What is Tezos (XTZ)? How does it work?

Tezos is a unique smart contract platform that eliminates the need for hard forks, allowing for self-upgrades and addressing blockchain weaknesses.

Continuing our series of articles on Coins and Tokens by AZCoin. Today, let’s explore Tezos (XTZ) together.

What Is Tezos (XTZ)?

Tezos lets XTZ token holders vote on network changes. Once a consensus is reached, the software updates all nodes automatically, giving users control over Tezos’ future.

This governance system boosts user satisfaction and reduces the risk of hard forks.

Tezos introduced a new model dividing cryptocurrencies into “on-chain governance” and “off-chain governance.”

Tezos gained public interest in its innovative approach, evident in its successful 2017 funding round. It was launched in 2018.

How does Tezos work?

Tezos differs from other cryptocurrencies in how it operates. It has two main parts: the network shell, which handles transactions and adjusts itself based on user votes, and the network protocol, which submits proposals for review.

Tezos uses a unique version of proof-of-stake called liquid proof-of-stake (LPoS). Users can stake XTZ by “baking” them to participate in block creation. To become a baker, one must have 8,000 XTZ tokens.

Bakers play a crucial role in governing the blockchain by voting on proposed code changes from developers. The voting period lasts for 4×23 days.

History of Tezos

The concept of Tezos was conceived in 2014 by Arthur Breitman and Kathleen Breitman, who initiated the project with a team of core developers. The company is based in Switzerland.

During its initial coin offering (ICO), Tezos raised an impressive $232 million within a span of just 2 weeks, accepting contributions to both Bitcoin and Ether. Following this highly successful ICO, Tezos encountered numerous management challenges.

Contrary to expectations, the funds from the ICO were not held by the company that owned Tezos, DLS (Dynamic Ledger Solutions), but by a new entity named Tezos Foundation. Issues arose when the head of Tezos Foundation hesitated to release the funds to the co-founders of Tezos. Despite facing significant negative publicity, the situation eventually resolved, allowing the project to proceed as planned.

What Makes Tezos Unique?

Tezos aims to establish itself as a blockchain with the most rewarding structure globally.

What sets Tezos apart from other cryptocurrencies is its dual nature of being decentralized and self-governing. The automatic upgrades and updates further distinguish Tezos, allowing network participants to vote on proposed changes, making it an ideal platform for crypto fans.

What Gives Tezos Value?

Tezos gains its value from both the XTZ token and the businesses that opt for Tezos to tokenize their assets.

The XTZ token plays a crucial role in running the Tezos network, allowing users to hold, transfer, use, or bake it. Through owning and baking XTZ, users can participate in voting for network improvements, which is highly beneficial for the Tezos community.

Various companies like Securitize, Elevated Returns, BTG Pactual, and tZero have chosen Tezos as the platform to tokenize their assets, forming valuable partnerships for the network.

Other Technical Data

Tezos (XTZ) bakers play a crucial role in shaping the network’s future through a special voting system.

This system involves four distinct voting phases, each lasting 23 days:

• Proposal Period: Any baker can suggest changes to how the network operates. The proposals with the most votes progress to the next phase.
• Exploration Vote Period: Proposals with at least 80% positive votes advance to the next stage.
• Testing Period: The proposal is tested on a temporary network fork to ensure functionality and safety for the main blockchain.
• Promotion Vote Period: A final vote decides if the proposal will be added to Tezos’ source code. An 80% or higher approval is required for passage.

Bakers may receive rewards for beneficial proposals by including an invoice with their submission. If their proposal successfully passes all four stages and gets implemented, the invoice will generate a specified amount for the baker.

Security of the Tezos network

Tezos operates on a decentralized blockchain network, which means there is no central database or single point of failure. Even if a hacker tries to breach the system, changes cannot be made without agreement from the stakeholders.

To ensure user data remains protected, Tezos employs cryptographic encryption. It utilizes a customized Proof of Stake (PoS) system called Liquid Proof of Stake (LPoS), which enables users to easily move their stake between nodes, promoting better behavior from delegated baker nodes.

How To Use Tezos?

Although the Tezos blockchain hasn’t been fully utilized, it has gained some level of adoption. Developers interested in launching decentralized applications may find this project appealing. Examples like tzBTC and Tezsure have successfully developed their applications on the Tezos platform.

Currently, the main purpose of Tezos is as a staking currency, offering the opportunity for stakers (referred to as “bakers” in Tezos) to passively earn more Tezos XTZ tokens. It can also serve as a speculative investment and a means of payment.

Where can I buy and trade Tezos (XTZ)?

You can acquire XTZ coins by purchasing Bitcoin (BTC), Ethereum (ETH), or Tether (USDT) on exchanges that support XTZ trading. Holding BTC, ETH, or USDT allows you to then purchase XTZ. Check out the best crypto exchanges 2024 to choose platform for trading.

Summary

Through this article, you have gained some basic information about the project to make your own investment decisions. To ensure a secure investment, review the Evaluation Process on AZCoin. We wish you success and hope you make a lot of profit from this potential market.