Tezos, or XTZ, is an incredibly interesting cryptocurrency. One that is wholly and truly different from any other available. It is not mined, nor is it a fork of an existing blockchain. The coin is based on its own unique codebase. While it does offer smart contract capabilities, similar to Ethereum and uses blockchain technology- much like bitcoin, that’s about as far as the similarities go.
Tezos aims to remain secure, decentralized, and scalable well on into the future of blockchain technology and all the growth and innovation that can be expected of this arena. Most notably though- it plans on doing so by using a census driven commonwealth model. Sound a bit confusing? For trading information and basic intros, check out your friendly newbie focused trading platform, like Bitvavo, for everything else- keep reading.
How Tezos Works
First launched in September of 2018, you shouldn’t be too disappointed in yourself if you haven’t heard of this particular crypto token. Partly due to the fact that the Tezos white paper was released in 2014, and it took until 2017 for them to put together their record-breaking ICO. But because of some pretty hearty disagreements between investors, the coins release date was regularly put off, which in turn put off much of the public’s interest in the token.
Tezos becomes useful in the way that it can offer Turing-complete smart contracts. What is set to impress is how Tezos goes about creating them. They use a domain-specific coding language called “Michelson” and instead of energy inefficient mining processes behind most proof-of-work systems, Tezos has developed their own proof-of-stake system called Liquid or LPoS.
The Tezos system utilizes “tezzies” or “a Tez” as their digital token. Tezos functions within two types of accounts: Implicit accounts, much like a bitcoin wallet, these accounts have public and private keys and can be used to move around Tez. The other type of accounts, known as originated accounts, are used for baking or for smart contracts.
LPoS, Baking and Commonwealth Ledgers
Where proof-of-stake (PoS) and proof-of-work (PoW) differ is how the blocks are created. Each is a way of creating a consensus over how the blocks are created. In PoW systems, nodes work to solve extremely difficult mathematical algorithms to validate transactions. In a PoS system, the creator of the next block is chosen at random.
Creators of blocks in Tezos are called “bakers”. Each block is baked at random and then notarized and validated by 32 other stakeholders, chosen at random. Tezos, like bitcoin, offers their bakers block rewards and transaction fees, so they can gain Tezzies for their work. To keep bakers honest, Tezos requires that a baker place a type of security deposit on their block- should anything be found left of center when that block goes to be confirmed by the other 32 bakers, the security deposit is lost.
In an LPoS system, bakers can delegate other bakers to cast their votes for them. Likewise, delegates can also elect delegates… Meaning that anyone who doesn’t have the time or desire to cast their vote can give that responsibility to someone else, without having to transfer ownership. Making the system far less rigid than other PoS systems.
The commonwealth ledger set up is maintained by on-chain governance and self-amending. Self-amending works by continually updating the blockchain without the use of hard forks. Developers submit amendment proposals and invoices for their protocol upgrades. The proposed upgrades are then given a testing period and the community can give feedback on how the new protocol is functioning. The original amendment can then be improved based on the critiques given and undergoes a second phase of testing.
Following the second phase of testing, the community can then vote on whether or not they want to see the new protocol implemented. If the yes vote takes it, the protocol is integrated as a soft fork and the self-amender is rewarded.
What Sets Tezos Apart
The ability to continue to upgrade and evolve alongside any newfound blockchain technology without having to undergo a hard fork is one of the most novel features that Tezos offers. Promoting open participation as network developers and consistent and constant upgrades. The Liquid proof-of-stake system assures that inherent flexibility stays consistent throughout all aspects of the network. Meaning that no one needs to participate or contribute any more than they would like. Or any less.
Using a PoS system over a PoW means that Tezos offers not only a more cooperative and innovative network but one that is quite a bit greener as well. This LPoS system also ensures the greatest degree of decentralization possible.
Using the specific programming language that Tezos does, they can often higher security with smart contracts, making the token quite enticing to critical industries. And in the arena of never-ending altcoins, the coin with the strongest niche is sure to win out.
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