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 decentralized ledger backed by a global community of validators, researchers and builders.
Tezos facilitates peer-to-peer transactions, and also the establishment of decentralized applications (DApps) on the network. The network utilizes 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 epitomizes 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.
What is the price of Tezos (XTZ)?
XTZ launched via ICO in July of 2017 and raised around $232 million to put it in the category of one of the largest token issuances of all time. Unfortunately, a dispute among its creators subsequently emerged, ultimately delaying the launch of the network until June 2018. However, since this debacle, Tezos has seen remarkable gains as it caught tailwinds of DeFi hype beginning around November 2020. Its year-to-date performance currently (as of early May 2021) sits around +174%, with the token at about $5.75.
Average daily trading volumes have come down from their peak in mid-February, but an appetite for XTZ ownership has certainly picked up from last year, especially considering how just about anyone can participate in the proof-of-stake verification method and thereby be entitled to receive compensation.
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This article is for informational purposes only and takes no account of particular personal or market circumstances, and should not be relied upon as investment, tax, or legal advice. For investment, tax, or legal advice and before taking any action you should consult your own advisors. Note that digital assets such as cryptocurrencies present unique risks for investors. Please see our disclaimer regarding risks specific to holding digital assets before investing.
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This content is correct as of January 2021
Note: this cryptocurrency is not available for withdrawal to external crypto wallets. It can be bought, held, and sold on Uphold.
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