About Tezos (XTZ)
Tezos is a cryptocurrency and blockchain platform that provides a decentralized, global computer on which developers can build decentralized applications (Dapps) and their own crypto tokens. It differentiates itself from Ethereum by using a different governance model, developer language, and initial consensus algorithm.
Tezos was first described in a position paper published by L.M. Goodman in August 2014. It was later described in a white paper published by Goodman in September 2014. Like the Ethereum network, the Tezos Network is a decentralized virtual computer with a programming language that allows developers to create and run smart contracts. Smart contracts are computer programs that can automatically facilitate, verify, or enforce the terms of a contract entered into by human or computer counterparties. The Tezos network was developed by Dynamic Ledger Solutions, Inc., a US-based company co-founded by Kathleen and Arthur Brietman.
Tez or XTZ is the digital asset token of the Tezos Network (similar to how bitcoin or BTC is the digital asset token of the Bitcoin network). All XTZ balances and transactions are recorded on the Tezos blockchain. The smallest subunit of XTZ is the “mutez,” which is 10-8 XTZ or one hundred-millionth of an XTZ(0.000001 Tez). XTZ can be bought and sold for fiat currency or other digital currencies.
The supply of XTZ is deterministic and not fixed. The supply schedule is embedded in the Tezos protocol and modeled to achieve a nominal inflation rate of 5.4% per year. It is possible that validators (often referred to as “miners” in other crypto networks) could vote to cap the supply and/or change the schedule at a future date.
Tez, like ether, is a “digital oil” that powers a decentralized, global computer; however, Tezos offers an alternative governance system, programming language, and initial consensus algorithm.
The Tezos Network has a unique governance model that supports on-chain upgrades. This model defines a procedure for holders of XTZ (each, a stakeholder) to submit and approve amendments to the network, including amendments to the voting procedure itself. Historically, network changes have been dictated by de facto groups of contributors and miners. If a modification to the network is not accepted by a majority of miners and users, but is accepted by a substantial plurality of miners and users, the network can “hard fork” into two or more competing and incompatible networks. For example, Ethereum experienced a hard fork in June 2016, which resulted in Ethereum and Ethereum Classic. Bitcoin has experienced several contentious hard forks as a result of disagreements around block size, also known as “the block size debate.” By offering an on-chain mechanism to amend its network and seamlessly deploy upgrades, Tezos aims to avoid off-chain debates that can result in hard forks.
The Tezos protocol is written in the Objective Caml (OCaml) functional programming language. OCaml was created in 1996 and is maintained by the French Institute for Research in Computer Science and Automation (INRIA). OCaml comes from the software verification research community and emphasizes formal verification, a mathematical “proof of correctness” that verifies that a computer program will fulfill its specification. This is important for any network or application where failure could be catastrophic (e.g., computer software for airplanes, satellites, etc.).
Tezos uses the Michelson language for smart contracts. Like OCaml, Michelson emphasizes formal verification and was chosen to make it harder for developers to unintentionally introduce bugs into their smart contracts. This decision was influenced by the high profile vulnerabilities found in smart contracts written in other languages (e.g., DAO hack, Parity wallet contract bug, etc.) on other networks.
Tezos’ consensus mechanism uses a delegated proof of stake algorithm. Voting influence is directly proportional to the amount of XTZ that a stakeholder holds. Stakeholders can delegate the vote of their stake to one or more delegates (each, a validator), who can then create blocks and validate transactions on their behalf. Validators are like miners on other networks. They receive XTZ in return for the services they perform on the Tezos network. The more stake delegated to a validator, the greater its reward.