What is cryptocurrency Tezos (XTZ) and how does it work?

What Is Tezos (XTZ)?

Tezos was created as a cryptocurrency that allows anyone who owns its XTZ token to vote on any future changes to network rules. Once the consensus has been reached for these rule changes, the software automatically updates the rules across all network nodes. This essentially puts the power of directing the future of Tezos directly into its users’ hands.

Adopting this system of governance provides the network with the benefit of vastly increased user satisfaction – which also nearly eliminates the chances of a hard fork occurring.

The arrival of Tezos was groundbreaking, as its new model separated cryptocurrencies into two camps, those with “on-chain governance” and those with “off-chain governance.”

This new and unique idea brought Tezos a lot of public interest, which was proven by its more-than-successful funding series in 2017. Tezos officially went live in 2018.

How Does Tezos Work? 

While Tezos offers similar features to other cryptocurrencies, its system of operations is much different. Tezos’ blockchain can be split into two distinct parts:

• Network shell: the part of the code that handles transactions, administrative operations, and amends itself based on how users vote.
• Network protocol: the part of the code that sends proposals to the shell for review.

Tezos uses a variation of the classic proof-of-stake (PoS) consensus mechanism called liquid proof-of-stake (LPoS). This mechanism works by its users staking, or in Tezos’ case, “baking” XTZ. To become a baker, a single node is required to bake 8,000 XTZ tokens.

Bakers play a major role in the governance of the blockchain by voting on code changes proposed by developers. The voting process lasts for 4×23 days.

Who Are the Founders of Tezos? (History of Tezos)

The idea of Tezos started in 2014, when co-founders Arthur Breitman and Kathleen Breitman started this project along with a group of core developers. The company operates from Switzerland.

The Tezos ICO managed to raise $232 million in just 2 weeks, accepting contributions in both Bitcoin and Ether. Shortly after this record-breaking ICO, Tezos ran into a lot of management issues.

The company that owned Tezos, DLS (Dynamic Ledger Solutions), was not the one to hold the ICO proceeds. Rather, a new company called Tezos Foundation held all the funds. Problems arose when the head of Tezos Foundation refused to disburse the funds to Tezos co-founders. However, after a lot of unwanted media attention, things settled and the project started working as intended.

What Makes Tezos Unique?

One of the main goals of Tezos is to become a blockchain that is capable of creating the best reward structure in the world.

One of the main differences between Tezos and other cryptocurrencies is the fact that it is both decentralized and self-governing. Its automatic upgrades and updates also play a major role in the uniqueness of Tezos. The network participants can easily vote for or against the proposed updates, thus making it the perfect place for crypto enthusiasts.

What Gives Tezos Value?

Tezos derives its value from two things, its XTZ token and from the companies that use Tezos to tokenize their assets.

Tezos XTZ

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Bitcoin BTC

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Ethereum ETH

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The role of the XTZ token is to maintain and operate the Tezos network. It can be used for holding, sending, spending, or baking. By owning and baking XTZ, users are able to vote on network upgrades, which is incredibly valuable to the Tezos users.

When it comes to its partnerships, companies such as Securitize, Elevated Returns, BTG Pactual, and tZero have all been tokenizing their assets on Tezos.

How Many Tezos (XTZ) Coins Are in Circulation?

Tezos’ maximum and circulating supply count is a bit under 762 million XTZ tokens.

The current system introduces around 80 XTZ tokens per block (every minute), which translates to a per-annum inflation of around 5.51%.

Other Technical Data

Tezos (XTZ) bakers are responsible for deciding the future of the network through a unique voting process.

This process consists of four different voting periods, with each vote separated by 23 days:

The Proposal Period: any baker on the network can propose changes to the way the network is run. The proposals receiving the most votes move on to the next stage.

The Exploration Vote Period: proposals that reach an 80% positive vote move on to the next stage.

The Testing Period: the proposal is implemented on a temporary fork of the network to ensure it works and will not cause harm to the primary blockchain.

The Promotion Vote Period: a final vote is cast to determine if the proposal will be implemented to the source code of Tezos. 80% or more is needed to pass.

Bakers can also be rewarded for beneficial proposals by attaching an invoice to their submission. If their proposal is implemented after passing all 4 stages, the invoice will mint a specified amount for the Baker.

How Is the Tezos Network Secured?

Tezos uses a decentralized blockchain network, meaning that there is no central database or a single point of failure. Even if a hacker manages to find a way, no amendments can be made without prior approval from the stakeholders’ consensus.

Tezos also uses cryptographic encryption to keep all user information safe and secure. It operates a customized version of Proof of Stake (PoS) that is built to allow users more flexibility moving their stake from node to node, thus encouraging more honorable behavior from the delegated baker nodes. This specialized consensus mechanism is dubbed Liquid Proof of Stake, or LPoS.

How To Use Tezos

While the Tezos blockchain hasn’t been properly utilized yet, it has still seen some form of adoption. This project might be interesting to developers that are looking to launch decentralized applications. Projects like tzBTC and Tezsure have already created their fully-functional applications on the Tezos platform.

The major use for Tezos currently is as a staking currency, attractive because of its ability to earn the staker (or “baker” in the case of tezos) passive generation of more Tezos XTZ tokens. Additionally, it can be used as a speculative investment tool and a form of payment.

How To Choose a Tezos Wallet

The type of Tezos (XTZ) wallet you choose will likely depend on what you want to use it for and how much you need to store.

Hardware wallets or cold wallets provide the most secure option with offline storage and backup. Both Ledger and Trezor hardware wallets offer storage and staking solutions for XTZ. Hardware wallets can involve a bit more of a learning curve and are a more expensive option, however. As such, they may be better suited to storing larger amounts of XTZ for more experienced users.

Software wallets provide another option and are free and easy to use. They are available to download as smartphone or desktop apps and can be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. While convenient, they are seen as less secure than hardware wallets and may be better suited to smaller amounts of XTZ or more novice users.

Online wallets or web wallets are also free and easy to use, accessible from multiple devices using a web browser. They are considered hot wallets and can be less secure than hardware or software alternatives, however. As you are likely trusting the platform to manage your XTZ, you should select a reputable service with a track record in security and custody. As such, they are most suited for holding smaller amounts or for more experienced frequent traders.

Kriptomat offers a secure storage solution, allowing you to both store and trade your Tezos (XTZ) tokens without hassle. Storing your XTZ with Kriptomat provides you with enterprise-grade security and user-friendly functionality.

Buying and selling XTZ, or exchanging them for any other cryptocurrency, is done in mere moments when you choose our secure platform as your storage solution.

Tezos Staking

Tezos works on a liquid proof-of-stake, meaning that it cannot be mined. Instead, its users can stake (bake) their XTZ tokens in order to become nodes. If they don’t have enough tokens to become a full node, they can delegate their tokens and still participate.

Conclusion

Tezos is a well-established cryptocurrency that has encountered and passed numerous obstacles. It offers a unique value proposition in terms of governance, which many investors may like. If we add to that that Tezos is a blockchain that can host decentralized applications, we may see why this cryptocurrency is so popular amongst crypto enthusiasts.

Tezos FAQ

Is Tezos a Competitor to Ethereum?

In a way, yes. Both Tezos and Ethereum are blockchain platforms that have the ability to host decentralized applications.

Is XTZ Delegation Safe?

Yes, delegating your funds to a baker is completely safe, as the baker can only “use” your crypto for staking, and nothing else.

When Does an XTZ Baker Start Earning Rewards?

Potential bakers will initially need to wait 35 days to be approved. However, this process only happens the first time when a user decides to stake their XTZ.

After the 35 day period passes, the baker will start earning rewards every 3 days.

How To Buy Tezos

Buying Tezos (XTZ) is as easy as visiting Kriptomat’s how to buy Tezos (XTZ) page and choosing your preferred method of payment.

How to Sell Tezos

If you already own XTZ and hold it on a Kriptomat exchange wallet, you can easily sell it by navigating the interface and choosing your desired payment option.

Tezos Price

Several factors influence Tezos price, including exchange inflows and outflows, sentiment, technical and fundamental developments, the news cycle, and the general economic environment.

XTZ price is also directly impacted by the demand for it by those using the network.

Ultimately though, the price is decided at any given moment by the cumulative buying and selling of millions of participants worldwide. You can keep up to date on the latest price action and news using crypto exchanges like Kriptomat or one of the many different cryptocurrency tracking services.

The current Tezos (XTZ) price is EUR.

The 24-hour trading volume of XTZ is EUR. Tezos (XTZ) is currently ranked of all cryptocurrencies by total market capitalization, with a market cap of $ EUR. It has a circulating supply of XTZ.

Register now to begin your journey into the world of XTZ and cryptocurrencies with Kriptomat!

If you’re experiencing any issues or have any questions at all, please don’t hesitate to reach our Customer Support Team. We’re always here to help!