A Simple Guide to What is Tezos (XTZ)

There is one crypto project that drew attention through its innovative and remarkable consistency, even when all cryptocurrencies plummeted – Tezos. 

And, all things considered, the community expects Tezos to fight its way up and have the XTZ surpass Ripple and Ethereum. 

What is Tezos?

Tezos is a smart contract and dapps platform built on an up-to-the-top original blockchain. The network uses tezzies (XTZ) to incentive bakers and runs its operations. 

It was released at the end of 2017, and it had one of the most successful ICOs ever, raising $232 million.  

While there already are similar successful projects like Ethereum or EOS, Tezos aims to be the first self-­amending blockchain solution. Also, its protocol has the ability to evolve and implement new innovations over time without the risk of experiencing a hard fork.  

The network uses a delegated proof-of-stake mechanism. It prioritizes security through formal verification and mathematically proves the correctness of a smart contract’s code. 

Even more, in the Tezos environment, developers are able to come up with propositions for protocol upgrades. The propositions are reviewed and voted on by token holders and if implemented, the developers will be actually rewarded for their contribution.   

The idea of Tezos came to Arthur Breitman. Together with his wife, Kathleen Breitman, Arthur believed that the future of cryptocurrencies should be based on unity and commonwealth rather than disputes, community splits, and ever-launching coins. 

In 2015, the Breitmans tried to convince several banks to adopt the technology Arthur proposed and raise $10 million in two or three years. It didn’t work out, but in 2016, they managed to conduct an ICO and get $612,000 from 10 early bakers. 

Arthur and Kathleen decided to hold the Tezos ICO in Zug, Switzerland. And to meet the requirements of the Swiss Civil Code, they established the Tezos Foundation, with Johan Gevers as president.  

So, in July 2017, Tezos managed to gather $232 million, but the continuation of the project and token issuance were delayed due to the falling out between the Breitmans and Gevers. 

The delay drew with itself a series of lawsuits that got Tezos in legislative troubles with the U.S. Securities and Exchange Commission.   

In 2018, the internal struggles were sorted out, and Gevers was dismissed. When the project was about to retake its course, it unexpectedly announced the implementation of Know Your Customer/Anti-Money Laundering checks for contributors. The Tezos KYC was met with a negative reaction from the community. 

But finally, the beta network was launched at the end of Q2. And even if 2018 was rather bearish, Tezos kept its value quite stable and continued improving and developing. Moreso, in the bull from the beginning of 2020, the tezzie tripled its value. 

Tezos Amendament Process 

Tezos inner core is made up of amendments. The project is structured in such a way that a roadmap is unnecessary because all information about what is coming up for Tezos can be found in its governance process and forums. However, any update to Tezos will be posted as an amendment with all its features and upgrades.  

There are nine amendments up to this point. And they are as follows:   

Athens – was the first proposed protocol adopted in February 2019 by the development team Nomadic Labs, which intended to increase the gas limit and decrease the roll size necessary to bake from 10K Tez to 8K Tez.   

Babylon – the second amendment was implemented in October 2019, bringing notable changes such as a new consensus algorithm variant (Emmy+), the addition of new Michelson features to aid smart contract developers, an account rehaul that enabled clearer distinction between TZ and KT accounts, and refinements to the quorum formula and the addition of a 5% proposed quorum threshold.  

Carthage: In March 2020, a proposal was activated that includes raising the gas limit per block and operation by 30%, improving the correctness of the formula used for computing baking and endorsing incentives, and making various small improvements to Michelson.   

Delphi – the protocol was automatically triggered in November 2020, which includes enhancing the performance of the Michelson interpreter, lowering gas prices by modifying the gas model, lowering storage costs by 4x, and a variety of other slight adjustments.   

Edo – went live in February 2021 and brought two key capabilities to smart contracts. Sapling and BLS12-381 will work together to allow privacy-preserving smart contracts and tickets for native on-chain permissions and asset issuance. Edo has been changed through the Tezos amendment process by shortening the period duration to 5 cycles and adding a 5th Adoption phase.   

Florence – in May 2021, the amendment aids in optimizing gas for smart contracts and improving smart contract interoperability by switching inter-contract calls to depth-first ordering rather than breadth-first and eliminating test chain activation.   

Granada – implemented in August 2021, which assisted with minimizing gas expenses, reducing Tezos’ block duration from 60 seconds to 30 seconds, and introducing liquidity baking, which entails utilizing a part of all XTZ block rewards to give liquidity to Tesla’s d5 protocols.  

Hangzhou – appeared in 2021, providing security against transaction failure, enhanced smart contract interoperability, improved blockchain storage, lower gas expenses, and increased liquidity banking.   

Ithaca – the most current amendment in which XTZ holders have voted for the name was implemented in April 2022. Ithaca includes essential enhancements, such as updating Tezos’s consensus algorithm to offer quick finality to Tesla’s blockchain. This means that Tezos transactions will be confirmed practically quickly rather than waiting x number of blocks before being deemed irrevocable.   

Tender Bake is a new consensus mechanism introduced by Ithaca that will speed up exchange deposits and withdrawals of XTZ. Ithaca will also abandon Tezos’ role-based paradigm, which is now employed for both staking and governance, in favor of regular proportional staking, and a token equals one vote quorum.   

In addition, the minimum XTZ a baker must place in the oven will be decreased from 8K to 6K, and delegates will be obliged to lock up at least 10% of their assigned XTZ for the same 14-day period as bakers. 

Is it mineable? Tezos staking

As mentioned above, Tezos has a delegated proof-of-stake (DPOS) consensus mechanism. It means people can stake their tezzies to earn more tokens.  

In Tezos, staking is called “baking” as a metaphor for creating new blocks. 

The creation of a new block requires one baker and 32 endorsers. The baker is the one that is actually chosen to create the block, the one who will receive a 16 XTZ reward for completing the task. On the other hand, the endorsers are the accounts chosen to verify if the block was baked correctly, and for completing the task, each baker gets 2 XTZ. 

Whether you want to bake or endorse, you need to set up a baking node. To set up a Tezos baking node, you will need at least one roll consisting of an 8,000 XTZ minimum stake.  

The more XTZ, a baker, is staking, the more chances he has to create and endorse new blocks. 

If you do not want to set up a node or don’t own enough tezzies, you can also delegate your XTZ to a baker.  

Most Tezos wallets support delegating, so to start earning more tezzies, you only need to transfer your funds to a wallet and delegate to a baker. You can find a list of delegates on mytezosbaker.com.   

The first thing you need to know about delegating is that most delegates require a fee. Also, the efficiency differs from one baker to another, and the annual yield is around 5-7%. 

“Giving my funds to some stranger so he can stake? Too risky…Not happening!” or so you may think. The good thing about Tezos DPOS is that Delegation is non-custodial thus, the baker cannot use or steal the XTZ you delegated, and you can retract your funds safely. The downside is that the delegate has control over profits, and if he’s a crook, he may, however, steal the earnings. 

That’s why it’s important to do your research before choosing a baker. Additionally, on MyTezosBaker, you can find a list of blacklisted bakers. 

Furthermore, you can delegate directly through some trusted exchanges (Coinbase, KuCoin, or Binance). 

Tezos dapps and smart contracts

Before everything else, Tezos is a platform for dapps and smart contracts, which can be compared in several aspects to Ethereum. It is meant to host assets and applications backed by a global community of validators, researchers, and builders. 

Tezos comes to satisfy the demand for a blockchain platform that is suitable for security tokens based on real-world assets such as real estate, equity, or bonds. Through automation, it is supposed to bring improved cross-border settlements with reduced counterparty risks and liquefy assets in real time. 

Some of the most successful STOs deployed on Tezos are tZero, Alliance Investments, Elevated Returns, and Securitize. 

The smart contracts on Tezos can be written in six native smart contracts languages: Michelson, SmartPy, LIGO, Morley Framework, Archetype, and Formal Verification.   

Michelson is stack-based, with high-level data types and primitives and strict static type checking. It allows users to confirm the properties of a smart contract through a formal verification process.  

SmartPy is a full toolset for creating Tezos blockchain smart contracts. SmartPy is an integrated Domain Specific Language (DSL) in Python that allows users to develop and execute test scenarios to validate their smart contracts. Python is utilized in this example to produce programs in SmartML, an imperative language.  

LIGO is a simpler smart contract language developed for creating more-complex contracts than those written with Michelson. Initially, it was meant to be a language for developing Marigold on top of a hacky framework called Meta-Michelson. However, due to the attention received by the Tezos community, LIGO is now a standalone language being developed to support Tezos directly. Because it’s implemented for the Tezos blockchain, LIGO compiles to Michelson.   

Morley Framework is a set of initiatives that build on and complement one another, including Morley, Lorentz, Indigo, and Cleveland.   

Morley is a Haskell-based meta-programming framework for Michelson smart contracts. In Haskell, Lorentz is a Michelson-compliant stack-based embedded Domain Specific Language (eDSL). Indigo is an eDSL high-level language used to create Michelson contracts. It, like Lorentz, fully utilizes Haskell’s type system to assure safety, expressiveness, and reusability. Cleveland is a Haskell package that is used to test Michelson contracts. Cleveland makes it simple to load a contract from a disk, initiate it, transmit XTZ, verify its storage/balance, call its entry points, and determine whether it failed with a specific fault, among other things.  

Archetype‘s 5th language is a Tezos DSL (domain-specific language) that promotes formal verification and transcodes contracts to SmartPy and LIGO.   

And formal verification is described as the act of utilizing formal definitions to ensure that a program meets particular requirements. On the other hand, programmers now build unit tests to confirm that software adheres to specified specifications. However, the unit test technique may be unable to cover all conceivable inputs (or edge cases), resulting in software failure. The answer to this difficulty is formal verification, which entails creating mathematical definitions of the program.  

Tezos vs Ethereum

When it comes to smart contracts and dapps, Ethereum is the market leader. But the Dao incident and the millions of dollars lost in transactions because of faulty programming inside ERC smart contracts inspired Arthur Breitman to push forward with Tezos.  

Updating Ethereum also takes a hard fork, which puts a strain on the community by making the switch from the old version to the new version. So Breitman proposes a platform with on-chain governance via the self-amending mechanism.  

Also, mining for ether became extraordinarily difficult, with a cost for energy consumption that surpasses the possible profits. Therefore, in recent years, many made the switch to proof of stake, which is mainly monopolized by big Ethereum pools. That’s why the delegated proof of stake baking system was essential to Tezos.

Ethereum vs Tezos – Comparison Table

On the other hand, Ethereum is preparing to roll out a substantial update in 2022– the Merge of Beacon Chain with Ethereum mainnet. And between many new features, the Merge will come out with Shard Chains and a full switch to the Proof of Stake consensus mechanism. 

Tezos vs Ripple

But before challenging Ethereum’s token, Tezos would first tackle Ripple’s XRP. 

Ripple is an unusual case in the cryptocurrency community. The company’s objective is to solve the issue of expensive and long-lasting cross-border payments, especially for the enterprise sector. 

XRP doesn’t use blockchain but a distributed consensus ledger operated by a network of validating servers called Gateways. 

Sidenote. XRP Ledger Gateways are businesses that provide a way for money and other forms of value to move in and out of the XRP Ledger network. Gateways can be banks, money service businesses, currency exchanges, or other financial institutions. 

Ripple vs Tezos – Comparison Table

Looking at numbers, it’s easy to deduce that Ripple holds quite a consistent payment solution, far superior to what Tezos has. It only remains to see what updates Tezos will roll out in the payments area. 

Key Takeaways

• Tezos is a smart contract and dapps platform. It uses the delegated proof of stake mechanism and incentivizes its miners with tezzies (XTZ). 
• Tezos does not have a roadmap, and each update is called an amendment. There are nine amendments so far, with more to come.  
• Every amendment brings new features and updates and makes the Tezos more innovative. 
• In Tezos, miners are called bakers, and they can be chosen to either create new blocks or endorse created blocks.  
• Baking requires at least one roll that consists of an 8000 XTZ minimum stake. People that don’t want to open a node can delegate their XTZs to existing bakers. 
• Tezos comes to satisfy the demand for a blockchain platform that is suitable for STOs based on assets like real estate, equity, or bonds.  
• Users can write smart contracts in the Tezos environment using the Michelson, SmartPy, LIGO, Morley Framework, Archetype, and Formal Verification. 
• Tezos makes up for the shortcomings of the current version of Ethereum, but Merge changed Ethereum’s roadmap.
• As a payment solution, Ripple holds a superior position to Tezos, and it’s hard to say if the XTZ will surpass XRP. 

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