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BeginnerIntermediateAdvanced

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 the coin 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

Pros

  • 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

Cons

  • History of negative media attention

Recommended Exchange for Buying Tezos (XTZ)

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Funding Methods Debit & Credit Bank, PayPal, ACH, Bank Transfer
Cryptocurrencies 40+
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Tezos Ratings

Supply

Total Supply: 694,191,974 XTZ

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. 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. The coin utilizes a proof of stake (POS) mechanism in order to reach consensus on the state of the blockchain and anyone who owns tokens (known as XTZ) can participate in the consensus process. The cryptocurrency uses its own smart contract language called Michelson to allow formal verification of smart contracts that wish to use the 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 XTZ 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 the coin 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 the coin including the following:

How Does Tezos Work?

Tezos is a decentralized ledger that looks to utilize smart contracts. The difference between XTZ 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 coin, 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 XTZ to participate in this mechanism. The protocol then rewards honest behavior and punishes dishonest behavior meaning you can lose a portion of your deposit.

The smart contract language designed for the cryptocurrency 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.

Why Self-amendment is a Big Deal

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 the cryptocurrency 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 XTZ 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


According to the developers, Tezos comes from ancient Greek and means “smart contract”.


No, at the time of writing you cannot buy Tezos on Coinmama. For a list of exchanges where you can buy Tezos please visit the “Where to Buy?” section of this article.


During their uncapped two weeks of Initial Coin Offering funding Tezos raised $232 million in Bitcoin and Ether.


Yes! Tezos is based on proof-of -take. Proof of stake is a consensus mechanism where stakeholders earn rewards, such as more Tezos, in exchange for validating blocks. This is in contrast to proof of work consensus mechanism, where a miner earns rewards by competing with other miners to solve a puzzle first by expending computing power. Proof-of-stake also means that the participants in the network, also known as nodes, provide the computational resources necessary to keep the network up and running by being online. This essentially means that the stakeholders keep the network going, but they are rewarded for it as an incentive. See the FAQ “What is ‘baking’ in regard to Tezos?” for more information on how Tezos rewards its stakeholders.

Tezos’ proof of stake is called Delegated Proof-of-Stake due to the multitude of options a stakeholder has regardless of the size of their stake. Stakeholders can participate in voting directly or give their vote(s) to a delegate, who can also let another person delegate for them. If the participant does not like the way their delegate votes they can take it back and vote themselves.


No, Tezos does not have a special wallet. On their website they note three software wallets and two hardware wallets for storing Tezos that have undergone at least one external security audit. The three software wallets noted are Galleon, Tezbox, and Kukai. The two hardware wallets noted are Ledger and Trezor. See Cryptovantage’s “Crypto Wallet” section for in depth reviews on the Ledger and Trezor hardware wallets.


Baking is how blocks are validated and produced on the Tezos blockchain and is done by participating in the proof of stake consensus mechanism. Being a baker on the Tezos blockchain requires 8,000 XTZ per “roll”. The more rolls you have the higher chance you have of baking the next block. If you don’t have enough XTZ to get a roll then you can delegate your tokens to someone who can. Since more XTZ means more rolls it can be beneficial to delegate to those with large quantities of XTZ that they have either accumulated themselves or received in delegation. They can then bake for you and share their earning with those that delegated to them. It is important to note that when you delegate your tokens you are not transferring ownership, which means whoever you delegate your tokens to cannot steal the funds your portion earned. Baking rewards often include fees in combination with a sum of XTZ.

For more information on baking please visit: https://learn.tqtezos.com/files/baking.html#what


No, Tezos is not built using Ethereum. Tezos is similar to Ethereum in that its goal is to house smart contract applications, but it is a separate project and blockchain.


Yes! You can buy Tezos with Bitcoin and many other cryptocurrencies. Please check your exchange of choice to see what trading pairs they offer with Tezos.

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