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What is cryptocurrency Tezos (XTZ) and how does it work?

Tezos (XTZ) is a self-upgrading, open-source blockchain platform for developing and hosting decentralised assets and applications. The obligation for overseeing protocol updates, as well as changes to the governing process itself, falls to Tezos stakeholders. A tezzie or Tez is its own digital token.

The Tezos ICO raised $232 million in 2018, making it one of the biggest ICOs ever. Even if this open-source project had managerial and legal problems up until well into 2020, these have been overcome, and because to the acceptance of its staking mechanism, Tezos is gaining ground.

Tezos (XTZ) has caught your attention, but you’re not sure what it is or where to start. Not to worry. This manual aims to teach you everything you require.

What Is Tezos (XTZ)?

Tezos is a cryptocurrency that enables all holders of its XTZ token to vote on upcoming network rule changes. The programme instantly updates the rules on all network nodes once agreement has been reached on these rule changes. This effectively places the control over Tezos’ destiny in the hands of its users.

By implementing this form of governance, the network gains significantly higher user satisfaction, which also almost completely eliminates the possibility of a hard fork.

The introduction of Tezos was revolutionary because its novel approach divided cryptocurrencies into two groups: those with “on-chain governance” and those without.

Tezos attracted a lot of public interest with this novel and original concept, as seen by its exceedingly successful investment round in 2017. Tezos launched in full in 2018.

How Does Tezos Work?

Tezos has features that are comparable to those of other cryptocurrencies, but its operational model is very distinct. The blockchain of Tezos can be divided into two parts:

Network shell: the section of the programme that manages transactions, administrative tasks, and self-amends in response to user input.
The section of the code known as the network protocol sends proposals to the shell for review.

Liquid proof-of-stake is a variant of the traditional proof-of-stake (PoS) consensus process that is used by Tezos (LPoS). This system operates by users “staking,” or in the case of Tezos, “baking,” XTZ. A single node needs to bake 8,000 XTZ tokens before they may become bakers.

By casting their votes on developer-proposed code changes, bakers play a significant part in the governance of the blockchain. The voting period is 423 days long.

Who Are the Founders of Tezos? (History of Tezos)

Co-founders Arthur Breitman and Kathleen Breitman came up with the concept for Tezos in 2014, along with a few core developers. The business is based in Switzerland.

Accepting donations in both Bitcoin and Ether, the Tezos ICO raised $232 million in just two weeks. After this record-breaking ICO, Tezos encountered numerous management problems.

The ICO revenues were not kept by Dynamic Ledger Solutions, the firm that owned Tezos. Instead, all the money was held by a brand-new business called Tezos Foundation. When the head of the Tezos Foundation declined to distribute the monies to the Tezos co-founders, issues emerged. But after a lot of unwelcome media coverage, things calmed down and the project began to function as expected.

What Makes Tezos Unique?

One of Tezos’ key objectives is to develop into a blockchain that can design the finest incentive structure possible.

Tezos is both decentralised and self-governing, which is one of the ways it differs from other cryptocurrencies. The distinctiveness of Tezos is also greatly enhanced by its automatic updates and upgrades. The network is ideal for crypto aficionados since it allows users to quickly vote in favour of or against suggested improvements.

The Tezos network is maintained and run by the XTZ token. Holding, sending, spending, and baking are all possible uses for it. Users who own and bake XTZ can vote on network upgrades, which is very beneficial to Tezos users.

Companies like Securitize, Elevated Returns, BTG Pactual, and tZero have all been tokenizing their assets on Tezos as part of their agreements.

How Many Tezos (XTZ) Coins Are in Circulation?

The total number of XTZ tokens in the Tezos system is just under 762 million.

Inflation under the present system, which introduces about 80 XTZ tokens per block (every minute), is about 5.51%.

Other Technical Data

The destiny of the network is decided by Tezos (XTZ) bakers via a novel voting system.

There are four voting periods in this process, with a 23-day gap between each vote:

Any baker on the network is permitted to suggest modifications to the way the network is administered during the proposal period. The motions that receive the most votes advance to the following phase.

During the exploration voting period, concepts that receive 80% in favour advance to the following phase.

The Testing Period: To make sure the idea works and won’t damage the main blockchain, it is implemented on a temporary fork of the network.

During the Promotion Vote Period, a final vote is taken to decide whether or not the proposal will be incorporated into the Tezos source code. The passing score is 80% or higher.

By including an invoice with their contribution, bakers can also receive compensation for successful suggestions. The invoice will include a specific amount for the Baker if their proposal is adopted after passing all four rounds.

How Is the Tezos Network Secured?

There is no central database or single point of failure since Tezos employs a decentralised blockchain network. Even if a hacker is successful, no changes can be performed without prior agreement from all parties involved.

Additionally, Tezos employs cryptographic encryption to safeguard all user data. It uses a modified form of Proof of Stake (PoS) that is designed to provide users more freedom when moving their stake from node to node, encouraging the delegated baker nodes to behave more honourably. Liquid Proof of Stake, or LPoS, is the name of this specific consensus process.

How To Use Tezos

The Tezos blockchain has nevertheless received some adoption, even though it hasn’t yet been fully employed. Developers who are interested in releasing decentralised applications might find this project interesting. On the Tezos platform, initiatives like tzBTC and Tezsure have already developed their fully operational apps.

Tezos’ primary usage right now is as a staking currency, which is appealing due to its capacity to reward the staker (or “baker” in tezos’ case) with the passive generation of more Tezos XTZ tokens. It can also be used as a payment method and a speculative investment tool.

How To Choose a Tezos Wallet

The kind of Tezos (XTZ) wallet you select will probably depend on the purposes for which you’ll use it and the amount of data you need to store.

The most secure solution comes from hardware wallets, also known as cold wallets, which offer offline backup and storage. Hardware wallets from Ledger and Trezor both have XTZ storage and staking options. However, hardware wallets come at a higher cost and with a little bit more of a learning curve. As a result, they might be better suited to holding more XTZ for experienced users.

Software wallets are an additional choice that are both free and simple to use. They might be custodial or non-custodial and can be downloaded as desktop or smartphone apps. With custodial wallets, the service provider is in charge of managing and backing up the private keys on your behalf. Non-custodial wallets keep the private keys on your device using safe components. Even though they are practical, they are thought to be less secure than hardware wallets and would be more appropriate for people with lower quantities of XTZ or less experience.

Tezos Staking

Tezos cannot be mined since it operates on a liquid proof-of-stake system. As an alternative, users can stake (bake) their XTZ tokens to turn into nodes. They can delegate their tokens and still participate if they don’t have enough to become a complete node.


The cryptocurrency Tezos has been around for a while and has overcome several challenges. Regarding governance, it presents a distinctive value proposition that a lot of investors would find appealing. We may begin to understand why Tezos is so well-liked among cryptocurrency aficionados if we consider the fact that it is a blockchain that supports decentralised applications.


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