A Comprehensive Guide about the Tezos (XTZ) Protocol

An open-source platform for applications and assets, Tezos (XTZ) evolves by upgrading itself. Upgrades to the core protocol are governed by stakeholders, which include upgrades made to the amendment process. A systematic and formal procedure is provided by Tezos for participants of the platform to vote and come to an agreement over a proposed protocol amendment, with the help of self-amendment and duo on-chain mechanism. Furthermore, Tezos also serves as a platform for creating smart contracts and building decentralized applications that cannot be shut down or censored by third parties.

Launch

Tezos was introduced back in 2014 with the purpose of creating a ‘self-amending blockchain’. Kathleen and Arthur Breitman were the people behind it and they founded the startup known as Dynamic Ledger Solutions that was formed for developing Tezos. The first ICO was conducted by the Tezos team in July 2017 and they were able to generate around $232 million, which was equal to 60,000 BTC and 361,000 ETH at the time and was the largest one that had happened. The Tezos Foundation launched the protocol after the initial coin offering.

They procured Dynamic Ledger Solutions, which included intellectual property rights that formed the Tezos blockchain, in accordance with its ICO agreement. The arrival of the protocol was considered groundbreaking because its novel model separated cryptocurrencies into ‘on-chain’ and ‘off-chain’ governance. This unique and new idea generated a lot of public interest in the Tezos protocol, which became apparent in its funding series in 2017 that turned out to be more than successful. The protocol officially went live in 2018.

LPoS Blockchain

As opposed to other cryptocurrencies, such as Tron (TRX), Lisk (LSK), EOS (EOS), and BitShares (BTS) that use Delegated Proof-of-Stake, a liquidity Proof-of-Stake (LPoS) algorithm is used by Tezos. It enables the Tezos software to keep the network secure, distribute newly minted XTZ and validate transactions. The delegation purpose remains optional because it can keep the dilution of small token holders to a minimum. 8,000 XTZ is the barrier to entry and 8.25% of the total baked tokens are frozen as bonds. In order to participate in governance, people are required to stake XTZ in a process that’s known as ‘baking’ by Tezos. To become a baker, you have to have around 8,000 XTZ.

Other characteristics of Tezos include a reliable internet connection and modest computing power. Tezos has a dynamic validator Set, which has about 80,000 bakers. The tokens can also be delegated by users to other bakers and votes can be allocated to other users for earning XTZ rewards on the blockchain. The design priorities of the LPoS blockchain are accountability, decentralization, security, and governance.

Tezos (XTZ) Token

The Tezos platform has its own cryptocurrency, which is known as Tezos (XTZ) token. This is a decentralized computing ecosystem that has the LPoS consensus mentioned above. Holders of the token who stake them can earn rewards. Tezos has a total available supply of 850.78 million XTZ. As of January 2021, its total circulating supply was 756,203,598 XTZ. As of May 2021, nearly 78.8% of the Tezos tokens have already been delegated. This also includes the 10% that are owned by the Tezos Foundation, which means that the annualized yield is around 5.8%.

Benefits

First and foremost, users can enjoy affordable staking on Tezos. The affordability gives users the opportunity to delegate or stake their tokens in order to get rewards. There is no minimum amount of tokens that have to be delegated, even though some bakers do set limits. Users who choose to delegate their tokens can receive a payout every seven cycles, which is around 20 days. The governance on the Tezos protocol is also accessible. It has an edge due to its delegated proof-of-stake and liquid proof-of-stake. The latter gives most participants the opportunity to directly or indirectly influence the network and get a reward. Seamless upgrades are another benefit that people can enjoy with Tezos.