What is Tezos? XTZ

Hey crypto fam. Who remembers the ICO boom? This is when thousands of other coins appeared
and began raising money like wildfire. Tezos was no exception, raising a whopping
$232M in July 2017. Tezos went on to persevere the bear market
and had a strong year in 2019 which saw the Tezos price breakout to all-time highs of
$3.80 in February 2020. Let’s dig into the hype. What is Tezos and how does Tezos work? Tezos is a smart contract and decentralized
application platform. A smart contract is a self-executing contract
with the agreement terms written directly into the line of code. Once the terms of the agreement are met, the
smart contract can execute based on what is already included in the code. Smart contracts allow the performance of credible
transactions without third parties. These transactions are trackable and irreversible. Tezos has its own native smart contract language
called Michelson. Michelson facilitates formal code verification
by mathematically proving the properties of a program such as smart contracts. This sounds a bit circular, but the security improvement helps avoid costly
bugs and contentious debates.

Before we take a look at the differences between Tezos and other networks, click the "like" button and subscribe to the channel for weekly videos about crypto. One major difference between Tezos and other
smart contract platforms, such as the popular Ethereum network, is that it is secured and
ultimately managed by Tezos bakers. Bakers are like miners in the Bitcoin or Ethereum
network. They secure the network, verify transactions,
and distribute block rewards. Instead of physically mining the blocks with
expensive hardware, this process is done virtually on Tezos through a mechanism called DPOS or
Delegated-Proof-of-Stake. According to stakingrewards.com, Bakers earn
about 6.37% annually. XTZ holders can qualify to be a baker as soon
as they have 8,000 XTZ, otherwise known as a roll in the Tezos lexicon.

If you don’t have 8000 XTZ or don’t want
to deal with the complexity of baking, don't worry. You can still benefit from Tezos staking. Tezos cryptocurrency holders can also delegate
their coins to a baker and earn between 5-6% per year through Tezos staking, making it
one of the highest returns on investment amongst staking coins in crypto. But Tezos is more than your typical Proof-of-Stake
blockchain. Tezos aims to be completely modular and upgradeable
without needing hard forks.

That means the Tezos blockchain can implement
new changes to the network without forking, or splitting into separate chains. To add some context, let's take a look at one of the most popular networks that's had many forks. The Bitcoin community
has had differing perspectives on certain aspects of the network. These differences have in some cases led to
the forking, or spitting, of the original Bitcoin code. And what we have now are bitcoin forks such
as Bitcoin Cash, Bitcoin Diamond, Bitcoin Gold and well, there’s others as anyone
can fork Bitcoin since the code is public. The point is, disagreements can divide communities
& miners. Tezos attempts to solve for disagreements
that lead to splits by letting network participants, the bakers, decide on protocol changes via
four different voting periods. Only the bakers can cast a vote, so if you
delegate XTZ to a baker and don’t agree with their stance, you can delegate to a different
baker who aligns more with your values.

In other words, bakers who don’t vote in
alignment with the views of those who have delegated their tokens to them, get punished
with reduced delegation power as stakeholders delegate elsewhere. This is why Tezos’ governance is called
Delegated-Proof-of-Stake. In traditional proof-of-stake systems, each
individual token holder can participate in the governance process. However, with Tezos, bakers cast votes on
behalf of the delegated XTZ. Bakers are also the only Tezos network participants
who can propose a protocol upgrade. So how does the Tezos upgrade process work? The first phase of voting is the proposal
period. Any baker can submit a proposal to upgrade
or alter the Tezos network.

The most well-received proposal then moves
onto the exploration period. If the proposal gets enough votes there, it
moves to the testing period. A testnet is created for each proposal in
the testing period to ensure that the proposal is safe, secure and functions properly. A testnet is essentially a sandbox to see
the proposed features in action before deciding if they’re worth making a part of the protocol. The fourth and final stage is the promotion
period, where if the proposal receives enough votes in the testing period, it is then deployed
to the tezos mainnet.

This period requires participation from at
least 81.39% of XTZ rolls, which ensures that a majority of network participants are both
participating and in favor of the proposed upgrade. As you can see, decentralized decision making
is a fundamental part of the tezos network. You may be asking yourself, this sounds really complicated,
does it even work? …YES! As an example, in 2019, A Tezos developer group by the name of Nomadic
Labs proposed that holders should only need 8,000 XTZ to become a baker as opposed to
the initial requirement of 10,000 XTZ. This proposal, dubbed Athens A, initially
surfaced in February 2019 and took over 3 months of onchain voting before the community
ultimately decided to push this proposal to mainnet, a monumental moment for both Tezos
and the crypto community at large. If you want to take part in Tezos and are
looking for a Tezos wallet, Exodus has you covered. Click the link above to download an easy to
use Tezos wallet. You can even exchange other cryptocurrencies
for Tezos directly inside of Exodus. What do you all think about Tezos? Do you believe a blockchain can be modular
and upgradeable while being governed exclusively by its stakeholders? Share your thoughts in the comments below.

And if you want to see more videos about Tezos
or other cryptocurrencies, like this video and subscribe to the channel. Until next time, Hodl on..

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