About Tezos (XTZ)

Founded in 2014, Tezos broadly speaking is an open-source platform for assets and applications. Look below the hood, and you see it’s a self-amending decentralised ledger backed by a global community of validators, researchers and builders.

Tezos facilitates peer-to-peer transactions, and also the establishment of decentralised applications (DApps) on the network. The network utilises smart contracts to automatically execute the terms of a buyer-seller transaction agreement.

Network participants use proof-of-stake verification to come to a consensus on whether that block comprises a valid transaction. 

This all sounds pretty similar to other blockchains that use smart-contracts, such as Ethereum. Where Tezos exhibits a stark difference from other blockchain-based transaction networks is with regards to its governance.

XTZ is the governance token adopted by the network for voting on upgrades to the underlying Tezos protocols.

Tezos epitomises democratic on-chain governance. Any participants on the platform can stake XTZ in smart contracts to participate – or select someone else to participate on their behalf – in deliberation and formalization of agreements on protocol upgrades. This enhance-as-we-go process is known as self-amendment. 

With some other blockchains, protocol amendments are proposed and agreed upon; major amendments can result in forks. 

But with Tezos, the changes arise fluidly then automatically take effect. No forks, no ecosystem fragmentation. 

Ultimately, self-amendment governance aims to promote democratic stakeholding, and keep upgrade costs in check. 

Seamless governance is the foundation supporting the potential for constant growth of the intrinsic value of Tezos’s network.

Since new upgrades can be made on a continuous basis, the protocol is able to incorporate new technologies to fulfill the needs of a larger client base. 

XTZ gets introduced into the marketplace through mining i.e. validation and endorsement of the blocks comprising transaction records on the ledger. 

Those who mine and endorse blocks are required to purchase bonds – security deposits that mature at the end of each mining cycle –beforehand. 

At the end of each cycle, bondholders are compensated with different rewards of XTZ (varying, depending on their status as either a miner or endorser). 

Ultimately, miners yield 33% on their security deposit bonds. These serve as an effective counterweight to any potential validation fudging – if you give inaccurate information, then you lose your security deposit. The current mining structure implies an annual nominal inflation rate of around 5%; but this can be subject to change, given that over time stakeholders potentially can vote on operational changes.