A Beginner’s Guide to Tezos

By Swati Kishore

The controversial crypto platform, Tezos entered the market with its record USD 32 million ICO. Ever since, Tezos has faced a lot of problems, be it the lawsuits filed by ICO investors, to the power struggle for the Tezos source code, to giving up on sole control on Tezos Blockchain.  The controversy has died down after the Betanet launch. In a recent news, dated July 2018, Tezos announced that the big four will audit the Tezos Blockchain. If you want to know more about the cryptocurrency that has made headlines ever since its launch, then this beginner’s guide to Tezos is the ideal place to start.

What is Tezos cryptocurrency and how does it work?

The Tezos Blockchain platform is characterized by its distributed, permission-less, and self amending mechanisms. The platforms utilizes Smart Contracts to provide on-chain governance, and it has noticeable enhancements as compared to the Ethereum Network.

It utilizes the Proof of Stake consensus algorithm. In such a model all stakeholders take part in the governance structure. The focus of the Tezos platform is on modular design with trivial on-chain protocol upgrading. The Blockchain platform can be used across industries, such as healthcare, retails, logistics and even governance. To read more about Blockchain in governance, do read our glossary titled Blockchain Use Case Governance.

Network Shell of Tezos Blockchain

The platform’s self amending and governance mechanisms are achieved by leveraging a network shell. The network shell works through 3 primary Blockchain protocols, namely, Network Protocol, Transaction Protocol, and the Consensus Protocol.

Tezos Governance

The governance of the Tezos platform is carried out by all the stakeholders who have the ability to take part in the governance of the Blockchain protocol. Stakeholders have the access to vote on any potential upgrades to the protocol, which are issued by the developers. The developers attach invoices to their proposed protocol upgrades, and once accepted they are compensated accordingly.

Formal verification and Smart Contracts

Tezos uses formal verification in parallel with OCaml as the preferred programming language. This is an enhancement in the Smart Contract logic to avoid hacks like the ones that have happened in the past such as the Parity wallet hack, and the DAO massacre.

Proof of Stake consensus and Baking

The Proof of Stake implementation in Tezos Blockchain combines several concepts such as Chain of Activity, Proof of Burn, and Slasher.

Tezos uses Baking as compared to Mining. Baking entails that the creation of Blocks is carried out by the stakeholders who obtain these rights whenever a Tezos token of theirs is randomly selected for the purpose of creating a Block.

Stakeholders who do not wish to participate in the baking can delegate their token to others. In the Baking process, bakers receive Blocks as rewards for acting honestly while they are penalised for dubious activity such as propagation of Blocks on different branches or double spends.