Tezos

Tezos, a decentralized blockchain network, was first proposed in 2014 by husband-and-wife team Arthur and Kathleen Breitman. Arthur Breitman, a French native with a background in mathematics, computer science, and physics, published two white papers under the pseudonym "L. M. Goodman" outlining the principles behind Tezos. The name "Tezos" was generated via an algorithm that sought to find the names of unclaimed domains pronounceable in English.

Arthur Breitman, who studied financial mathematics in the U.S., worked at Morgan Stanley and later registered a company called Dynamic Ledger Solutions, Inc. (DLS) in Delaware to develop Tezos. He contracted a French firm, OCamlPro, to help conceive the protocol and develop the prototype and ICO infrastructure.

In July 2017, the Switzerland-based Tezos Foundation, led by Johann Gevers, organized a highly successful initial coin offering (ICO) for Tezos. The ICO raised 66,000 Bitcoins and 361,000 Ethers, worth $232 million at the time, making it a record-breaking uncapped ICO.

However, the project faced significant delays and challenges due to internal conflicts and legal battles. The distribution of coins was delayed due to a power struggle between the Breitmans and Johann Gevers, who eventually stepped down as Tezos Foundation president in early 2018.

In June 2018, the Tezos Foundation announced that ICO "donors" awaiting their Tez allocations would have to first submit to know-your-customer (KYC) and anti-money-laundering (AML) verification. The project officially went live in September 2018, with its mainnet launch.

Tezos is known for its innovative governance mechanism, which allows token holders to vote on future changes to network rules. This system of governance provides the network with the benefit of vastly increased user satisfaction and nearly eliminates the chances of a hard fork occurring.

Despite its challenges, Tezos has continued to grow and evolve, with its native cryptocurrency, XTZ, being traded on various exchanges and used for decentralized finance (DeFi), decentralized applications, and non-fungible token (NFT) projects.

Tezos (XTZ) is a decentralized, open-source blockchain platform that operates on a unique governance model and a liquid proof-of-stake (LPoS) consensus mechanism. Here's a detailed overview of how it works:

Governance Model

Tezos is designed to be self-amending, meaning that it can upgrade itself without the need for hard forks. This is achieved through a governance model where stakeholders who own XTZ tokens, known as bakers, can propose, vote on, and implement changes to the blockchain. This process ensures that the network evolves based on the collective decisions of its users, rather than relying on a central authority.

Liquid Proof-of-Stake (LPoS)

Tezos uses a variation of the classic proof-of-stake (PoS) consensus mechanism called liquid proof-of-stake (LPoS). In LPoS, users can stake (or "bake") their XTZ tokens to participate in the validation of transactions and the governance of the blockchain. To become a baker, a user must stake at least 8,000 XTZ tokens. Bakers are responsible for proposing and voting on changes to the blockchain, as well as validating transactions and creating new blocks.

Staking and Baking

Staking involves holding XTZ tokens in a special wallet to support the network. Users who do not have enough XTZ to become a full baker can delegate their tokens to a baker, allowing them to participate in the staking process and earn rewards. Bakers earn rewards in the form of XTZ tokens for validating transactions and creating new blocks. The staking process is designed to be energy-efficient compared to traditional proof-of-work mechanisms like Bitcoin mining.

Transaction Validation

When a baker validates a block of transactions, they receive a staking reward in XTZ tokens. The validation process involves a series of steps, including proposing changes to the blockchain, voting on proposals, and testing new code. If a proposal is approved, it is implemented on the mainnet, ensuring that the blockchain evolves based on the collective decisions of its users.

Smart Contracts and Decentralized Applications

Tezos supports the development of decentralized applications (dApps) and smart contracts, similar to other blockchain platforms like Ethereum. Tezos' smart contracts are designed to be formally verified using functional programming languages, which increases confidence in their accuracy and functionality. This makes Tezos suitable for high-stakes applications such as financial services, autonomous driving, and real estate tokenization.

Inflation Funding Model

Tezos has a unique inflation-based funding model, where newly created XTZ coins hold their value and provide a powerful incentive for stakeholders to participate in the governance and staking processes. This model ensures that the economic worth of XTZ tokens remains stable, even as new coins are created.

Network Upgrades

Tezos continuously adds new innovations and capabilities through its upgrade mechanism. This allows the platform to evolve and improve over time, incorporating the latest advancements in blockchain technology. Recent upgrades have focused on increasing the throughput and efficiency of the network, as well as enhancing the security and functionality of smart contracts.

In summary, Tezos operates on a decentralized governance model, where stakeholders can propose and vote on changes to the blockchain. The liquid proof-of-stake consensus mechanism ensures that the network is secure and energy-efficient, while the smart contract platform supports the development of decentralized applications. The unique inflation funding model and continuous upgrades ensure that Tezos remains a dynamic and evolving platform.

Tezos (XTZ) has several strengths that contribute to its unique position in the cryptocurrency market:

1. Underdog Status: Tezos has a clean social media presence, a strong brand image, and high-quality content. It has avoided the negative attention that other Layer 1 projects have faced, and its relatively low profile has allowed it to maintain a sense of confidence and stability.

2. Growing DEFI TVL: Despite the overall decline in the crypto market, Tezos has seen an increase in its Total Value Locked (TVL), which is a key metric for evaluating the economic prominence of a network or protocol. This growth indicates a strong and resilient ecosystem.

3. Mumbai Upgrade: The Mumbai upgrade has been a significant development for Tezos, enhancing its capabilities and further solidifying its position in the market.

4. Self-Governing Protocol: Tezos is a self-executing blockchain protocol where community members have a say in how the protocol works and what changes are made. This democratic approach allows for faster and more efficient updates, avoiding potential bifurcations.

5. Scalability: Tezos is designed to support high transaction volumes and enable easy network growth, making it possible for more users to join the network and make transactions.

6. Flexibility and Optimization: Tezos determines the contents and guidelines for updating smart contracts and developing the protocol through voting, making the protocol more flexible and easier to integrate new features.

7. Security and Formal Verification: Tezos uses formal verification techniques to increase the security of smart contracts, making them more resilient to vulnerabilities caused by software bugs.

8. Process Efficiency: Tezos' Proof of Stake (PoS) consensus mechanism ensures faster and more efficient transaction times, reducing energy consumption and costs for users.

9. Low Transaction Fee: Tezos has low transaction fees, which reduce users' transaction costs and encourage wider participation in the network.

10. Developer Friendly Tools: Tezos offers a variety of developer tools for writing, testing, and executing smart contracts, making it an attractive platform for developers.

11. Low Energy Consumption: Tezos' use of the Proof of Stake (PoS) consensus mechanism reduces energy consumption compared to Proof of Work (PoW) mechanisms used by other cryptocurrencies.

These strengths collectively contribute to Tezos' unique position and potential for growth in the cryptocurrency market.

Tezos (XTZ) faces several risks, including:

• High Wealth Concentration: Tezos suffers from extremely high wealth concentration, which can lead to significant market volatility and potential manipulation by large holders.
• Lack of Real-World Use Cases: Tezos lacks real-world use cases, which hinders its widespread adoption and limits its potential for growth.
• Small User Base: With a relatively small percentage of users compared to other major cryptocurrencies like Ethereum, Solana, Cardano, and Polkadot, Tezos possesses a potential security risk.
• DeFi Ecosystem: Tezos has a nearly nonexistent DeFi ecosystem, which puts it outside the top 40 in terms of market capitalization.
• Technical Risks: There are material technical risks associated with XTZ, including code defects, security breaches, and other threats concerning XTZ and its supporting blockchain.

These risks highlight the challenges Tezos faces in terms of adoption, security, and market competitiveness.

• Arthur Breitman (CTO): A computer scientist and mathematician, Arthur Breitman is the husband and co-founder of Tezos. He has experience working for large financial establishments like Morgan Stanley and Goldman Sachs. He is also a former engineer at Google X and Waymo.

• Kathleen Breitman (CEO): Kathleen Breitman is the wife and co-founder of Tezos. She has a background in the financial industry, having worked for companies like Bridgewater Associates and R3. She is also the co-founder of Coase, a software company aiming to reduce transaction costs.