Back

What is Tezos and Why We Listed It

We have just listed Tezos on CoinMetro! You can now start trading it right on our platform. Read all about what Tezos is, why you should be trading it and how to do it!

What Is Tezos?

Tezos is an open-source platform that can evolve by upgrading itself. It was created to provide developers with the tools necessary to create blockchain based applications. Tezos has its own native currency XTZ.

Sure, there are many blockchain networks out there. So, what makes Tezos so unique? There are three main aspects to cover here. 

Self Amendment

Tezos has included self amendment to its network. But what does this mean? Basically, Tezos can upgrade itself through an in-protocol amendment process without the need for a hard fork. Why is this important? Well, it accelerates innovation and reduces the likelihood of contentious splits. It also coordinates stakeholders within one network over a long period of time.

This type of upgradability gives developers a strong assurance that the protocol will operate smoothly long into the future. In conclusion, Tezos was built to stand the test of time.

Proof-of-Stake

Let’s look at how Tezos approached consensus mechanisms. Tezos uses proof-of-stake to reach consensus on the state of the blockchain. Their method is called baking. It also features optional delegation, which allows any stakeholder to participate in consensus without giving up custody of their tokens. Tezos’ approach to consensus is called Liquid Proof of Stake.

But why is proof-of-stake so great? As a start, it is energy efficient. It increases the cost of 51% attacks and avoids environmentally wasteful proof-of-work. Proof-of-stake also improves scalability and encourages incentive alignment.

Tezos was one of the first major proof-of-stake networks upon their launch in June 2018. As of now, they have nearly 460 bakers and more than 100 public delegation services.

Secure Smart Contracts

We can all agree that no system can be unconditionally secure. But Tezos has come quite close to one. Tezos uses a smart contract language called Michelson. This was designed with security and formal verification in mind. Let’s have a closer look at what formal verification is all about.

Essentially, formal verification allows developers to mathematically prove that code performs correctly, according to its formal specification or certain properties. This is great news for financial smart contracts that represent significant real-world value. For instance, tokenized assets, loans, etc. These types of assets require guarantees that funds will not be lost or frozen due to bugs in the code. Formal verification helps to grant this.

Why Tezos Uses Formal Governance

After reading this, you might be wondering about the importance of formal governance. Let’s break this topic down. 

Most networks, including blockchain as well as open source software, face challenges with sustainability, upgradability, and incentive alignment. This is because open source projects are often maintained by only a few volunteers with little monetary gain. This leads to slow progress. Technical roadmaps, if ever formed, are determined by a small group who don’t necessarily represent the interests of the larger network.

So, when an upgrade is due, it often requires every node operator to download and run new software, aka hard fork. And this is a massive project to take on. It requires coordination of node operators over different social media channels. Users need to be notified of the changes. Naturally, this comes with high costs. In order to save on coordination efforts, updates are often bundled together and pushed infrequently.

Addressing the Challenges

In general, this creates challenges in the network. And how these challenges are handled, determines the network’s evolution and progress of all projects that are built on it. This is why Tezos chose on-chain governance. So, token holders can participate in the amendment process to approve/reject the upgrade by selecting a baker. Nodes will automatically switch to the latest version of the protocol without the need for off-chain communication. 

Applications on Tezos

As we know by now, Tezos offers formal governance and focuses on smart contract security. Tezos’ platform can provide a home for many types of applications. But there are some that are a perfect fit. Let’s have a look at two.

Digital Assets

Digital assets are a great fit for Tezos. We are talking about digital money, tokenized real estate, stablecoins and digital collectibles.

We have to get a bit more technical to explain this. So bare with us! In blockchains without formal governance mechanisms, widely adopted asset projects are likely to gain significant soft power in protocol governance. So, assets would theoretically exist on both forks in a contentious, sustainable split. However, an issuer is likely to honor the asset on only one fork. Avoiding contentious forks can preserve value and coordination around one network. This makes Tezos particularly compelling for issuing digital assets.

Trust-Minimized Financial Contracts

Trust-minimized financial contracts are also well suited for Tezos. 

Financial contracts (like decentralized exchanges, swaps, loans) demand a high-level of correctness. Decentralized blockchain networks get their value from the absence of a trusted third party. This means that if a bug in the code results with a loss of funds, it is particularly unforgiving. If we’re looking at a larger scale,  smart contract exploits can pose challenges for blockchain governance. We all remember the infamous DAO hack, right?

So, this is where Tezos’ smart contract language, Michelson, becomes vital. As we already know, it facilitates formal verification. This boosts the security of the most sensitive or financially weighted smart contracts and reduces the likelihood of bugs. 

Future of Tezos

By now, we know all about Tezos’ revolutionary technology. And it seems like the platform has a bright future ahead.

The platform already created lots of buzz after their ICO in 2017. They managed to raise $232 million and made it to the ICO hall of fame as one of the largest ICOs of all time. But this is certainly not where their story ended.

Unlike many other hyped ICOs of that time, Tezos has seen impressive price increases. As of August 2020, XTZ is priced at $4. This is a solid sign of Tezos’s progress. They have future-proofed their technology and have ambitious plans for the future. 

Now that you know all about the revolutionary technology behind Tezos, why not start trading? Head over to our crypto exchange and buy Tezos with a credit card.