Do you still remember the Initial Coin Offering or ICO boom? This is when thousands of other coins appeared and began raising money like wildfire. And Tezos was no exception, raising a whopping $232 million in July 2017.
Tezos went on to persevere the bear market and had a strong year in 2019 which saw the Tezos price breakout to all-time highs of $3.80 in February 2020.
What is Tezos and how does Tezos work?
Tezos is a smart contract and decentralized application platform.
Smart contract is a decentralized contract with the terms of agreement written directly into the code's line. Once the term of the agreement are met, the smart contract can execute based on what is already included in the code.
Smart Contracts are allowed to transact without the use of a third-party. These transactions are trackable and irreversible.
Tezos has its own native contract language called Michelson.
Michelson facilitates formal code verification by mathematically proving the properties of a program such as smart contracts. This sounds a bit circular, but the security improvement helps avoid costly bugs and contentious debates.
Differences of Tezos to other networks
One major difference between Tezos and other smart contract platforms such as the popular Ethereum network, is that it is secured and ultimately managed by Tezos Bakers.
Tezos Bakers are similar to miners in the Bitcoin or Ethereum network. They secure the network, verify transactions, and distribute block rewards.
Instead of using an expensive hardware to mine the blocks, the procedure is done by Tezos Delegated-Proof-of-Stake or DPoS.
According to stakerewards.com, Bakers earn about 6.37% annually. Tezos (XTZ) holders can qualify to be a Baker as soon as they have 8,000 XTZ, otherwise known as a roll in the Tezos lexicon.
Staking Tezos
If you don't have 8,000 XTZ or don't want to deal with the complexity of Baking, you can still benefit from Tezos staking.
Tezos cryptocurrency holders can also delegate their coins to a Baker and earn between 5-6% per year for Tezos staking, making it one of the highest returns on investment amongst staking coins in cryptocurrency.
But Tezos (XTZ) is more than just a Proof-of-Stake blockchain. Tezos want to be completely upgradable and modular with no needs of any hard forks. And this means that the blockchain of Tezos can make changes in the network without splitting into another chains.
Tezos attempts to solve for disagreements that lead to splits by letting network participants, the bakers, decide on protocol changes via 4 different voting periods.
Only the bakers can cast the vote, so if you delegate XTZ to a baker and don't agree with their stance, you can delegate to a different baker who aligns more with your values. In other words, bakers who don't vote in alignment with the views of those who have delegated their tokens to them, get punished with reduced delegation power as stakeholders delegates elsewhere. This is why Tezos governance is called Delegated-Proof-of-Stake.
In traditional Proof-of-Stake systems, each individual token holder can participate in the governance process. However, with Tezos, bakers cast votes on behalf of the delegated XTZ.
Bakers are also the only Tezos network participants who can propose a protocol upgrade.
How does Tezos voting works?
Tezos voting has 4 phases;
Proposal period
Exploration period
Testing period
Promotion period
The first phase of voting is the proposal period.
Any baker can submit a proposal upgrade or alter the Tezos network.
The most well-received proposal then moves into the exploration period.
If the proposal gets enough votes there, it moves to the testing period.
A testnet is created for each proposal in the testing period to ensure that the proposal is safe, secure and functions properly. A testnet is essentially a sandbox to see the proposed features in action before deciding if they're worth making a part of the protocol.
The fourth and final stage is the promotion period, where if the proposal receives enough votes in the testing period, it is then deployed to the Tezos mainnet. This period requires participation from at least 81.39% of XTZ rolls, which ensures that a majority of the network participants are both participating and in favor of the proposed upgrade.
As you can see, decentralized decision making is a fundamental part of the Tezos network.
You may be asking yourself, this sounds really complicated, does it even work? And the answer is YES! Let's have an example;
In 2019, a Tezos developer group by the name of Nomadic Labs proposed that holders should only need 8,000 XTZ to become a baker as opposed to the initial requirement of 10,000 XTZ. This proposal, dubbed Athens A, initially surfaced in February 2019 and took over 3 months of onchain voting before the community ultimately decided to push this proposal to mainnet, a monumental moment for both Tezos and the cryptocurrency community at large.
Image source : semitri.cryptobriefing.com
Article by: @Learnerer1998
Which do you think is better? Tezos or Algorand?