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Tezos (XTZ) - the self-governing, smart contracts, DeFi capable coin
Over the weekend I began learning about Tezos. I thought I might as well share what I am reading and learning as I go, in case it should be helpful to others with similar interests.
Let me first try to describe what Tezos is. I am going to share a few descriptions I have encountered so far:
From r/tezos:
Tezos is a decentralized blockchain that governs itself by establishing a true digital commonwealth. It facilitates formal verification, a technique which mathematically proves the correctness of the code governing transactions and boosts the security of the most sensitive or financially weighted smart contracts.
From tezos agora:
Tezos is a self-amending blockchain software which uses an on-chain process to propose, select, test, and activate protocol upgrades without the need to hard fork. In practice, this enables Tezos to improve itself over time via a structured, yet decentralized process while preserving a high level of consensus.
Tezos also allows stakeholders to upgrade the amendment process itself. As a result, details of the mechanism described below represent the current mechanism and are subject to change. This page will evolve as the network evolves.
From tezos.com:
Tezos is an open-source platform for assets and applications that can evolve by upgrading itself. Stakeholders govern upgrades to the core protocol, including upgrades to the amendment process itself.
Self-Amendment
Self-amendment allows Tezos to upgrade itself without having to split (“fork”) the network into two different blockchains. This is important as the suggestion or expectation of a fork can divide the community, alter stakeholder incentives, and disrupt the network effects that are formed over time. Because of self-amendment, coordination and execution costs for protocol upgrades are reduced and future innovations can be seamlessly implemented.
On-Chain Governance
In Tezos, all stakeholders can participate in governing the protocol. The election cycle provides a formal and systematic procedure for stakeholders to reach agreement on proposed protocol amendments. By combining this on-chain mechanism with self-amendment, Tezos can change this initial election process to adopt better governance mechanisms when they are discovered.
Decentralized Innovation
Proposed amendments that are accepted by stakeholders can include payment to individuals or groups that improve the protocol. This funding mechanism encourages robust participation and decentralizes the maintenance of the network. Fostering an active, open, and diverse developer ecosystem that is incentivized to contribute to the protocol will facilitate Tezos development and adoption.
Smart Contracts & Formal Verification
Tezos offers a platform to create smart contracts and build decentralized applications that cannot be censored or shut-down by third parties. Furthermore, Tezos facilitates formal verification, a technique used to improve security by mathematically proving properties about programs such as smart contracts. This technique, if used properly, can help avoid costly bugs and the contentious debates that follow.
Proof-of-Stake (PoS)
Participants (“nodes”) in decentralized, peer-to-peer networks provide the necessary computational resources that keep a network up and running. Proof-of-Stake (PoS) is the mechanism by which the various participants in Tezos reach consensus on the state of the blockchain. Unlike other PoS protocols, any stakeholder can participate in the consensus process in Tezos and be rewarded by the protocol itself for contributing to the security and stability of the network. Additionally, PoS is less costly than other consensus mechanisms and lowers the barriers to entry for involvement.
Delegation
In PoS, a security deposit is required to participate in the consensus process and avoid being diluted by inflation. As in proof-of-work, the consensus protocol relies on an honest majority for its security which is incentivized directly by the Tezos protocol by penalizing dishonest behavior and rewarding honest behavior. If a participant behaves dishonestly, they can lose their deposit. Users who do not wish to participate directly in the consensus protocol have the option to delegate their rights to other users to participate on their behalf.
