What Is Tezos?
Tezos (XTZ) is a blockchain network linked to a digital token, which is called a tez or a tezzie. Tezos is not based on the mining of tez. Instead, token holders receive a reward for taking part in the proof-of-stake consensus mechanism.
After a promising start and a highly successful Initial Coin Offering (ICO), Tezos was troubled by numerous delays and legal issues. However, Tezos survived the cryptocurrency bear market, in part because of its unique proof-of-stake mechanism. The price of tez more than tripled between October 2019 and February 2020 and reached record highs. As of February 2020, Tezos was attracting attention again.
- Tezos (XTZ) is a blockchain network linked to a digital token, which is called a tez or a tezzie.
- Tez are not mining-based and rely on a proof-of-stake mechanism.
- Tezos had a highly successful ICO, but it was followed by lawsuits and price declines.
- The price of tez reached record highs in early 2020, leading to renewed speculation about its future investment potential.
Like Bitcoin and Ethereum, Tezos is a decentralized ledger that makes use of blockchain technology. Like Ethereum, Tezos is designed to make use of smart contracts. The term “Tezos” is ancient Greek for “smart-contract,” according to the developers.
However, Tezos goes beyond previous offerings. It takes the smart contract concept “one step further by letting participants directly control the rules of the network.”
Tezos is intended to be an evolving network. This flexibility is seen as a crucial aspect of the system. In particular, the lack of flexibility and scalability in Bitcoin has created numerous difficulties and growing pains. Ethereum has grown in large part because of its flexibility, and Tezos continues in that direction.
How Tezos Is Different
One of the distinguishing elements of Tezos is its governance. Most early blockchains rely on development teams and mining communities to formulate new design choices. However, Tezos attempts to build the decision-making process into the network of users itself.
“Tezos takes a fundamentally different approach by creating governance rules for stakeholders to approve of protocol upgrades that are then automatically deployed on the network," its developers claim. "When a developer proposes a protocol upgrade, they can attach an invoice to be paid out to their address upon approval and inclusion of their upgrade.”
As a result of this system, Tezos creates incentives for user participation in the core development process. That democratizes the development process and decentralizes maintenance.
At the same time, the developers of Tezos were aware that specific critical properties needed to be upheld over time. Tezos uses formal mathematical proofs to verify that these properties are maintained.
In effect, this means that the Tezos network remains decentralized. While other blockchains are decentralized, Tezos also includes a mechanism that allows for collective decision making. Tezos token holders are allowed votes on pending protocol developments.
Concerns About Tezos
With a powerful and flexible network at its core, Tezos drew massive attention in its initial coin offering. The ICO began on July 1, 2017. It went on to earn $232 million, making it one of the largest ICOs of all time.
However, following the success of the ICO, a significant dispute took place between Tezos President Johann Gevers and Arthur and Kathleen Breitman, the owners of Tezos' intellectual property rights.
As a result of the dispute, the launch of the Tezos platform itself was delayed indefinitely. As of early March 2018, the Tezos network had not yet launched, although Kathleen Breitman had previously suggested the launch would come within a few weeks of a conference at UCLA in February.
The delay of the launch was one of the reasons that Tezos ran into legal trouble. Investors initiated a series of lawsuits, arguing that tez were unregistered securities. The lawsuits sought to allow investors to receive refunds for the purchases that they made in the ICO. However, Tezos eventually launched in 2018.
The outlook for Tezos improved in early 2020, but the prices of cryptocurrencies are extremely volatile and highly speculative. Potential investors should exercise due diligence and avoid risking more than they can afford to lose.
Future of Tezos
The future of Tezos was once again looking bright in February 2020. While the rapid rise in the price of tez suggests caution in the short-term, record highs resolve some problems. In particular, all those who want their money back could simply sell their tez on the market for a profit.
More importantly, Tezos proved its staying power by surviving the bear market and reaching new highs. As cryptocurrency skeptic Warren Buffett once put it, “Only when the tide goes out do you discover who's been swimming naked.” It seems that Tezos is better suited to the future than many believed. However, the ultimate fate of Tezos will depend on the value of its technological innovations and its ability to gain support.