What is Tezos? Complete Review

What is Tezos? Simply put, Tezos is a blockchain based, smart contracts platform that works on a self-governance and self-evolution model.

If the words “blockchain” coupled with “smart contracts” bring to the surface popular platforms like Ethereum and what some describe as the Chinese equivalent, NEO in your mind, then you might not be the only one.

Fortunately, the team at Tezos seems to be aware of that fact, since it promises that Tezos does indeed have significant differentiation over other blockchain platforms. The Tezos team primarily points to the self-amending properties of their platform.

The Problems Being Faced by Cryptocurrencies and the Solutions that Tezos Brings to the Table

According to Tezos, the platform has the ability to propose continuous changes to its codebase on an ongoing basis. This idea of regular evolution is a compelling one, since it would mean that if the Tezos blockchain encounters problems, then the platform would work towards resolving it and progress in a more streamlined manner.

It would also mean that Tezos would be able to prevent itself from running into the same scalability and upgrade problems that popular platforms such as Bitcoin and Ethereum face at the moment.

If the idea of continuous improvement in the codebase can be implemented correctly, then Tezos would be able to bring something to the marketplace and overcome issues faced by the other blockchains. This includes issues such as a lack of timely updates which are demanded by the marketplace to bring about effective change in the way a blockchain operates.

Another one of the biggest hurdles that the aforementioned blockchain platforms face in terms of updates is reaching community consensus to implement said updates. Tezos’ feature to self-govern the platform would address this problem and would make the process of making decisions that much easier.

Users associated with the cryptocurrency space would also know all too well how any rift in reaching upgrade decisions also results in hard forks, which weakens the potency of a platform’s user base by having it divided into multiple sections. By using Tezos’ governance system, these users will respect the decision that has been taken by the majority of a cryptocurrency platform.

An added yet just as important feature is Tezos’ ability to self-verify smart contracts. At the moment, any smart contracts that are built on most supported platforms are not confirmed by the blockchain until they have been deployed. If there are any issues or if the contract needs any fundamental changes, then developers have to go through the contract creation and development process through scratch once again. But Tezos allows its users to self-verify the contracts through its native language, saving the developers’ precious time that they could invest into making the Tezos blockchain an even better place to work in.

As outlined above, Tezos addresses these imperative issues through specific features, which set it apart from other blockchain platforms by solving the problem of lagged performance and rifted community consensus.

How Does Tezos’ Self-Evolution and Self-Governance Work?

Tezos

As noted earlier, Tezos has the capabilities to actually evolve by amending its very own code. To do this in the first place, Tezos starts off with a “seed protocol”. This seed protocol will define procedures that need to be approved by stakeholders on the platform. The process is something that will be operated through the self-governance platform.

The proposed changes are then voted on by the stakeholders on the platform, who would be bound to make decisions that favor the network’s growth due to having a vested interest in the project. Voting rights require stakeholders to put in reserve a specific amount of their coins.

Once the decision has been taken, the platform moves forward with the required action. However, due to the way the voting system is built, all stakeholders agree to its final decision, which prevents the process from being led to a hard fork.

How it plans to execute these actions effectively is through its classification of the overall blockchain protocol.

Now, for this part, you will need to put your seat belts on and your tinfoil hats over your heads, because it is going to be a rough technical ride.

All set?

Let’s go.

Tezos defines that the blockchain protocol is based on three sub-protocols, which come together to form an overall blockchain network.

  1. The network protocol
  2. The transaction protocol
  3. The consensus protocol

The network protocol

The network protocol in a blockchain is responsible for broadcasting information including but not limited to network transactions. One of its important, other tasks includes the discovery of blocks. Overall, you may think of the network protocol as your home or office’s local WiFi network – which is the lifeblood of your infrastructure. That’s the same way it works for a blockchain.

The transaction protocol

The transaction protocol is to the blockchain what an accounting or auditing software is to an office environment. This protocol is responsible for verifying transaction-related information on the blockchain.

The consensus protocol

The consensus protocol works on taking confirmations from the network. It’s the consensus protocol’s job to have consensus formed throughout the change. Think of this as a voting platform on your office’s local portal, or in the terms of personnel, the chairperson of a board whose job is to know what other members think of a particular idea.

Now that you know of these protocols with real-world examples, let’s see how they come together to form the integral functions of the Tezos blockchain.

To bring all of the information together, Tezos makes use of a network mechanism called a “generic network shell.” While the transaction and consensus protocol are treated the same way by this network shell, it differentiates in its treatment of the network protocol and works as the bridge between the transaction & consensus protocols at one side, and with the network protocol on the other.

When all of these protocols come together, they bring such capabilities to the surface as irrevocable timestamps on each block, and an automatic chain selection algorithm that works on maintaining a single chain and prevents denial-of-service attacks executed by low yet valid forks on the blockchain.

These protocols also serve as the lifeblood to the Tezos self-amendment and self-governance system, where tasks such as presenting information from the network to respective nodes and obtaining votes from selected nodes are achieved in a holistic manner.

Whereas, to achieve what it promises to its users, Tezos also explains the rules of its Seed Protocol, which will help the platform’s plans of evolution to move along without much disruption.

The Seed Protocol

Instead of presenting a generic hash to its users, Tezos uses a developed economy through its Seed Protocol. Part of this economy deals with the coins it works with, which have been dubbed as “Tezzies” (XTZ), much to the chagrin of some of its users.

Apart from the unusual name and the ticker itself (which logically could have been TEZ but by the looks of it takes after Bitcoin’s official “XBT”), the tokens raised a then record-breaking $232 million in their initial coin offering back in July 2017. As a result, Tezzies resulted in a total supply of over 763 million XTZ (763,306,930 XTZ, to be precise).

Now, this supply can be used by interested individuals to act as stakeholders on the Tezos platform. The action works the same way as other proof-of-stake and governance-based blockchains. Individuals who are interested in having a say in the Tezos blockchain can “bake” their coins (which is the Tezos term for staking), and from here, they can enjoy voting rights and work on the blockchain’s maintenance to receive rewards.

This also holds true for individuals who want to start mining on the platform. Unlike Bitcoin, not everyone that has a mining rig will be able to take part in the mining mechanism. Instead, mining hopefuls on Tezos need to stake a certain amount as a “bond” within the platform. The bond remains with the platform until its validity period expires, upon which the miner and their endorser (the one who referred them to the Tezos blockchain) receive rewards on top of their earnings obtained during the bond period.

It is prudent to note that the bond period has been mentioned as being a year at first, but then it changed to a “cycle” instead, with amendments being made to the Tezos whitepaper accordingly. The new text from the whitepaper now reads as outlined below (with amendments originally shown by Tezos in red).

“We conjecture that the security of any decentralized currency requires to incentivize the participants with a pecuniary reward (we are in the process of finalizing the rewards schedule at the moment). As explained in the position paper, relying on transaction costs alone suffers from a tragedy of the commons. In Tezos, we rely on the combination of a bond and a reward. Bonds are one year (bonds will now only last a single cycle, given the high opportunity cost and little benefit to the security of extending the bonding period past one cycle) security deposits purchased by miners (endorsers will also be required to purchase bonds). In the event of a double signing, these bonds are forfeited.

After a year (cycle), the miners (and endorsers) receive a reward along with their bond to compensate for their opportunity cost. The security is primarily being provided by the value of the bond and the reward need only be a small percentage of that value.”

Tezos features

The Proof-of-Stake system

As hinted above, Tezos uses a proof-of-stake mechanism to supplement its day to day operations and to keep the blockchain stable. The proof-of-stake system remains conventional for the most part, with the amount and period of staking still being discussed and finalized after being changed from a whole year to a specific “cycle”.

In Tezos’ proof-of-stake consensus, miners are asked to prove good faith by staking a certain amount of coins with the blockchain. The same holds true for those who want to take part in the self-governance model and vote on the continuous proposals being put forth by the blockchain for its improvements – individuals who are called “bakers” due to Tezos’ decision to change the terms related to staking.

Tezos’ mechanism differs where it puts its own spin on now-classic mechanisms such as the “follow-the-Satoshi” procedure, which denotes system serial numbers to a set of coins to track back to their source. However, since this information could cause lagging incidents and lead to scalability issues if generated in large quantities, Tezos revises the mechanism on its own.

It does so by introducing a “coin roll” algorithm, where one coin roll is made up of 10,000 XTZ. Instead of fragmented chunks of coins that have serial numbers denoted to them, the system waits until an address has sourced that specific number of coins. Once it does, they get assigned the serial number and the counter resets for said address, so on and so forth. This is one of the many aspects that could save the blockchain from running into scalability issues in the future.

The Smart Contracts

The smart contracts on the Tezos platform allow for self-verification of smart contracts, which is a very beneficial feature especially for those who need to keep their smart contracts impeccable when they go out for real-world adoption and usage. This feature works through Tezos’ implementation in OCaml, a programming language that provides a clear coding mechanism. This is supposed to make it easier to cross verify the correctness of a smart contract in terms of optimal function.

Now, this does not mean that you can make a contract technically impeccable but have it do nothing in the end; the tool is just there so you could verify if your work is prone to failure or not, not to do all the work for you.

You may think of this as referring to a teacher while writing your paper in a specific format. They may tell you if the format is correct or not, but the contents of your paper are something only you yourself are responsible for in the long run. This is mostly to ensure that there are no shortcomings in the development of the smart contract that could lead towards unfortunate incidents such as the DAO hack.

While some blockchains use unspent outputs during code development, Tezos makes the process to be more “branded” and instead uses stateful accounts in the place of that term. And when these stateful accounts result in an executable code, they are known as smart contracts. All of these contracts have a “manager” (which in the case of a contract is simply its owner) who can see whether or not the contract has been flagged as spendable, and can then spend the funds associated with the contract if they wish to do so. However, there are some storage fees to keep track of with each smart contract. You may think of this storage fees as the gas that smart contract developers have to spend on blockchains such as Ethereum and NEO.

With the launch of its Betanet and future plans to launch the Mainnet in the upcoming months, the platform will evolve to obtain more users and perform more transactions in a few months from its launch. It is at that time that it will need a sustainable model of function that does not need much intervention to provide a truly impeccable experience to its users.

You may think of this as how Ethereum initiated as a lag-free blockchain that did not have any scalability issues at the start, but with increased user demand and consumption, it started to slowly have similar scalability issues as Bitcoin. A network in its metaphorically shiny and glossy self can work very well, but it’s true test comes when it is used rigorously by its customers, and the same holds true for Tezos.

Tezos - Start baking

Controversies Abound

If you have been camping out the cryptocurrency space over the last few months, then you might be aware that Tezos has had its fair share of controversies in the past.

As cited by various news reports by digital publications such as Reuters and Bloomberg, the platform has had various issues where it had to fight for its own funds. The issues were faced by CEO and co-founder Kathleen Breitman and her husband, Arthur Breitman, who also serves as the project’s CTO.

Mrs. Breitman had been a former employee of revered organizations such as R3 and Bridgewater Associates. Mr. Breitman has work experience with Morgan Stanley and is also known for writing a set of papers in 2014. These papers pointed out the future flaws of the blockchain, including the prediction of scalability issues being faced by popular blockchains such as Bitcoin and Ethereum in the present day.

The story of the Breitmans is one to be read as a saga on its own, but for the sake of keeping it brief as we can, let’s go through the most important aspects of their lives which actually affected the larger public around them.

In 2015, Mr. Breitman had started a company in Delaware, U.S., by the name of Dynamic Ledger Solutions, which ended up being the entity under the banner of which the Tezos code was developed by the Breitmans. However, when it was time to register Tezos in a country with more lenient regulations towards digital financial transactions, the Breitmans ended up selecting Switzerland as their headquarters.

To operate in Switzerland, they had to select a third party to join them on the board to meet the requirements of having the vested interest of a neutral party between their then-family-regulated business.

The neutral party was Johann Gevers, who was the president of the Tezos Foundation.

An entity that was set up in Switzerland. It was all smooth sailing at first. The Breitmans worked on the development, subsequent fundraising and then the planned launch of their brainchild, while Gevers overlooked the matters of the office.

That is until he accused the couple of acting against the interests of Tezos and everything it stood for.

The result? A domino effect that resulted in multiple class action suits that surprisingly were not represented by Gevers. After months of these scandals, Gevers finally stepped down from his position as the president of the Tezos Foundation, which finally led to the betanet launch of the troubled cryptocurrency platform.

Should We Expect Anything out of Tezos?

Due to what it promises on paper, Tezos comes off as one of the most subversive projects of the cryptocurrency industry due to how it aims to revolutionize the way that cryptocurrency platforms could work.

It not only uses smart contracts like Ethereum and NEO but also leverages the self-governance idea from networks such as Dash. This makes Tezos a “best of both worlds” kind of an option for its investors, which is not a bad thing at all.

It is a pretty unique system that works with continuous updates, mining and signing blocks, along with using bonds and rewards to help keep it up and running and prevent as many attacks as it possibly can. Furthermore, by only maintaining a single chain at a time, the system can run faster and more efficiently, and again, can be better protected against other attackers.

When you add the features of self-verifying smart contracts to the mix, it only enhances the ability of the platform to be adopted as a mainstream solution.

In its present situation, it has managed to pique everyone’s interest, but not for all the right reasons.

After much controversy and its trials to rise past the issues that it has faced lately, Tezos needs something very tangible in order to present what it is truly capable of pulling off. It has already set itself on that path by launching the Betanet, but it needs to stay on that course if it has to turn things around for itself.

It is evident to see that this blockchain project is trying to achieve the goal of being the world’s first “self-amending cryptocurrency.” But it is not an easy feat in itself and almost impossible when you are trying to compete with the big names in the industry.

That is why Tezos has to fight its way through the past controversies to establish its own name in the cryptocurrency space. On paper, it has what it takes to be a great project. It just remains to be seen whether it could emulate that success tangibly where it is needed the most.

For Tezos, reaching the revered $1 billion market cap was the easy part. Now it needs to tread the road ahead carefully and repeat the same level of success in another setting.

Tezos Rating: 3.5 - Review by

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