If the blockchain does not have a controlling center, there is no person or organization with absolute right to voice, and everyone can uphold their own opinions. Without an effective decision-making mechanism, it is easy for the community to be consumed by various fearless disputes and disagreements. Therefore, how to make decisions and reach consensus in an organization has become a very important topic.
Governance is a mechanism that helps blockchain organizations make decisions and execute decisions.
The second reason is that the blockchain is basically a distributed ledger supported by a software system. Any software will have the possibility of bugs, and it will inevitably produce the need to update and upgrade over time with environmental changes. The software in the blockchain network is distributed on node servers around the world, and upgrading means that all nodes need to agree and synchronize. Therefore, how to make distributed nodes upgrade the ledger uniformly, and how to upgrade is another governance issue that requires consensus.
It can be said that governance is an important means to help the blockchain realize its own evolution.
Many blockchain projects after Bitcoin and Ethereum have recognized the importance of governance in blockchain projects, and have also conducted a lot of exploration in governance, and put forward many ideas for blockchain evolution.
TEZOS is a very representative blockchain star project in this exploration process. Its most important concept is to rely on governance to realize the evolution of the blockchain, avoid losses similar to the bifurcation of the Bitcoin-based blockchain, and achieve the goal of better survival and development.
Therefore, the second topic we want to analyze is the self-evolutionary concept of TEZOS.
TEZOS's self-evolving concept
First, what kind of blockchain is TEZOS?
1. TEZOS is a public chain smart contract platform capable of self-upgrading and evolution. It can achieve the upgrade of distributed ledgers and the self-evolution of blockchain protocols by modifying the software code. This is the biggest feature of TEZOS.
2. The principle of evolution is realized through a set of governance mechanisms. It defines a set of basic agreements on how stakeholders agree to upgrade the blockchain in a programmatic way. The scope of the upgrade in the definition includes both the modification of the software code itself and the procedure for voting on the modification. The content that can be evolved in the TEZOS system is not only the blockchain software, but also the decision-making methods and operating procedures for software upgrades.
Together, they constitute the governance mechanism of TEZOS.
3. The logic of self-evolution is: the first TEZOS provides an initial version of the basic framework or prototype of the blockchain. Its function and design may take into account the needs of the initial period, or the most important needs in the TEZOS concept, which can be understood as Version 1.0; second, in the subsequent use process, with the development of the blockchain and changes in people's needs, higher requirements will be put forward on the system capabilities of TEZOS. When version 1.0 cannot adapt to new changes, it can be used The advantage of TEZOS in the self-evolving solution is to improve the system capabilities by upgrading the TEZOS blockchain to achieve the goal of self-evolution as the situation changes.
How exactly does TEZOS achieve the goal of self-evolution?
The governance mechanism of TEZOS is how to determine how stakeholders agree and implement the blockchain upgrade mechanism. Firstly, we need to clarify the stakeholders through the consensus mechanism of TEZOS.
1. LPOS consensus mechanism:
The TEZOS consensus adopts a proof-of-stake POS, which determines the right to speak in the network based on the number of coins held.
Holding a full 8000 XTZ coins, that is, a roll, will meet the conditions for becoming a block producer. The block producer of TEZOS is called a baker .
Among the many bakers who determine the block producer of each block, the decision is made through a random algorithm. Block producers are elected once in each production cycle, and 4096 blocks are produced in each cycle, which takes approximately 2.84 days. Before the start of the cycle, determine the block producer of the next block, and at the same time, it is necessary to determine 32 validators to endorse the consensus of the new block.
The probability of block producers and validators being selected is positively related to the number of rolls owned by the baker. The more coins they hold, the greater the probability of being selected.
Both the blocker and the certifier are rewarded for their due diligence and the reward comes from additional issuance of the system. The current ratio is 4.96% per year.
TEZOS has no restrictions on the number of block producers and validators, but not all coin holders have the ability to become baker. For token holders who cannot participate in the block production, TEZOS adopts the mechanism of entrusted agent DPOS, so that all token holders can delegate their XTZ to other bakers, and act as their own agent to exercise the rights of block generation and verification. Enjoy the rewards generated during the block production process.
However, TEZOS's DPOS is fundamentally different from the DPOS adopted by EOS and other projects.
The fundamental purpose of the first TEZOS proxy agent is to encourage all token holders to participate in block production and network construction, and achieve the greatest possible decentralization. The fundamental purpose of EOS DPOS is to select 21 super nodes to exercise the block-producing rights of the entire network.
So, what is entrusted to the validator is the production equity of the token, but the liquidity of the token is not locked. In other words, in the TEZOS system, token holders who entrust XTZ can enjoy the benefits of block production and verification, but the liquidity of XTZ is still in your wallet, and you can even transfer XTZ out. Therefore, TEZOS's DPOS is also called LPOS.
According to the governance mechanism of TEZOS, an upgrade of the underlying protocol requires 3 validator votes, 48 hours of testing, and 20 days of evaluation. It takes 32 cycles and about 90 days before it can finally be deployed to the main network.
From the governance process, we can see that the governance of TEZOS is that the main body of decision-making is the validator in the network, which needs to pledge a certain amount of currency and register as a validator. That is to say, only those token holders who agree with the long-term development of the project and actively participate in the construction of the system are qualified for governance. This is also in line with the interests of long-term development of the project.
The governance mechanism of TEZOS allows long-term stakeholders to automatically make decisions and implement system upgrades through a set of standardized standards and procedures.
Because of the evolvability of governance, the decentralization of the blockchain network, the balance and stability of the macroeconomic structure, and the precise verification of the formalization of smart contracts, the TEZOS blockchain is known for its security and stability. , Precise characteristics, has become the irreplaceable best choice for large financial institutions to carry out securities tokenization (STO).
Today, financial institutions that have issued securities tokens STO on TEZOS include New York asset management company Elevated Returns, Latin America’s largest private investment bank BTG Pactual, Dubai asset management company Dalma Capital, British real estate developer investment company Alliance Investments, and German blockchain Technology company Fundament, digital asset software provider Vertalo, Overstock's securities token trading platform tZERO, etc. The amount of STO deployed and executed on TEZOS has reached USD 3 billion. Tezos has become the best smart contract platform for securities tokens and other high-value, high-complexity use cases, and is emerging as a prominent leader in the STO field.