Tezos Blockchain

Tezos is a blockchain designed to grow and adapt as technology advances. It’s built to support decentralized apps and smart contracts with a focus on security and efficiency

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What is Tezos?

Tezos is a blockchain platform created in 2014, designed to be a "self-amending" system. The core idea behind Tezos is simple: it enables the blockchain to evolve and upgrade itself automatically based on decisions made by its users. This means that holders of Tezos' native cryptocurrency, XTZ, can participate in voting on changes to the network's protocol. This self-amendment process ensures that Tezos doesn't experience hard forks — a situation where the blockchain splits into two different versions, leading to two cryptocurrencies with separate prices.

Tezos introduced the concept of "on-chain governance" in contrast to traditional blockchain systems, which rely on off-chain governance. This distinction helped reshape the landscape of blockchain protocols.

How Does Tezos Work?

Tezos operates on a unique structure, where its blockchain is split into two main components: the Shell and the Protocol. The Shell is the code that adapts and updates itself based on the results of the voting process. It is responsible for interpreting transactions and managing administrative tasks. The Protocol, on the other hand, is the code responsible for submitting proposals to the Shell for review and approval.

This self-amendment process allows Tezos to evolve without needing external interventions, offering flexibility in decision-making and enabling a smoother process of network upgrades.

Tezos Blockchain: Liquid Proof of Stake (LPoS)

Tezos uses a variation of proof-of-stake (PoS) called Liquid Proof of Stake (LPoS) to maintain and secure its network. In this system, users stake their XTZ tokens to participate in governance and validate transactions.

To participate in the validation process, known as baking, a user must stake a minimum of 8,000 XTZ (referred to as a "roll"). Bakers can propose changes to the protocol and are rewarded for their work in validating transactions and securing the network.

However, users don't necessarily have to become bakers themselves. They can delegate their XTZ to other bakers, effectively allowing them to vote on network decisions without directly participating in the baking process. This delegation system ensures that even those with smaller amounts of XTZ can still have a say in governance.

Bakers are incentivized to act honestly, as participants can switch bakers at any time, ensuring that bakers who are not performing well will lose delegates and, subsequently, rewards.

Tezos' Upgrade Process

One of the defining features of Tezos is its governance process. Network upgrades are proposed by bakers, and the proposal process is broken down into four stages, each lasting approximately 23 days:

Proposal Period: Any baker can submit a proposal to amend or upgrade the blockchain. Proposals with the most votes move on to the next stage.
Exploration Vote Period: Proposals that receive a supermajority (80% approval) move to this stage.
Testing Period: Proposals that reach the Exploration Vote stage are tested in a temporary chain for 48 hours to ensure they are safe and work as intended.
Promotion Vote Period: In the final stage, bakers vote on whether the proposal should be implemented. If the proposal receives a supermajority in favor, it is integrated into the blockchain.
This structured process ensures that proposed changes are carefully vetted before they are implemented, reducing the risk of errors or malicious changes.

The Role of XTZ

XTZ, the native cryptocurrency of Tezos, plays a critical role in maintaining the network and participating in governance. Users can hold, send, spend, or stake their XTZ tokens.

XTZ is used for baking (staking), which allows holders to vote on proposed changes to the network. The more XTZ a user has staked, the greater their influence in the voting process. Bakers receive rewards for validating transactions, and delegators (those who delegate XTZ to bakers) also earn a share of the rewards.

In addition to its role in governance, XTZ is a key asset for anyone looking to participate in the Tezos ecosystem.

Why Use Tezos?

Tezos may appeal to various groups for different reasons:

Developers: Tezos enables the creation of decentralized applications (dApps) and smart contracts. With its advanced governance and self-amending features, developers can deploy projects that adapt to future changes in the blockchain's protocol. Examples of such projects include tzBTC, a decentralized finance (DeFi) application that tokenizes Bitcoin, and Tezsure, a decentralized insurance marketplace.
Investors: Investors may be drawn to Tezos because it offers a unique opportunity to earn rewards by staking XTZ. With staking, users can earn a return on their XTZ, adding an additional layer of value for those who hold the token. The flexibility of Tezos' governance system also ensures that the network can continue to evolve without experiencing the challenges associated with hard forks.

Smart Contracts & Formal Verification

Tezos enables developers to create smart contracts with formal verification. This means that the code of the contract can be mathematically proven to be secure and free from errors. This reduces the risks of bugs or vulnerabilities that could otherwise cause major issues in decentralized applications.

Proof-of-Stake (PoS)

Unlike traditional Proof-of-Work systems, Tezos uses a more energy-efficient Proof-of-Stake consensus mechanism. This allows participants to secure the network by staking their XTZ tokens. PoS lowers energy consumption, is more scalable, and allows anyone to join the consensus process—providing rewards for those who help maintain the network’s integrity.

Delegation

If you don’t want to participate directly in the consensus process, Tezos allows you to delegate your tokens to other users (called “bakers”) who will stake on your behalf. You can still earn rewards while leaving the technical details to someone else.

Decentralized Governance

Tezos is built with on-chain governance, meaning that decisions about protocol upgrades and changes are made by the community. This enables stakeholders to propose, vote on, and implement changes, ensuring that the network evolves based on the collective consensus of its users, without the need for external intervention.

Smart Rollups

Tezos is also pioneering the use of Smart Rollup. These allow for highly scalable and secure decentralized applications that are capable of processing thousands of transactions in a fraction of the time. Smart rollups take the best of both worlds: they provide the security of the Tezos network while allowing for speedier execution of applications and transactions.

Smart Rollups

The Basics of Tezos

Tezos is designed to grow and evolve, without the limitations that traditional blockchains face. By embracing self-amendment and decentralization, it remains adaptable to future changes, ensuring that the network stays at the cutting edge of blockchain technology.

Tezos provides a flexible, sustainable platform that fosters innovation, participation, and a strong, diverse developer ecosystem. Whether you're building smart contracts, decentralized applications, or exploring staking and governance, Tezos offers the tools and infrastructure to make it happen.

Additional Information

If you're interested in learning more, check out the links below for detailed documentation, guides, and tutorials:

Feel free to dive into the world of Tezos, and explore how this innovative blockchain can transform the future of decentralized applications and assets.