What is Tezos (XTZ)?

Camilla Marziani

By Camilla Marziani

Self governance and user participation are at the heart of Tezos, an open source platform that is pushing for the Web3 revolution. Known for its unique liquid Proof of Stake consensus mechanism and self-amending protocol, Tezos is especially popular with entertainers and artists such as Doja Cat and Mike Shinoda.

  • Tezos wants to advance the adoption of blockchain technology by providing a secure and scalable platform for smart contracts and DApp development.
  • Tezos is known for its focus on community-driven self governance and special liquid Proof of Stake (PoS) consensus mechanism.
  • XTZ is the native currency of Tezos and is used in staking and governance.
  • The Tezos price reached its all time high of €7.5065 on 10 March 2021.

What is Tezos? 

Tezos is an open source development platform that wants to help push the widespread adoption of Web3 and blockchain technology. Based on a community-led governance model, Tezos differs from many other cryptocurrencies in that it is designed to prevent a future split of its blockchain through forks. This means that decentralised consensus is not achieved by a management or development team. Instead, every stakeholder who owns XTZ - the currency of the Tezos network - is able to approve or reject amendments to the protocol. To earn block rewards and be able to vote, stakeholders may choose to delegate their XTZ. Tezos calls this approach “liquid Proof of Stake”, which combines the concepts of liquid democracy with a Proof of Stake consensus mechanism.

How does Tezos work? 

In the Tezos network, validators are called “bakers”. Users can become bakers if they stake a minimum of 8,000 XTZ, which is called a “roll”. The more rolls, the higher the chance of being selected for block creation. 

Other than low gas fees and a short block creation time, Tezos is also known for its unique consensus algorithm, which was named Liquid Proof of Stake for its fluid use of delegation. Tezos users who don’t have the minimum amount of XTZ to participate in the block creation as bakers, or who own it but lack the necessary infrastructure to effectively create blocks, have the opportunity to delegate their coins to a baker. This type of delegation doesn’t transfer ownership of the coins from a user to a baker, but rather resembles the act of lending. Bakers who accept the delegation and are chosen for block creation will then have to share their rewards with the users that “lent” them the coins.

In contrast to a Delegated Proof of Stake system, regular and delegated bakers coexist and can all take part in block creation. In short, there isn’t a predetermined group of delegates like in a traditional Delegated PoS.

On-chain governance and self-amendment

Other singularities of Tezos are its on-chain governance and self-amendment rule. Bakers can not only create blocks, they can also vote to approve or reject adjustments or amendments to the protocol. If an alteration to the Tezos network is approved by the bakers, it will automatically be implemented on the blockchain through smart contracts. This is the process that earned Tezos the title of self-amending protocol.

Tezos’ on-chain voting system combined with the self-amendment feature make disputes and forks less likely to occur on the blockchain as every upgrade is democratically voted for by bakers and then executed via smart contracts. This means that all upgrades and changes are democratically approved by the community of bakers, virtually eliminating the need for a fork. 

How to buy XTZ?

You can buy Tezos through cryptocurrency exchanges like Bitpanda using fiat currencies, e.g. euros or U.S. dollars, but it’s a good idea to first get familiar with the XTZ price history and the current exchange rate. Once purchased, your Tezos investment can be viewed and accessed in a digital wallet that acts similarly to a banking app. You then have the option to hold on to your XTZ or sell it again via the exchange.

XTZ price history

Like other cryptocurrencies, XTZ is a highly volatile asset and its price can fluctuate based on market conditions. XTZ initially struggled to gain traction when it launched, but found its footing in late 2021 and early 2022. In the summer of 2021 it reached several significant peaks, achieving its all time high of €7.5065 on 10 March 2021. Currently XTZ is trading at an average daily high of €1.5641 and an average daily low of €1.5105.

How to use Tezos?

Tezos has experienced headline-grabbing attention and adaptation in the last few years, especially in the banking sector and entertainment sphere. In October 2021, for example, people from Neuilly-sur-Seine, France, were able to digitally cast their votes through the Tezos-based app Electis. The vote concerned the choice of books in a public library, and it represented a great testing opportunity for the use of Tezos blockchain technology in the voting system.

More and more traditional financial institutions are adopting decentralised finance solutions based on the Tezos blockchain, most notably Swiss Arab Bank, which will be using the Tezos blockchain and native coin to offer digital assets to its clients.

Tezos is also one of the go-to choices for musicians: the NFT platform OneOf, running on the Tezos blockchain, has been gaining popularity thanks to users such as Doja Cat, John Legend, Charlie Puth, The Kid LAROI and others. Speaking of NFTs, Tezos is also an active player in the digitalisation of art and culture. Another popular platform built on Tezos is “hic et nunc”, a decentralised digital asset platform used by the likes of musician Mike Shinoda of Linkin Park and by the Manchester Whitworth Gallery, which minted an NFT of the poet William Blake to raise money for social projects. 

Camilla Marziani

Camilla Marziani

Global content specialist, blockchain enthusiast and coffee lover