What are cryptocurrencies Tezos (XTZ): review, mining

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Cryptocurrency Tezos – detailed project overview and forecast

Tezos is a new decentralized blockchain that facilitates formal verification, a method that mathematically proves the correctness of the code governing transactions.

The Tezos blockchain will support robust, decentralized applications and smart contracts, avoiding some of the political and technological challenges that efforts like Bitcoin and Ethereum have previously encountered.

Tezos has 3 key layers – the network layer, the transaction layer, and the consensus layer. The components are modular, making it easy to upgrade them by seamlessly replacing modules.

He runs the “collaboration” model, where he allows XTZ owners to vote in the direction of the blockchain, so theoretically there is no need to rigidly fork the blockchain.

Tezos goal is to build a better chain and solve problems that the team sees on other platforms.

Tezos is largely a competitor to Ethereum. He plans to offer smart contracts and support decentralized applications. The system will operate according to a model with a proof of price, at which the Tezos Foundation states on its official website that “stakeholders regulate the protocol.”

A bit of history

For the first time, the world learned about the existence of a project called Tezos in 2014. The authors are Kathleen and Arthur Breitman, they own the company DLS, which is directly involved in programming. The Swiss investment fund Thezos Foundation, headed by Johann Gevers, is also related to the project, the investment fund deals with finance.

Beginning July 1, 2017, the Tezos team raised a historic $ 232 million (65,703 BTC and 361,112 ETH) over about 2 weeks, accepting contributions from both Bitcoin and ether. In addition, the company was sponsored by many investors, mainly from hedge funds.

Shortly after the end of the ICO, problems quickly began to appear one after another. Some of the key events include lawsuits, leaders leaving or being replaced, fines, securities fraud allegations, and a deferred major online launch that has infuriated many with impatience.

Tezos Features

  • Written by Tezos in Ocaml, a key advantage of this approach is the ability to verify portions of the protocol. Among the shortcomings – the programming language is rarely used, which creates difficulties in development;
  • The Ethereum virtual machine is not used. This approach is found in most Bitcoin clones, but the creators of Tezos developed their own virtual machine, it works on Michelson;
  • Implemented the possibility of layer-by-layer protocol updates. The protocol itself is divided into 3 layers (network, transaction layer and consensus layer);
  • The consensus algorithm is based on PoS (Proof of Stake); this fundamentally distinguishes Tezos from the same Bitcoin and many other cryptocurrencies. PoS allows you to increase the speed of transaction confirmation, because not all miners will participate in their verification, but only part of the selected validators. Many authors of the cryptocurrency are scolded for using PoS in the form as described in 2014, it is much inferior to BFT PoS algorithms, in particular, it makes validators vulnerable to DDOS attacks.

Tezos calls itself ‘a new digital commonwealth’ – ‘a new digital community.’ The Commonwealth is a group that wants to be connected with each other for their common goals and interests. Tezos aims to have token holders make decisions together, manage the platform, and improve it over time.

The platform is positioned as an alternative to Ethereum network protocol for secure smart contracts, which will be able to avoid the technological and political problems that Bitcoin and Ethereum had.

The fact is that Tezos can update the entire protocol of decentralized circuits without a hard fork, the code will be updated automatically. This method of changing the protocol will be used for the first time.

“Tezos is the first blockchain formalizing protocol-level management. We see this as a fascinating experiment that could potentially lead to a huge breakthrough, ”Olaf Carson-Wi, founder and CEO of Polychain Capital hedge fund commented on the new blockchain platform earlier this year, when Polychain Capital invested in Tezos.

Tezos co-founder Kathleen Brightman said that Tezos has developed its own Michelson smart contract language, which is designed to facilitate formal verification. Formal verification is a process that mathematically guarantees the correctness of certain aspects of computer code. It is, in particular, used in the aerospace industry, where the cost of error is especially high.

If the Tezos developers want to make changes to the code, they will have to pay. Hard forks are usually undesirable because they lead to conflict within the network community and increase the volatility of cryptocurrencies. So, recall, Ethereum twice produced a hard fork. The first, most serious one, after about $ 60 million was stolen from DAO Ethereum. As a result, two Ethereum blockchains and two coins appeared – Ethereum and Ethereum Classic (a community that did not agree to the cancellation of the Ethereum ICO DAO announced by the Ethereum development team led by With Vitalik Buterin).

On the eve of the hard fork and Bitcoin blockchain due to problems with low transaction speed. There is also a conflict within this community that threatens to split the single Bitcoin network, the emergence of several bitcoins and the drop in the capitalization of the main cryptocurrency. Hard forks lead to sharp jumps in cryptocurrencies, which is bad for calculations.

That is why Tezos code makers would like to avoid hard forks. This is stated in Position Paper.

The second significant difference between Tezos and the Bitcoin blockchain is the consensus algorithm. In the case of Tezos, it will be based on DPoS (delegated confirmation of the share), in which not all block producers are responsible for the verification of transactions, as in the Bitcoin blockchain, but only selected ones. But token holders have the right to participate in verification. This will give a higher transaction speed. Such a consensus system was also proposed by the EOS blockchain.

But the main thing that the Tezos development team is focused on is transaction security, which Ethereum cannot provide yet. Because of all these improvements, Tezos is already called “blockchain 3.0.”

‘Baking’ instead of mining

In the Bitcoin network, new blocks are created by solving complex mathematical problems through the processing power of the equipment; in Tezos, the generation of blocks is due to “backing”.

Tezos Network Baking Scheme // Source: WhitePaper Tezos
What it is?
‘Baking’ (baking, English baking) is a new type of creating blocks, first proposed by Tezos. The process goes like this:

  • The algorithm randomly selects the coins that will participate in the formation of blocks.
  • Holders of ‘selected’ coins a few weeks before participating in the generation of blocks receive a notification indicating the period during which they must make a deposit (its size depends on how many blocks a particular holder was ‘assigned’ to create). In the WhitePaper of Tezos cryptocurrencies, this deposit is designated as a “debt obligation”.
  • The deposit is “frozen” and thawed only if the “baker” works honestly after accruing the due reward in the form of new XTZs.

According to the calculations given in the technical documentation, the average earnings of a “baker” is 33% of the deposit amount.

Output

Tezos is not a fraudulent project, companies really exist and real work is underway to launch the blockchain. So far, experts allocate about 20% to the fact that Tezos will really eclipse not only Ethereum, but also Bitcoin, 50-60% allocate that the fate of Ethereum awaits the project, i.e. Approximately 2-3 place by capitalization. The forecast of the Tezos cryptocurrency leaves 20-30% for the failure of the project.

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