The term “decentralization” was not widely used until the introduction of cryptocurrencies and blockchain technology took place. Because it offers the transfer of control from a centralized authority, which many users see as an advantage, decentralization is often considered when building a technology solution.
It is not new to us that Bitcoin (BTC) is the world’s most well-known cryptocurrency. Its network is also leading among several numbers of decentralized blockchain networks that can execute peer-to-peer transactions. One of those is Tezos, which also makes use of smart contracts—now standing as Ethereum’s direct rival that claims to offer faster transaction speed, improved governance, and safer smart contracts.
How promising can this cryptocurrency be? In this article, we will get to know more about Tezos and how it works. Is it really worth buying? We will find that out below.
What is Tezos (XTZ)?
Tezos is an open-source platform backed by a global community of validators, scholars, and builders that addresses the fundamental barriers to asset and application blockchain adoption. Its digital token is known as “tez” or “tezzie.” Tez holders do not receive the reward by mining but for participating in the network’s Proof-of-Stake (PoS) consensus mechanism. According to its developers, the term “Tezos” came from an ancient Greek word “smart contract.”
As mentioned above, Tezos is a decentralized ledger that uses blockchain technology, similar to Bitcoin and Ethereum. Tezos is a network that is supposed to grow over time. This system’s flexibility is seen as critical. Bitcoin has been plagued by various challenges and growing pains due to its lack of flexibility and scalability. In terms of flexibility, Tezos follows in the footsteps of Ethereum.
History
In 2014, Tezos, designed by Waymon engineer Arthur Breitman and his wife Kathleen, was first proposed and then finally launched after four years. Tezos has gained traction as a blockchain platform for Non-Fungible Tokens (NFTs) because of its energy-efficient Proof-of-Stake (PoS) mechanism, which has been a hot subject amid worries about other Proof-of-Work (PoW) platforms’ energy needs. OneOf has chosen Tezos, a music NFT platform funded by Quincy Jones, as well as McLaren Racing and Red Bull Racing, to construct their NFT platforms.
The Tezos Foundation contributed a good history in the cryptocurrency world by holding fundraising and successfully raised $232 million in 2017, making it one of the largest initial coin offerings (ICOs) of the cryptocurrency boom in the same year. The Tezos Foundation, located in Switzerland, was established following the ICO to launch the protocol.
How does it work?
Tezos employs a variant of traditional Proof-of-Stake (PoS) consensus called Liquid Proof-of-Stake (LPoS). The algorithm protects the network, verifies transactions, and distributes newly created or minted XTZ.
Bakers, or the network nodes that validate blocks and add them to the blockchain, are chosen to perform those actions evenly to their share of 8,000 XTZ staked rolls. After successfully performing their roles, bakers are rewarded with newly minted XTZ.
What are the benefits of Tezos?
Being a decentralized blockchain provides not only all of the usual benefits but also some unique characteristics. The following are its advantages:
- Self-Amending Blockchain – self-amendment makes future modifications and upgrades easier to coordinate and implement. This allows the network to update the protocol without having to go through a hard fork or separating into numerous blockchains.
- Proof-of-Stake Protocol – each stakeholder can participate in the consensus process and has the right to be directly rewarded by the protocol for making a significant contribution to the network’s security and liability.
- On-Chain Governance – there is an election cycle that provides stakeholders with a means for reaching consensus on proposed blockchain modifications and amendments in a systematic and organised manner. It can also enhance its election process for greater governance in the future by combining a self-amendment mechanism with on-chain governance.
- Smart Contracts – the Tezos blockchain may be used to create decentralised apps and smart contracts that cannot be blocked or taken down by external parties.
- Formal Verification Method – which improves the security of these applications by using mathematical processes. The method may also be used to find flaws and correct them before they cause major problems.
Is Tezos a good investment?
XTZ has a huge and developing ecosystem and is currently ranked 41st in terms of market capitalization in the cryptocurrency market. Indeed, Tezos is worth it. Although it is always reminded that cryptocurrency trading is not 100% risk-free, investing in Tezos can be successful if you know what you are doing and understand the asset.
Tezos can be a good investment to many, especially for long-term investors, financial institutions, and crypto enthusiasts. But in the end, whatever crypto user category you fall under, it always depends on your financial goals, perspective, and knowledge.
Keep in mind that the crypto market can be highly volatile. If you are diversifying your portfolio while considering Tezos, you can also look at other solid assets like Bitcoin, Ethereum, Binance Coin, or Ripple. If you are a new crypto trader, you can find all of these and other cryptos in the Yuan Pay App, an easily accessible and beginner-friendly trading platform created for a more exciting journey in the crypto world.
