Is Tezos the Future-Proof Cryptocurrency? Comprehensive Review

Tezos is an intriguing open source blockchain protocol for smart contracts that can house assets and applications and can evolve by upgrading itself. This is possible through stakeholder governance of upgrades to the core protocol and upgrades to that amendment process as well. The upgrade process means that Tezos never has to worry about a fork like other well-known blockchain protocols have experienced such as Ethereum which forked into Ethereum and Ethereum Classic.

General Overview

The Benefits PRO's
  • Self-amendment to network protocols
  • Upgrades approved by consensus after testing and feedback
  • On-chain governance that all Tezos holders can participate in
  • Any token holder can receive reward for POS participation
  • Formal verification of smart contracts
The Downside CON's
  • History of negative media attention

Our Favorite Cryptocurrency Exchange for Tezos (XTZ)

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Coinbase

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  • Diverse and consistently updated choice of coins

Ratings

Price

All-Time High: $10.00 USD (Dec 17, 2017) Dynamic
All-Time Low: $0.314631 USD (Dec 7, 2018) Dynamic

Market Cap

$1,152,899,756 USD Dynamic

Supply

Circulating Supply: 694,191,974 XTZ Dynamic
Total Supply: 694,191,974 XTZ Dynamic

Network Speed

Rating: Low
Reason: Currently the Tezos blockchain is capable of handling about 40 transactions per second. With an ability to change protocol, and upgrade the network, it is conceivable that Tezos can achieve something greater down the road.

Disbursement

Rating: Medium
Reason: The rich list for Tezos is a little difficult to determine. When you observe the balances of the top accounts, it appears that the distribution of balances is very centralized [ source ]. The biggest accounts on the network, is exchanges, and so the individuals that own the coins is likely to be much more distributed.

Developer Engagement

Rating: Medium
Reason: The developer community for Tezos is largely underdeveloped compared to some of the larger blockchain communities out there. That being said, Tezos has a rich set of tools and codebases in which developers can build on top of. Tezos is actually an ecosystem that is primed for rich development due to the way that the blockchain was built.

Liquidity

Rating: High
Reason:Tezos being traded on most major exchanges in the world, and accounting for hundreds of millions of dollars in volume per day gives Tezos a solid liquidity rating. If you’re looking to get rid of, or pick up Tezos, you won’t have a problem getting it at the price you desire.

What’s the Long-Term Outlook for Tezos?

Tezos is designed to stand the test of time. Tezos utilizes a proof of stake (POS) mechanism in order to reach consensus on the state of the blockchain and anyone who owns Tezos tokens (known as XTZ) can participate in the consensus process. Tezos uses its own smart contract language called Michelson to allow formal verification of smart contracts that wish to use the Tezos blockchain.

History of Tezos

Tezos was co-founded in 2014 by Arthur and Kathleen Breitman along with their team of core developers. The Switzerland-based company raised $232 million in an uncapped two-week ICO accepting payments in both Bitcoin and Ether. The company ran into issues when Johann Gevers, the president of the foundation that held the funds raised, refused to release them to the Breitmans. This caused delays with the platform’s release and affected its price in a negative manner. After a period of much unwanted media attention and drama, Gevers left the company with a severance payment and the project was able to get back on track.

How Do I Actually Buy Tezos?

The most popular way of buying Tezos is to simply use a cryptocurrency exchange. It’s worth noting that some exchanges only offer Tezos as a trading partner for other cryptocurrencies, such as Bitcoin. That means you won’t be able to purchase Tezos directly with paper money such as USD or CAD.

We recommend Coinbase for its intuitive layout and beginner-friendly process but there are a number of different exchanges where you can purchase Tezos including the following:

How Does Tezos Work?

Tezos is a decentralized ledger that looks to utilize smart contracts. The difference between Tezos and other platforms that try to make use of smart contracts, like Ethereum, is its method of governance and self-amendment, along with its proof-of-stake consensus mechanism, and its smart contract security and formal verification.

Self-amendment allows for the network protocol to be upgraded without creating a new version, commonly known as a fork. Self-amendment is decided upon using the protocols of on-chain governance. With Tezos, all stakeholders can take part in this governance process through a formal election procedure in order to reach agreement on upgrades to the network protocol. This process is also used for deciding what blocks to add to the chain.

This consensus is reached through a delegated proof of stake mechanism, meaning stakeholders can either vote themselves, or delegate their votes to someone else without transferring ownership. This allows stakeholders to reap rewards whether they choose to actively participate or delegate. Stakeholders simply put down a “security deposit” of Tezos to participate in this mechanism. The Tezos protocol then rewards honest behavior and punishes dishonest behavior meaning you can lose a portion of your deposit.

The smart contract language designed for Tezos is called Michelson. This is a turing complete language, which just simply means that the code can be tested, and mathematically validated for security, and vulnerabilities.

The Advantages

The main advantages of the Tezos blockchain protocol are related to its self-amendment capabilities, the on-chain governance that comes with that, its proof of stake consensus mechanism, and its ability to provide formal verification of smart contracts.

Self-amendment is a huge advantage because it avoids the issue of a fork in the network, which usually divides the community, alters stakeholder incentives, and disrupts the network over time. By allowing self-amendment, coordination and upgrade costs are reduced and future innovations can be integrated seamlessly. It also ensures longevity for the blockchain. Self-amendment is decided upon through the on-chain governance that uses the proof of stake consensus mechanism mentioned in the section above.

The formal and systematic election procedure for deciding how to upgrade network protocols, and which blocks will be added, ensures agreement amongst participants while also allowing for changes to the election system through self-amendment should a better system arise. The ability for all stakeholders, regardless of size of stake, to participate in the consensus mechanism and be rewarded for this participation also means Tezos has a low barrier for entry for involvement in the network.

Formal verification of smart contracts is a big advantage as well. By being able to mathematically verify and prove that a smart contract will perform as it is designed with no bugs opens up the possibility of using Tezos for hosting financial smart contracts that represent large portions of real-world value such as loans or tokenized assets.

The Disadvantages

There are not really any obvious disadvantages to Tezos. Other than the fact that you cannot mine the tokens in a traditional manner (though you receive them as a reward through proof of stake), the only disadvantages are related to the tumultuous start the company experience after its Initial Coin Offering. Apart from the negative media attention the conflict within the company created, its affect on the price and actual release of the network led to a lawsuit that is still underway. However, the Securities and Exchanges Commission is no longer investigating the company and the lawsuit is that of a general class action suit made by some displeased investors.

Tezos Frequently Asked Questions

About the Author

Evan Jones CryptoVantage headshot

Evan Jones

Evan Jones was introduced to cryptocurrency by fellow CryptoVantage contributor Keegan Francis in 2017 and was immediately intrigued by the use cases of many Ethereum-based cryptos. He bought his first hardware wallet shortly thereafter. He has a keen and vested interest in cryptos involving decentralized backend exchanges, payment processing, and power-sharing.