughout the network.
- Consensus Layer: At the core of the Tezos platform is its innovative Liquid Proof-of-Stake (LPoS) consensus mechanism. The consensus layer governs the process of validating transactions, proposing and endorsing blocks, and achieving consensus among participating nodes. LPoS provides an energy-efficient and secure alternative to traditional Proof-of-Work systems while allowing for decentralized governance and stakeholder involvement.
- Transaction Layer: The transaction layer is where smart contracts and transactions are executed. This layer interprets and processes the Michelson programming language, which is specifically designed for Tezos smart contracts. The transaction layer also handles the creation and management of accounts, token transfers, and other on-chain operations.
Smart Contracts
Smart contracts are self-executing agreements that run on a blockchain platform. They are designed to facilitate, verify, and enforce contractual agreements without the need for intermediaries. On the Tezos platform, smart contracts are written in the Michelson programming language, which is designed to prioritize security, accuracy, and formal verification.
The Tezos smart contract ecosystem enables developers to create decentralized applications (dApps) with a wide range of use cases, such as decentralized finance (DeFi), non-fungible tokens (NFTs), and asset tokenization. By providing a reliable and secure environment for smart contracts, Tezos aims to foster the development of innovative solutions and drive the adoption of blockchain technology across various industries.
Tezos' Liquid Proof-of-Stake (LPoS) Consensus Mechanism
How LPoS Works
Tezos’ Liquid Proof-of-Stake (LPoS) is a unique consensus mechanism that combines elements of both Proof-of-Stake (PoS) and Delegated Proof-of-Stake (DPoS) systems. LPoS strikes a balance between decentralization, security, and energy efficiency by allowing XTZ token holders to participate in the validation process either by staking their tokens or delegating their staking rights to others.
Baking and Endorsing Blocks
In the Tezos ecosystem, the process of validating and adding new blocks to the blockchain is called “baking.” Bakers are selected randomly based on the number of XTZ tokens they hold, also known as their “roll size.” Each roll consists of 8,000 XTZ, and the more rolls a baker has, the higher the chance they have to be selected for baking a new block.
When a baker is chosen, they create a new block containing a set of transactions and add it to the blockchain. The process doesn’t end here – the new block must also be endorsed by a group of endorsers, who are also selected based on their roll size. Endorsers verify the validity of the newly baked block, and once they approve it, the block becomes part of the Tezos blockchain.
Both bakers and endorsers receive rewards for their participation in the form of newly minted XTZ tokens. This incentivizes token holders to actively engage in the baking and endorsing processes, thereby contributing to the network’s security and decentralization.
Staking and Delegation
Not all XTZ token holders can become bakers, as it requires a minimum of 8,000 XTZ to form a roll. To ensure that smaller token holders can still participate in the validation process and earn rewards, Tezos allows for delegation. Delegation enables token holders to delegate their staking rights to a baker without transferring ownership of their tokens.
Delegators can choose from a variety of bakers, each with its own fee structure and performance metrics. Once delegated, the baker includes the delegated tokens in their roll size, increasing their chances of being selected for baking and endorsing. In return, the baker shares a portion of the rewards with their delegators, allowing everyone to benefit from the network’s growth and security.
Governance and Protocol Upgrades
One of the standout features of Tezos’ LPoS mechanism is its ability to facilitate on-chain governance and protocol upgrades. Token holders can submit proposals for changes to the protocol, which are then voted on by bakers. If a proposal receives enough support, it moves through a series of voting periods before being integrated into the Tezos blockchain.
This self-amending process ensures that Tezos can evolve and adapt to the ever-changing blockchain landscape without the need for hard forks or contentious debates. It empowers the community to shape the platform’s future, fostering a truly decentralized and self-governing ecosystem.
XTZ: The Native Token of Tezos
Tokenomics
XTZ, also known as “tez” or “tezzies,” is the native cryptocurrency of the Tezos blockchain. The token plays a vital role in the network’s operations, such as securing the platform, incentivizing participation, and facilitating transactions. The tokenomics of XTZ are designed to promote a healthy and sustainable ecosystem, encouraging long-term growth and stability.
Distribution and Supply
Tezos had an initial coin offering (ICO) in July 2017, raising over $230 million from investors worldwide. During the ICO, approximately 607 million XTZ tokens were distributed to investors. In addition to the initial distribution, the Tezos protocol has an inflationary model, with new tokens being minted as rewards for bakers and endorsers.
The annual inflation rate of XTZ is around 5.5%, but it is worth noting that this rate is offset by the rewards earned by token holders who participate in the baking and endorsing processes. As a result, the effective inflation rate experienced by active participants is lower than the nominal rate.
Role in the Tezos Ecosystem
XTZ tokens serve multiple purposes within the Tezos ecosystem:
- Securing the Network: Token holders can participate in the baking and endorsing processes by staking or delegating their XTZ, contributing to the platform’s security and decentralization.
- Incentivizing Participation: Bakers and endorsers earn rewards in the form of newly minted XTZ tokens, incentivizing them to actively engage in the validation process and maintain the network’s integrity.
- On-chain Governance: XTZ token holders have a say in the platform’s governance by voting on proposals for protocol upgrades and changes, fostering a truly decentralized and self-governing ecosystem.
- Fueling Transactions and dApps: XTZ tokens are used to pay for transaction fees and interact with decentralized applications (dApps) built on the Tezos platform.
Exchange Availability
As a popular and widely recognized cryptocurrency, XTZ is available for trading on various cryptocurrency exchanges, including major platforms like Binance, Coinbase, Kraken, and Bitfinex. Users can trade XTZ against other cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and stablecoins such as USD Coin (USDC) or Tether (USDT). Additionally, some exchanges offer fiat-to-crypto trading pairs, allowing users to buy XTZ directly with traditional currencies like USD or EUR.
To store XTZ tokens securely, users can choose from a range of wallets that support Tezos, including hardware wallets like Ledger and Trezor, as well as software wallets such as Galleon, Kukai, and TezBox.
Tezos Smart Contracts: The Michelson Language
Introduction to Michelson
Michelson is the domain-specific programming language used to write smart contracts on the Tezos blockchain. It is a stack-based, statically-typed language designed with a strong emphasis on security, accuracy, and formal verification. Michelson’s unique features make it particularly suitable for creating smart contracts with high assurance, reducing the risk of bugs and vulnerabilities that could lead to security breaches or financial losses.
Benefits of Using Michelson
There are several advantages to using Michelson for smart contract development on Tezos:
- Security: Michelson’s design prioritizes security, minimizing the potential for coding errors and vulnerabilities that could be exploited by malicious actors.
- Formal Verification: One of Michelson’s key features is its support for formal verification, a mathematical approach to proving the correctness of a smart contract’s code. This enables developers to verify that their contracts behave as expected, reducing the risk of unexpected outcomes or issues.
- Expressiveness: Despite its focus on security and accuracy, Michelson remains an expressive language, allowing developers to create complex smart contracts and decentralized applications (dApps) that cater to a wide range of use cases.
- Compatibility: Michelson’s compatibility with the Tezos platform ensures that smart contracts can leverage the network’s unique features, such as the Liquid Proof-of-Stake (LPoS) consensus mechanism and on-chain governance.
Examples of Smart Contracts
Tezos’ Michelson language has been used to develop a variety of smart contracts and dApps, including:
- Decentralized Finance (DeFi) Platforms: Tezos supports various DeFi applications, such as decentralized exchanges (DEXes), lending and borrowing platforms, and stablecoins.
- Non-Fungible Tokens (NFTs): Artists and creators can leverage Tezos’ smart contracts to create, mint, and trade NFTs, which represent unique digital assets like art, collectibles, and virtual real estate.
- Tokenized Assets: Michelson can be used to create smart contracts that represent tokenized real-world assets, such as stocks, bonds, or real estate, enabling more accessible and efficient trading.
- Voting Systems: Developers can create decentralized voting systems on Tezos, leveraging the platform’s inherent security and transparency to ensure fair and tamper-proof elections.
Development Tools and Resources
To support developers working with Michelson, the Tezos community provides a range of tools and resources:
- SmartPy: A Python-based development environment for Michelson that includes an integrated development environment (IDE), a compiler, and a testing framework.
- LIGO: A high-level programming language that compiles to Michelson, offering a more familiar syntax for developers accustomed to languages like JavaScript or Solidity.
- Tezos Developer Documentation: Comprehensive documentation that covers various aspects of Tezos development, including smart contracts, Michelson, and the Tezos platform itself.
Tezos Community: A vibrant and supportive community of developers, researchers, and enthusiasts who contribute to the Tezos ecosystem by sharing knowledge, providing feedback, and participating in discussions.
Tezos Governance and On-Chain Upgrades
Self-Amendment Process
Tezos stands out among blockchain platforms for its built-in self-amendment process, which enables the network to undergo protocol upgrades without the need for hard forks. This feature promotes a more efficient, cohesive, and democratic approach to making changes, as it allows the Tezos community to propose, vote on, and implement upgrades directly on the blockchain.
Voting and Proposal Periods
Tezos’ on-chain governance process consists of four distinct voting periods:
- Proposal Period: During this phase, which lasts eight cycles (approximately three weeks), bakers can submit proposals for changes or upgrades to the Tezos protocol. Each baker can submit up to 20 proposals, and any proposal must receive support from at least 0.1% of the total rolls to proceed to the next stage.
- Exploration Vote Period: This phase also lasts eight cycles, and bakers vote on the proposals submitted during the proposal period. A proposal must receive support from at least 80% of the participating rolls to advance to the next phase. If multiple proposals meet this requirement, the one with the most support moves forward.
- Testing Period: In this phase, which lasts four cycles (approximately two weeks), a testnet fork of the Tezos blockchain is created to evaluate and test the proposed changes. This allows the community to assess the potential impact and effectiveness of the proposal before it is integrated into the mainnet.
- Promotion Vote Period: The final stage lasts eight cycles, during which bakers vote on whether to adopt the tested proposal into the mainnet. If the proposal garners support from at least 80% of the participating rolls, it becomes part of the Tezos protocol.
On-Chain Upgrades without Hard Forks
One of the key benefits of Tezos’ on-chain governance process is that it eliminates the need for hard forks to implement protocol upgrades. Hard forks can be contentious and lead to network splits, creating uncertainty and instability in the blockchain ecosystem. Tezos’ self-amendment process allows for seamless, consensus-driven upgrades that keep the community united and the platform evolving smoothly.
Examples of Past Upgrades
Tezos has undergone several successful protocol upgrades through its on-chain governance process:
- Athens: The first protocol upgrade, implemented in May 2019, increased the gas limit for blocks and reduced the roll size from 10,000 XTZ to 8,000 XTZ.
- Babylon: Launched in October 2019, this upgrade introduced a new consensus algorithm, Emmy+, and made improvements to the Michelson language and smart contract functionality.
- Carthage: Activated in March 2020, this upgrade focused on enhancing the performance and stability of the Tezos blockchain by fixing minor bugs and optimizing the gas model.
Delphi: Implemented in November 2020, the Delphi upgrade significantly reduced gas costs and improved the performance of the Tezos blockchain, paving the way for more complex smart contracts and dApps.
Tezos Use Cases and Applications
Decentralized Finance (DeFi)
Tezos has emerged as a promising platform for developing Decentralized Finance (DeFi) applications. Thanks to its robust security features, support for formal verification, and energy-efficient consensus mechanism, Tezos is an ideal choice for creating DeFi platforms, such as:
- Decentralized Exchanges (DEXes): Tezos-based DEXes, like QuipuSwap and Dexter, facilitate secure and permissionless trading of cryptocurrencies without relying on centralized intermediaries.
- Lending and Borrowing Platforms: Platforms like Kolibri and Checker enable users to lend and borrow digital assets, leveraging the power of smart contracts to automate and secure these transactions.
- Stablecoins: Tezos is home to stablecoins like kUSD and USDtz, which are pegged to the value of fiat currencies and provide stability and liquidity to the DeFi ecosystem.
Non-Fungible Tokens (NFTs)
Tezos’ secure and energy-efficient infrastructure makes it an attractive platform for creating, minting, and trading Non-Fungible Tokens (NFTs). NFTs represent unique digital assets like art, collectibles, and virtual real estate. Tezos-based NFT marketplaces, such as Hic et Nunc, Kalamint, and Objkt, enable creators and collectors to buy, sell, and trade NFTs while benefiting from lower transaction fees and reduced environmental impact.
Gaming and Metaverse Projects
The Tezos blockchain offers a strong foundation for developing gaming and metaverse projects, which require secure and scalable infrastructure. Games like Tezos Domains and InterPop blend blockchain technology with traditional gaming experiences, enabling players to own, trade, and monetize in-game assets through NFTs. Metaverse projects built on Tezos, such as OneOf, create immersive virtual worlds where users can interact, socialize, and participate in various activities, with NFTs playing a crucial role in digital ownership and value creation.
Real-World Asset Tokenization
Tezos is well-suited for tokenizing real-world assets, as its secure and transparent infrastructure allows for the creation of trustless, legally compliant digital representations of physical assets. Tokenization can enhance the accessibility and efficiency of trading assets like stocks, bonds, and real estate. Platforms like Equisafe and Vertalo leverage Tezos to facilitate the issuance, management, and exchange of tokenized assets, bridging the gap between traditional finance and the blockchain ecosystem
Tezos Community and Ecosystem
Developer Community
The Tezos developer community plays a crucial role in driving the platform’s innovation and growth. Comprised of developers, researchers, and enthusiasts, the community contributes to the Tezos ecosystem by creating and maintaining tools, libraries, and decentralized applications (dApps), as well as participating in discussions, providing feedback, and sharing knowledge with peers.
Grants and Funding
Tezos has a strong commitment to fostering its ecosystem, and several organizations provide grants and funding to projects that contribute to the platform’s development. The Tezos Foundation, for instance, offers funding to developers, researchers, and entrepreneurs working on projects that enhance the Tezos network’s capabilities, security, and adoption. Additionally, organizations like TQ Tezos and Tezos Commons support projects focused on various aspects of the Tezos ecosystem, such as protocol upgrades, infrastructure development, and community growth.
Partnerships and Collaborations
Tezos has established numerous strategic partnerships and collaborations that help expand its reach and strengthen its ecosystem. These partnerships span various sectors, including finance, technology, and academia, and involve organizations like Microsoft, Ubisoft, and the IMDEA Software Institute. By collaborating with leading industry players and research institutions, Tezos ensures that it remains at the forefront of blockchain innovation and adoption.
Educational Resources
The Tezos community and ecosystem prioritize education, providing resources and learning materials to help individuals develop their skills and understanding of the platform. Some key educational resources include:
- Tezos Developer Documentation: Comprehensive guides and tutorials covering various aspects of Tezos development, including smart contracts, the Michelson language, and the Tezos platform itself.
- Tezos Agora: An online forum where users can engage in discussions, ask questions, and share insights related to Tezos, its technology, and its ecosystem.
- Tezos Training Programs: Initiatives like Tezos Academy, Tezos Camp, and the Tezos Pathway Program offer training, mentorship, and support to developers, researchers, and entrepreneurs interested in working with the Tezos platform.
By fostering a vibrant, supportive, and well-resourced community, Tezos ensures its ongoing growth, innovation, and success in the rapidly evolving blockchain space.
Conclusion: The Future of Tezos
Challenges and Opportunities
Tezos faces challenges, such as increasing competition from other blockchain platforms and the need to continuously adapt to the rapidly evolving crypto landscape. However, it also presents significant opportunities, thanks to its robust security features, on-chain governance, and commitment to innovation. By addressing these challenges and capitalizing on its strengths, Tezos can maintain its position as a leading blockchain platform.
Upcoming Developments
Tezos has an active development roadmap, with upcoming improvements and features focusing on scalability, privacy, and user experience. Enhancements like Tenderbake, a new consensus algorithm, and the ongoing exploration of zero-knowledge proofs will further strengthen Tezos’ performance and capabilities. Additionally, the platform will benefit from the ongoing growth of its ecosystem, as more developers, users, and partners join the Tezos community.
Long-Term Vision
Tezos’ long-term vision is to become a robust, secure, and energy-efficient platform for decentralized applications, catering to a wide range of use cases and industries. By continuing to prioritize innovation, governance, and sustainability, Tezos aims to play a significant role in shaping the future of blockchain technology and driving the mass adoption of decentralized solutions across various sectors. In doing so, Tezos will contribute to the realization of a more transparent, inclusive, and efficient digital economy.
Semantically Similar FAQs
Tezos differentiates itself from other blockchains through its self-amending feature, allowing seamless on-chain governance and protocol upgrades without hard forks. Additionally, Tezos uses the Liquid Proof-of-Stake (LPoS) consensus mechanism, which is more energy-efficient than Bitcoin’s Proof-of-Work and offers unique features compared to Ethereum’s current consensus mechanism.
Tezos’ Liquid Proof-of-Stake (LPoS) consensus mechanism offers several advantages, including energy efficiency, lower barriers to participation, and a more decentralized validation process. LPoS also enables the Tezos community to participate in governance and protocol upgrades, fostering a more democratic and inclusive ecosystem.
To become a baker, you need to hold a minimum of 8,000 XTZ and run a Tezos node with baking software. As a delegator, you can delegate your XTZ to a baker without transferring ownership, enabling you to earn rewards while supporting network security.
XTZ tokens can be purchased on various cryptocurrency exchanges, such as Coinbase, Kraken, and Binance. To store your tokens securely, you can use a hardware wallet like Ledger or Trezor, or software wallets like Galleon or Kukai.
Tezos hosts numerous projects and platforms, spanning areas such as DeFi, NFTs, gaming, and asset tokenization. Examples include QuipuSwap, Hic et Nunc, Tezos Domains, Equisafe, and Kolibri.
Tezos implements on-chain governance through a multi-stage voting process that involves the proposal, exploration, testing, and promotion phases. This self-amendment process enables the Tezos community to propose, evaluate, and adopt protocol upgrades directly on the blockchain without hard forks.
Developers can access resources like Tezos Developer Documentation, Tezos Agora, and Tezos training programs, such as Tezos Academy and Tezos Camp, to learn and develop their skills in building on the Tezos platform.
The Tezos Foundation supports the growth and development of the Tezos ecosystem by providing funding and resources to projects, developers, researchers, and entrepreneurs working on various aspects of the platform, such as protocol improvements, infrastructure development, and community initiatives.
