Abstract

Tezos is a blockchain project that is unique in upgrading the network’s built-in governance mechanism. Changes to the Tezos blockchain are proposed through code proposals by users holding a certain amount of Tez (XTZ), and other users then vote on them. Because Tezos is self-amending, network upgrades occur seamlessly and do not require a hard fork.

Introduction

In the field of cryptocurrency, smart contract platforms are the sector with the most participants and the most fierce competition. Solving current technical problems is crucial to the development of the industry. In order to meet the huge demand for base-layer smart contract infrastructure, many solutions have emerged.

Tezos has become the foundation of a passionate global organic community, making it a prominent player in the blockchain space. Tezos’ Tez (XTZ) token is used by a growing ecosystem of users engaged in decentralized finance, art, gaming, and more.

What is Tezos (XTZ)?

Tezos is a blockchain that supports and executes decentralized applications and smart contracts. Its initial design plan came out in 2014, and the Tezos mainnet was launched in 2018. It has achieved steady growth and has become a strong competitor of the Ethereum network.

The Tezos ecosystem is supported by several businesses around the world, including the Tezos Foundation, a non-profit Swiss organization responsible for driving awareness and adoption of the Tezos blockchain.

Tezos held a fundraising event in July 2017, raising US$232 million, becoming one of the largest fundraising events for blockchain projects in history. In 2018, the Tezos mainnet was successfully launched and flourished in the bear market.

How does Tezos (XTZ) work?

Smart contracts on Tezos use Tezos-specific Michelson programming language and are usually written in higher-level languages, such as SmartPy, Ligo or Archetype compiled into Michelson. When transacting in the network, users pay a gas fee, settled in Tezos’ cryptocurrency Tez (XTZ).

Tezos is a proof-of-stake (PoS) blockchain. Technically, it uses a variation of PoS called Liquid Proof of Stake (LPoS), an implementation unique to Tezos.

Users with more than 6,000 Tezos holdings can become delegators. They are called "bakers" and can create, sign and publish new blocks to the Tezos blockchain, and Endorse blocks created by other bakers. In addition, if the token holder has less than 6,000 Tez or is unwilling to set up the required hardware himself, he can entrust the tokens to other bakers.

Importance of Tezos (XTZ)

Compared with other smart contract platforms in the blockchain field, Tezos has some unique features place.

Tezos’ on-chain governance and self-correction mechanisms are designed to build consensus around blockchain upgrades while also allowing upgrades to occur without the need for a hard fork. Think of the experience of Bitcoin's famous hard fork "Bitcoin Cash", Tezos is committed to avoiding such a situation.

Due to its self-amending capabilities, Tezos can easily adapt to changing regulatory regulations and technical environments. Tezos was able to implement the upgrade and continue without excessive disruption, even replacing basic components such as the consensus mechanism that occurred during the Ithaca 2 protocol upgrade. In contrast, Ethereum 2.0 is a huge leap forward for Ethereum, but its essence is to reinvent an independent blockchain.

Tezos (XTZ) governance method

The upgrade of Tezos is implemented through the on-chain governance model. Blockchain change proposals are submitted by delegators in the form of code upgrades, and token holders can vote to approve or reject the changes.

Under this on-chain governance model, major upgrades can occur at any time as long as the principal approves the proposed change to the blockchain. This could involve system changes such as modifications to fees or baking processes, or even fundamental elements like the consensus algorithm! This has also given rise to a prosperous community, with members actively participating in discussions on various changes and new rules, allowing the system to continue to improve.

For example, in April 2022, Tezos implemented the Ithaca 2 upgrade, replacing the Tezos consensus algorithm with "Tenderbake", an algorithm modeled after Tendermint and pioneered by the Cosmos protocol. In November 2020, Tezos underwent a Delphi upgrade that reduced fuel costs by approximately 75%. These upgrades are of great significance to the development of decentralized finance (DeFi) in the Tezos blockchain. They also show that on-chain governance can flexibly adapt to new development directions, and even make the grand idea of integrating the entire blockchain industry possible.

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Tezos (XTZ) use case

Similar to other blockchain networks, Tezos only requires a minimum level of trust , to quickly verify financial transactions.

In September 2019, the French Gendarmerie Cybercrime Department (C3N) became the first government agency to use Tezos to verify judicial fees.

Tezos can also be used to transfer ownership of illiquid assets such as real estate, art, jewelry, etc. For example, a company called MountX is tokenizing real estate in Mexico with the help of Tezos.

The Tezos NFT ecosystem is particularly popular, attracting the attention of major brands such as Manchester United, Ubisoft, Redbull Racing, and McLaren.

How to store Tezos (XTZ)

Tez (or XTZ tokens) can be stored in common wallets, including Software wallets such as Trust Wallet.

Tez can also be stored in hardware wallets such as Ledger or Trezor through third-party software.

If you are interested in staking Tez, you can learn about Binance Financial’s staking products.

Summary

Although the network activity of the Tezos blockchain is The development enthusiasm of DApp cannot be compared with that of Ethereum, but this is not because it is mediocre.

It uses a unique dynamic upgrade and on-chain voting method, which is more flexible than most competitors. In the long term, this can translate into huge advantages.

Tezos attracts an organic community of creators who value the decentralized nature of the network, energy efficiency, and emphasis on user control.

Tezos has proven its practicality and resilience, making it attractive to government and industry customers.