Investing in Tezos (XTZ) – Everything You Need to Know

What is Tezos (XTZ)?

Tezos (XTZ) is an advanced blockchain network that incorporates protocols meant to enable a host of functionalities. Primarily, the platform supports the development of decentralized applications (DApps) and the coding of smart contracts.

Tezos is an open-source, decentralized network for assets and applications. Today, the Tezos community consists of researchers, developers, validators, and various support groups. All of these parties share the common goal of expanding the Tezos ecosystem.

History of Tezos (XTZ)

Tezos' history began in 2014 when co-founders, Arthur Breitman and Kathleen Breitman began development on their next-generation blockchain. Specifically, the Breitmans sought to create a versatile blockchain with the ability to support smart contracts.  This meant utilizing a proof-of-stake (PoS) consensus mechanism, in addition to ensuring security and upgradability.  In doing so, Tezos was well-positioned from its onset to serve the needs of the digital economy.

The Tezos blockchain officially went live in 2018 and, like many other projects in the sector, utilized a dual-pronged approach that involved both the Tezos' founding company, Dynamic Ledger Solutions (DLS), and a non-profit known as the Tezos Foundation – the latter of which is tasked with holding/managing operating funds and capital generated through the 2017 Tezos ICO.

The Tezos Foundation has stated that in addition to being supervised by the Swiss Federal Foundation Supervisory Authority, its “…purpose is the promotion of the Tezos protocol through grants and other capital deployment vehicles.”

Arthur Breitman and Kathleen Breitman

Tezos hit the market running after hosting a record-breaking, uncapped, ICO in 2017. The event was a major success, securing $232 million in Bitcoin and Ether in just under two weeks. The success of the event made international headlines and helped to propel Tezos further into the spotlight.

The Tezos ecosystem makes use of ‘XTZ', which functions as a utility token that allows for users to pay for services and execute smart contracts.  Affectionately referred to as the ‘tez' or ‘tezzie' by Tezos enthusiasts, these utility tokens have a circulating supply of roughly ~940M.

Notably, Tezos never announced the total amount of XTZ the platform plans to release. Developers left this open in a bid to ensure that their platform never reaches its capacity in the market. However, some in the space argue that this lack of scarcity hurts the overall value of the coin.

Management Issues

Tezos' ICO success was short-lived. Within weeks, Johann Gevers, who functioned as the President of Tezos Foundation at the time, entered into a public feud with the Breitmans. The disagreement between parties stemmed from a contract dispute and resulted in Gevers refusing to disburse the funds to the burgeoning Tezos ecosystem.

The issue was a huge debacle at the time that caused investors to lose faith in the project. This led to the value of XTZ dropping temporarily. Eventually, Gevers left the project, and the funds made it to their destination. However, Gevers made sure to secure a $400,000 severance package for his troubles.

How Tezos (XTZ) Works

Tezos is unique in the market for a variety of reasons. For one, it utilizes a Liquid proof-of-stake consensus mechanism. Also, the platform introduces an agonistic native middleware known as a Network Shell. This strategy enables developers to utilize modules during the construction of applications.

Multi-Language Approach

Tezos is bilingual meaning it utilizes both an Imperative and Functional language. Imperative languages such as Solidity are ideal for smart contract programming in terms of flexibility.  Whereas functional languages are more adept at mathematical reasoning, making them more secure.

Tezos uses the combination to ensure its smart contracts are both robust and secure. Notably, the Tezos ecosystem relies on Ocaml for blockchain programming and Michelson for the coding of smart contracts. This strategy also improves transaction speeds across the network.

Currently, XTZ is capable of around 1000 transactions per second (tps). The limit is based on the max allowed gas per transaction. This rate can also increase in the future via voting on protocol changes such as off-chain scaling solutions.

Why Tezos (XTZ) Matters

Tezos offers users some features not available to earlier blockchains. To accomplish this task, Tezos combines its transaction and consensus protocols. This strategy streamlines its processes. Crucially, the combination aids in the communication between the network protocol and the blockchain protocol.

Liquid Proof-of-Stake – Tezos (XTZ)

The Liquid PoS consensus mechanism is an upgrade to the Delegated Proof-of-Stake systems found in alternative blockchains like EOS and NEO.  In a DPoS, the community votes on who will function as a delegated node.

Importantly, Delegated nodes approve blocks and add the transactions to the blockchain. Additionally, they have a few more rights and responsibilities in the network. Crucially, the number of delegators allowed depends on the bond size minimum requirement. Currently, this limit allows up to around 70,000 delegators.

The LPoS mechanism is exclusive to Tezos at this time. LPoS in Tezos has proven to be very successful. Currently, the network has a stake rate of approximately 80% spread across 450 validators and 13,000 delegators. This makes Tezos one of the most decentralized blockchains in the sector.

More Control

The Liquid PoS offers users more control compared to DPoS systems. For example, every user gets a vote, allowing them a say in network governance, or the ability to delegate this responsibility to another party. This strategy was adopted in hopes of cultivating a cohesive community.

Additionally, these delegates can then delegate their votes to other delegates via a process known as transitivity. Notably, users can choose to regain their voting rights at any time. They can even change their representative’s vote whenever there is a topic in which they disagree with their decision.

Benefits of Liquid PoS

The Liquid PoS consensus mechanism provides a balanced and inclusive approach to decentralized network security. Each person has a vote that counts in the final approval of network changes. Best of all, anyone can become a delegate for free. You just need to gain the respect of the community.

To participate in the process a user simply needs to stake their XTZ in a network wallet. In the Tezos ecosystem, this process is called “baking.” The more XTZ you bake, the better the chances you get to add the next block.

After the block is successfully baked, the network will have 32 random other bakers repeat the process. Once this process is complete, the baker receives a reward. Best of all, the baker gains the ability to charge transaction fees on all the transactions within the block.

Self-Amending Ledger with On-Chain Governance

The Tezos system mitigates the chance of hard forks via this decentralized voting mechanism. Developers took extra care to ensure that the network has the capability to upgrade passively in a decentralized manner via self-amendments. In this way, Tezos seeks to keep its community focused on the same goals.

Tezos (XTZ) Voting Process

The voting process begins when a developer submits an upgrade proposal. The proposal must include the technical aspects of the upgrade. Also, it must include the compensation required by the developer for their efforts.

Tezos – CoinMarketCap

From here, the protocol will go before the community. The community will test the protocol and give valuable feedback as to its merits. Notably, every protocol undergoes multiple testing periods. In this way, Tezos ensure that only top-quality coding makes it onto the blockchain.

Following the completion of the testing period, Tezos token holders can vote on the upgrade directly. If approved, the protocol upgrade will integrate into the network via a protocol called a “hot swap.” Additionally, the developer will receive compensation from the Tezos Foundation for their efforts at this time.

Tezos (XTZ) Account Types

The Tezos ecosystem provides you with the ability to operate under two different account types. These accounts go by the names Implicit Accounts and Originated Accounts. Critically, these accounts serve different purposes within Tezos' infrastructure. In most cases, an Implicit Account will work for basic functionalities.

Implicit Accounts

Implicit Accounts are the type of account that most users possess. These addresses function similarly to traditional crypto accounts. Each Implicit Account includes both public and private keys. Users can check their balance and transfer funds to and from this address.

Originated Accounts

Originated Accounts are what developers utilize for smart contracts. They differ from Implicit Accounts in a couple of key ways. For one, these accounts always begin with a KT1 versus a tz1. All Originated Accounts include a Manager, Amount, Delegatable, and Delegate Field options.

Where to Buy Tezos (XTZ)

Tezos (XTZ) is currently available for purchase on the following exchanges:

eToro USA – Established in 2007,  eToro is a leading cryptocurrency exchange that accepts USA residents. (Hawaii, Minnesota, Nevada, New York, & Puerto Rico are prohibited).

eToro Disclaimer: eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.

Uphold – This is one of the top exchanges for United States & UK residents that offers a wide range of cryptocurrencies. They also offer Tezos staking. Germany & Netherlands are prohibited.

Kraken – Founded in 2011, Kraken is one of the most trusted names in the industry with over 9,000,000 users, and over $207 billion in quarterly trading volume.

The Kraken exchange offers trading access to over 190 countries including Australia, Canada, Europe, and is a top exchange for USA residents. (Excluding New York & Washington state).

WazirX – This exchange is part of the Binance Group, which ensures a high standard of quality.  It is the best exchange for residents of India.

Uphold Disclaimer: Assets available on Uphold are subject to region. All investments and trading are risky and may result in the loss of capital. Crypto-assets are largely unregulated and are, therefore, not subject to protection.

How to Store Tezos (XTZ)

If you seek to make a major investment in XTZ or if you are planning on HODLing this crypto for long periods of time, a hardware wallet is a great option. Hardware wallets keep your crypto stored offline in “cold storage.” This strategy makes it nearly impossible for online threats to access your holdings. The Ledger Nano S and the more advanced Ledger Nano X are both options that support Tezos (XTZ).

Tezos – Out of The Storm

Now that Tezos has overcome its internal company-related issues, the firm is ready to take its platform mainstream. Today, Tezos has one of the largest followings in the market. Consequently, you can expect to see Tezos in the top twenty cryptocurrencies for years to come.