Tezos (XTZ) 101 - Complete Guide

In 2014, Tezos was launched by the husband and wife duo Arthur and Kathleen Breitman and since then has been gaining market traction over the last few years. 

The origins began when founder Arthur Breitman published a whitepaper outlining what he believed to be the challenges of the world’s leading cryptocurrency Bitcoin. During this time, he proposed his solution with a self-amending blockchain Tezos and its digital currency XTZ. 

After a few unsuccessful attempts to gain funding, Arthur and Kathleen Breitman held an uncapped initial coin offering in July of 2016. The ICO raised an astounding $232 million, and in 2018 the Tezos network launched with a total supply of 763 million XTZ tokens. The Tezos Foundation supports the digital cryptocurrency XTZ, and this foundation controls the capital and helps in the promotion of the cryptocurrency.  

It is a fourth-generation blockchain network, and the advanced Tezos protocols enable a wide array of functionalities. Primarily this blockchain network is attractive because of how it supports the development of decentralised applications or (dApps) and the coding of smart contracts. Decentralised applications and smart contracts are increasingly becoming the way of the future in many industries besides the cryptocurrency sphere. 

The Tezos blockchain network uses some features that are not available to earlier blockchain cryptocurrencies. For these features to function correctly, it combines its consensus and transaction protocols, and by doing so, the digital currency streamlines its processes making for a more user-friendly and efficient platform.

Three key elements differentiate the Tezos token from its counterparts and attract potential cryptocurrency traders and investors. It makes use of on-chain governance, which means blockchain modifications are undertaken via self-amendment rather than hard forking. 

On-chain governance with the blockchain network prevents unnecessary forking of the blockchain. It does this by allowing token holders to vote for any suggested upgrades that the system needs to implement. 

A systematic and efficient consensus mechanism is crucial within a blockchain as it facilitates communication between the nodes of the network to secure transactions. Tezos goes against the grain by using a Proof of Stake (PoS) consensus. More definitively, it utilises a Liquid Proof of Stake mechanism. This protocol is based around the idea of liquid democracy and is much less energy-consuming than Proof of Work (PoW). 

The PoS system works with validators who place their XTZ tokens at stake in order for them to validate new blocks in the blockchain and qualify for voting rights. Users can conduct staking in two different ways. They can vote, and also confirm transactions directly, which is known as baking. 

Alternatively, users can transfer their rights to another user and entrust them to do the staking, and this is known as delegating. Uniquely delegating is made possible with special smart contracts on the Tezos platform. What makes staking so attractive is that a participant can earn a 5.3% annual return on their stakes, and with the Liquid Proof of Stake consensus, more users can vote on transactions.

This leads us to the verification of smart contracts, which is another unique feature of Tezos. The cryptocurrency was built using two functional programming languages, known as Ocaml and Michelson.

This functional approach is much faster and more accurate than the imperative languages used by other cryptocurrencies. The Michelson functional language that it uses can guarantee that a program is correct via mathematical means, and this process is known as the formal verification of smart contracts. 

Tezos has many real-world use cases across several industries. The smart language, Michelson, allows it to be utilised for executing financial contracts with any number of companies. Additionally, through the use of a security token offering able to be programmed into a smart contract, the cryptocurrency can be used for investment in many liquid assets such as real estate and specific commodities.

Tezos, alongside many other cryptocurrencies, is rapidly gaining traction on the market. With online transactions becoming increasingly popular, the crypto is gaining a considerable market force. Tezos has been performing well on global markets, and as such, many people are considering buying XTZ and other cryptocurrencies now more than ever. 

The impressive performance and probable longevity and upgradability of its core development processes make this digital currency potentially worth investing in. The platform and Proof of Stake processes that it uses create the potential for many future digital currency applications in real-world settings. This helps to substantiate the digital currency’s credibility. Many investors and traders are beginning to wonder if Tezos is the preferred cryptocurrency choice for them. 

It is important to note that, like most cryptocurrencies, it is incredibly volatile. Even though the digital currency is doing progressively well right now, this could change at any moment. That’s why it is vitally important to practice safe trading and analyse market entry and exit points. By doing this, you can better discern the most opportune entry and exit points to negate some of the risks involved with crypto trading.   

Cryptocurrencies are steadily growing in prominence, and there is an excellent likelihood of this continuing into the foreseeable future. No one will be able to give you a definite answer on if an asset will be a worthwhile investment. It is crucial for you to do your research on the cryptocurrency that you want to invest in to make an educated decision on the best route for you to take.