You might already be familiar with the Tezos project due to its widely successful ICO in July 2017, during which the Tezos team managed to attract $232 million worth of Bitcoin and Ethereum, setting a record at the time of the ICO. In case you missed the hype, Tezos just recently landed on the radar as it entered the cryptocurrency top 20 with a market capitalization above the $1 billion mark.
The Tezos team has a clear vision. Numerous cryptocurrencies and blockchains are highly inefficient, yet many different approaches are necessary if we want to find the best model. They incorporated this idea into Tezos, a platform that allows for smart contracts and dapps to be built on top of it but is continuously being developed by its community to iron out any flaws.
It is the world’s first self-amending cryptocurrency and blockchain platform and therefore, the team playfully dubs its digital asset “the last cryptocurrency.”
Since the Tezos ICO, it hasn’t been all smooth sailing for the team. Various legal conflicts and community concerns led to negative press and continuous delays—however, the team seems to have figured out most of the issues and recently launched the beta version of the Tezos network. In this article, we fully explore the Tezos blockchain project in its current state.
What is Tezos?
As stated on the Tezos website, Tezos is formalizing blockchain governance in which stakeholders govern the protocol. What this distills down to is that Tezos is a new platform for smart contracts and decentralized applications.
On this platform, there is a specific focus on Tezos network members—the project aims to let Tezos token holders fully govern the platform and improve the quality of the ecosystem. Tezos has set out to establish a true digital commonwealth, a network in which all people involved can let their voices be heard and have a shared loyalty.
Tezos essentially is a blockchain platform, putting it in the same category as Ethereum, NEO, and EOS. Where it differs is the governance system Tezos employs.
Tezos has designed a process that enables continuous upgrades of the Tezos protocol through on-chain governance. This allows for the Tezos process to incrementally increase over time, instead of radical changes every now and then that could lead to hard forks, which are basically splitting the network. Tezos is firmly against hard forks and envisions a platform that doesn’t have to go through a hard fork as it’s continuously upgraded based on its users proposals and votes. Any parameter of the Tezos protocol can be changed by the network.
To upgrade the platform, developers independently submit proposals for protocol upgrades. These proposals also include the expected compensation a developer desires for developing and releasing the specified upgrade. Tezos token holders can vote on these proposals and if they are approved, the proposing developers can start working on their upgrade.
The funds are kept in escrow by the Tezos protocol and are distributed once an approved upgrade proposal is implemented. Since the developers are decentrally compensated, they can work independently and continuously as long as they have the community’s approval. The protocol is designed to incentivize its own progress.
Formal Verification Smart Contracts
Tezos has its own smart contract programming language called Michelson. This functional language is specifically designed to facilitate the creation of smart contracts on the Tezos blockchain.
Michelson has been employed to enable formal verification of smart contracts. In this context, formal verification is a technique that mathematically proves the correctness of the code governing transactions. This means that users can proof the properties of their contract and thus significantly increases the security of sensitive or financial smart contracts.
Formal verification methods are often used in engineering processes with little room for error such as aircraft design and nuclear development. The fact that there is a need for such a formal verification process is signalled by smart contracts failures such as the DAO hack last year and the recent Batch Overflow error for several ERC-20 tokens.
Because of Tezos’ governance model, the language can continuously change according to the wishes of the Tezos community. You can learn everything about the Michelson language here.
To achieve consensus on the platform, Tezos employs the delegated Proof-of-Stake algorithm. Because DPoS allows for virtual mining, instead of physical mining such as with Bitcoin’s proof of work, it is a highly energy-efficient consensus protocol. Each token holder can be part of the mining process of Tezos, either as a delegate or as a voter for delegates.
If a user decides to vote for a delegate, this means that that delegate now controls your vote to vote for proposals. This makes the governance process more efficient and puts community pressure on the delegates to perform according to the interests of the network.
Misuse of power of a delegate would lead to votes vanishing for that delegate. Unlike other DPoS projects, there is no upper limit to the number of Tezos delegates. Anyone can become a delegate and anyone can delegate their tokens to others.
Scalability is currently one of the biggest issues of the blockchain industry. Tezos has implemented an approach to ensure the long-term scalability of the platform, using zero-knowledge proof concepts, a mechanism made popular by the Zcash project.
Zero-knowledge proof concepts are used for smart contract execution and separate the actual execution of a smart contract and its verification by consensus nodes. This dramatically reduces the workload of consensus nodes which only verify the proof of a smart contract but do not need to execute the entire smart contract.
Besides the workload reduction, this method could also vastly reduce network transaction costs and allow for complex smart contracts to run more efficiently.
After the ICO, Tezos’ funds have been managed by the Tezos Foundation. This Swiss-based, non-profit foundation also has a veto power to block proposals during the first year of the network. This power doesn’t apply to submitting proposals, which all have to be democratically approved. The Tezos Foundation already scheduled to slowly remove their power for the sake of decentralization. This process will be guided by community votes.
The native token of the Tezos blockchain is the Tezzies (XTZ). Tezzies are used as the platform’s store of value, for payments of network transaction fees and for fueling smart contracts.
Since the Tezos blockchain employs a delegated proof of stake consensus mechanism, the token is also used for platform governance in which each token represents a vote. These votes are cast to the delegates, which then use them to vote on approving or rejecting improvement proposals.
Validating transactions in the Tezos network is called baking and is similar to mining in Bitcoin, only on a proof of stake basis. For baking, thus validating transaction on the blockchain and securing the network, bakers are rewarded Tezzies.
The token is also used by consensus nodes to buy staking bonds and as a factor for the calculation of baking rewards.
You can buy Tezzies (XTZ) at these exchanges and store them in the Tezbox wallet, a community developed wallet, and the Tezos Blue wallet, which currently is still a work in progress and has set out to become the light version of the Tezos wallet.
Arthur has an impressive background in applied maths and computer science. At the tender age of 18, he won France’s first ever medal in the International Olympiad in Informatics, after which he continued to educate himself in those fields. After his education, Arthur Breitman worked at Google X as a research engineer and at Goldman Sachs as a quantitative analyst.
Kathleen has an evenly impressive resume, having filled strategic positions at companies such as Accenture, Bridgewater Associates, The Wall Street Journal, and the blockchain consortium R3.
A notable addition to the Tezos leadership is Ryan Jespersen. Jespersen became president of the Tezos Foundation after becoming the voice of community concerns during the legal trials and tribulations the foundation was facing. Because of his actions such as petitions and community-led press releases, he was given the position as he strongly contributed to the continuation of Tezos.
The rest of the team is largely unknown and is estimated to comprise of 8 core developers.
Dynamic Ledger Solutions is the company behind Tezos and still controls the code behind the Tezos protocol. DLS has promised to release the code as open source under the MIT license on Github, however, this still needs to happen.
The Tezos project has some serious investor support who have been boosting the credibility of the project over the turbulent past year. One of those is Bitcoin permabull Tim Draper, who has persistently countered project criticism.
Another notable investor is the Winklevoss Capital firm. The Winklevoss twins have been rising stars in the crypto industry with the Gemini exchange, however, they do not invest in too many digital assets. Tezos is one of the few cryptocurrency projects the influential twins have invested in, besides Bitcoin, Ethereum, and Zcash, and some speculate that this could indicate a near-future Gemini listing.
The Tezos Roadmap
Even though the Tezos ICO finished in July 2017, its Tezzies made their way to the exchanges a year later on July 1, 2018. The Tezos team suffered serious delays due to legal concerns and a board member dispute and other complications they encountered, which is mainly the reason why it took so long for the Tezos token to become tradeable.
The disputes came to an end after months wasted on dispute settlement instead of working on the Tezos platform when the then president of the Tezos Foundation, Johann Gevers, stepped down in February.
After this, the team could go back to business and managed to squeeze out the Tezos betanet on June 30. According to the team, this beta version of the Tezos blockchain is fully functional, yet highly experimental. Downtime and even last resort hard forks still are in the realm of possibilities at this stage.
At the time of writing, there is no official roadmap yet and the scheduled progress of Tezos is therefore unknown. This has lead to community concerns based on the fact that most of the development of the Tezos network happens behind closed doors, leaving the community in the dark on the status of the platform. For now, few details are known about the development process of the Tezos blockchain.
Despite being plagued by legal issues and delays, the Tezos project seems to have rid itself from its down spiral with the release of the beta version of the Tezos network. The beta version is far from perfect, but it does boost confidence and indicates that the project is still alive and well.
However, the development team will likely need to step its game up if it wants to become a serious competitor of Ethereum, EOS, and all the other blockchain platforms. During the ICO, Tezos was still a novelty. However, as blockchain platforms are popping up everywhere, the project will need to do a lot more than being a novelty to make it.
Tezos’ idiosyncratic features are what should make this possible. The platform’s approach to be continuously increasing based on democratic community decisions could make the platform stand out from competition, but it could also make it slow and reluctant to make radical improvements.
The Tezos functional language does make smart contracts more secure as their correctness can be mathematically proven. This gives the platform an edge over Ethereum, for example, were flaws and bugs have been happening more than once. Additionally, the implementation of the zero-knowledge concept proofs also give Tezos a competitive edge in terms of scalability.
The vision of the Tezos founders is to create a self-amending platform that will be in a constantly evolving state. This evolution is fully steered by the Tezos network, making it a truly user-oriented blockchain platform. The foundational elements seem to be in place and are currently tested, but what they will lead to is anyone’s guess. Tezos’ success is by design completely dependent on the efforts of its community, which we will see unfolding over the next months.