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What is Tezos: The Definitive Guide

Posted by
Hristina Yordanova

The definitive guide to the Tezos blockchain and ecosystem

Tezos is an open-source, community-governed, energy-efficient Proof of Stake blockchain network capable of running complex smart contracts for asset settlement and decentralized applications (dapps) which benefit from censorship resistance, decentralization, and user-control.

Article updated (15th June 2021)

Making use of the Liquid Proof-of-Stake (LPoS) consensus algorithm, Tezos allows its bakers and delegators (a.k.a. validators) to earn rewards by delegating their XTZ without any lock-in or freeze mechanism. This gives the “liquid” nature to Tezos’s proof-of-stake implementation.

As the industry’s leading dapp analysis website, DappRadar is excited at the possibilities Tezos brings to the space. With its unique self-amendment feature, Tezos is able to adopt cutting-edge technology as it appears. Furthermore, with the facilitation of formal verification for smart contracts and the focus on security to the highest degree; Tezos is an increasingly important and relevant blockchain in the dapp universe.

A disruptive smart contract blockchain

One of the main goals of Tezos has been to be a fully sustainable blockchain with complete on-chain governance and a streamlined upgradability and self-amendment process. On-chain governance is something the community boasts as a huge step towards better decentralization; it allows users (specifically, bakers) to participate in the governance process and future technological evolution of the chain, without requiring hardforks.

The Tezos betanet was officially launched on June 30th, 2018 and later mainnet went live on September 17th, 2018. Since launch, Tezos has undergone 6 upgrades (with a 7th upgrade currently undergoing the governance process) which have made it an attractive platform for many use-cases; whether that’s for enterprises looking to build on a sustainable platform, artists looking to mint eco-friendly NFTs (cleanNFTs) without high energy requirements,  issuers wishing to tokenize assets on the blockchain, and much more.

Main characteristics

According to the official whitepaper, Tezos was created with the aim to consistently evolve and adapt – a well-defined and formal method to make amendments to the core protocol was key for that purpose. Tezos also focused on smart contract capabilities like other platforms such as Ethereum, while facilitating formal verification and focusing on security at the highest level. 

Because of its self-amending mechanism, the Tezos blockchain supports automatic and seamless updating. That means there is no need for hardforks in order to implement new developments. The democratic governance process also ensures that the community remains united regarding the future of the blockchain — which also prevents hardforks.

The governance and self-amendment process on Tezos includes the following steps:

  • A dev team injects the hash of a tarball file as a proposal into the Tezos Protocol with an invoice attached.
  • The injected proposal goes through 5 periods.
    • The first phase, known as the proposal period, is where bakers will vote and decide if the proposal is best for the protocol.
    • The second phase, known as the exploration vote period, is where another vote is made to move forward. During this phase, 80% of non-abstaining bakers are needed to vote “Yay” and proceed to the cool down period of the proposed changes.
    • The third phase, known as the cooldown period is where testing the protocol continues by using test chains that operate outside of the mainnet voting process.
    • The fourth phase, known as the promotional period, is where a final vote is cast on the proposed changes. During this final phase, if voted through with supermajority consensus, the new protocol will be added automatically with the new code and the protocol mints the tokens attached as an invoice in the proposal. If it does not go through, it goes back to the proposal phase.
    • The fifth phase, known as the adoption period, is where there is additional time for bakers and developers to update their infrastructure and code following the autonomous activation of the proposed changes.
Tezos

Tezos’ competitive advantage

Tezos is one of the most impressive early blockchain projects out there. While it is not part of the very first generation of blockchains like Bitcoin and Ethereum, Tezos benefits from the perspective of later development. Tezos has brought innovation to the blockchain space by drawing lessons from the drawbacks of already existing blockchains.

Because of its on-chain governance model, Tezos is able to seamlessly upgrade and add innovation on a regular cadence. In terms of speed, Tezos can output ~200 transactions per second, while Ethereum supports 15 transactions per second, and Bitcoin only 4,6. Tezos’ Proof-of-Stake mechanism also requires significantly less energy and cost to operate, making it an ideal alternative platform for building blockchain applications that are eco-friendly.

Last but not least, Tezos offers a thriving environment for the development of decentralized apps and DeFi solutions. The fast transaction speed, low gas fees and the self-amending features of the blockchain make it very flexible in terms of dapp development.

Numerous DeFi solutions, NFT platforms, decentralized identity applications, and more have been developed on top of Tezos. Some of the most notable examples include the NFT marketplace Hic et Nunc, token swap protocol Quipuswap, corporate baker Ubisoft, and RedBull Racing F1 building an NFT Fan Experience on Tezos.

Let’s talk about Tez (XTZ)

Tez, also referred to as XTZ, are the native Tezos tokens. Like other networks, the Tezos network is powered by a decentralized network of validators (known as “bakers” on Tezos) operating nodes. Tezos’ PoS-based mechanism allows for baking (staking) and features optional delegation, allowing any stakeholder to participate in consensus without giving up custody of their tokens. XTZ serves as the fuel for the network enabling the usage of dapps, DeFi protocols, minting of NFTs, and more.

There are currently about 848,876,636 XTZ tokens in circulation; for the latest circulation amount, visit tzstats.com.

Tezos founders and team

Arthur and Kathleen Breitman are the co-founders of Tezos. Previously, Arthur was a research engineer for Google X and Waymo. In his early career, he worked as a quantitative analyst for Goldman Sachs and Morgan Stanley. Arthur graduated from the École Polytechnique and the Courant Institute of NYU where he studied applied mathematics. He had experience working on projects for big names in the financial industry like Goldman Sachs and Morgan Stanley. Previously, Kathleen was a co-founder of Coase, a software company that aspires to lower transaction costs. She has also worked at Accenture, Bridgewater Associates, and The Wall Street Journal. was a senior strategy associate for R3, a consortium of more than 70 financial firms. 

The Tezos Foundation is a Swiss non-profit foundation that supports and fosters the Tezos protocol, which is a blockchain technology that evolves by upgrading itself. The Tezos Foundation Council consists of nine members, and its chair is Hubertus Thonhauser, who is also Co-founder and Managing Partner of Enabling Future.

A brief overview

Tezos is a remarkably versatile blockchain and one of the first and most mature energy efficient Proof of Stake blockchains with an emphasis on formal verification, security and on-chain governance that enables seamless and forkless upgrades.

Tezos is quickly becoming a preferred choice for dapp developers and seeing rapid growth in network activity, especially fueled by the surge in interest due to the recent NFT wave. Delivering on the idea of a completely independent blockchain that can develop and adapt on its own, Tezos is revolutionizing the way a blockchain can upgrade, evolve in a secure, autonomous and decentralized way.

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