Tezos (XTZ) - Blockchain Guide

Introduction to Tezos

Tezos pioneered the concept of self-amending blockchains—protocols that can upgrade themselves through on-chain governance without hard forks. Launched in 2018 after one of the largest ICOs in cryptocurrency history ($232 million), Tezos introduced innovations in governance and formal verification that influenced the broader blockchain space.

Founded by Arthur and Kathleen Breitman, Tezos was designed to avoid the governance disputes that plagued other chains (like Ethereum’s DAO fork and Bitcoin’s scaling debates). The protocol allows stakeholders to vote on upgrades, with successful proposals automatically implemented—a process that has enabled numerous upgrades without chain splits.

The Self-Amending Innovation

The Problem with Hard Forks

Traditional upgrade challenges:

Community splits
Contentious debates
Development paralysis
Chain fragmentation

Tezos Solution

On-chain governance:

Stakeholders propose upgrades
Voting determines acceptance
Automatic implementation
No fork required

Proven Track Record

Successful upgrades:

15+ protocol upgrades completed
No contentious forks
Regular improvements
Community consensus achieved

How Tezos Works

Liquid Proof of Stake

Consensus mechanism:

Proof of Stake variant
“Bakers” validate blocks
Delegation supported
Lower barriers than competitors

Smart Contract Languages

Multiple options:

Michelson: Stack-based, formal verification
SmartPy: Python syntax
LIGO: Multiple syntax options
Archetype: Domain-specific

Formal Verification

Mathematical proofs:

Prove contract correctness
Critical for high-value applications
Security guarantees
Academic foundation

Technical Specifications

Metric	Value
Block Time	~15 seconds
Consensus	Liquid Proof of Stake
Languages	Michelson, SmartPy, LIGO
Validators	400+ bakers
Upgrades	15+ completed
Min Stake	6,000 XTZ to bake

On-Chain Governance

Amendment Process

Four-phase voting:

Proposal: Submit upgrade proposals
Exploration: Initial community vote
Cooldown: Testing period
Promotion: Final approval vote

Voting Mechanics

How participation works:

One XTZ = one vote
Delegation transfers voting power
Supermajority required (80%)
Quorum requirements

Governance History

Notable upgrades:

Athens: First upgrade (2019)
Babylon: Consensus improvements
Granada: Performance optimizations
Oxford: Recent enhancements

The XTZ Token

Utility

XTZ serves multiple purposes:

Baking: Block production stake
Governance: Voting power
Transaction Fees: Network usage
Delegation: Earn rewards

Staking Economics

Participation rewards:

~5-6% annual rewards
Delegation available
Low minimum for delegation
No lockup for delegators

Tokenomics

Supply dynamics:

Initial supply from ICO
Inflationary rewards (~5%)
No maximum supply
Block rewards to bakers

Ecosystem Development

DeFi Protocols

Financial applications:

Plenty: DEX
Youves: Synthetic assets
Kolibri: Stablecoin
Temple: Wallet with DeFi

NFT and Art

Cultural adoption:

Teia: Community marketplace
objkt.com: NFT platform
fx(hash): Generative art
Art collector community

Enterprise

Business adoption:

Ubisoft gaming
Société Générale tokenization
Red Bull racing NFTs
Various enterprise pilots

Formal Verification Focus

Why It Matters

High-stakes applications:

Financial contracts
Token issuance
Critical infrastructure
Regulatory compliance

Academic Foundation

Research backing:

Inria collaboration
Nomadic Labs development
Peer-reviewed research
Academic credentials

Practical Applications

Real-world usage:

Financial auditing
Security-critical contracts
Institutional requirements
Compliance needs

Competition and Positioning

vs. Other L1s

Chain	Governance	Upgrade Method	Focus
Tezos	On-chain	Self-amending	Governance
Ethereum	Off-chain	Hard forks	General
Cardano	Voltaire (coming)	Hard forks	Research
Polkadot	On-chain	Forkless	Interop

Differentiation

Key advantages:

Proven upgrade mechanism
Formal verification
Strong governance
No contentious forks

Challenges

Competitive pressures:

Lower visibility
Smaller ecosystem
Developer competition
Market attention

Challenges and Criticism

Ecosystem Size

Development concerns:

Smaller than competitors
Developer attraction
dApp variety
Network effects

Foundation Governance

Off-chain concerns:

Tezos Foundation influence
Grant allocation
Strategic direction
Community vs foundation

Market Position

Visibility challenges:

Lower marketing spend
Less hype
Technical focus over marketing
Market share decline

Recent Developments

Smart Rollups

Scaling solution:

Layer 2 scaling
EVM compatibility option
Reduced fees
Higher throughput

Mumbai/Oxford Upgrades

Recent improvements:

Performance enhancements
Feature additions
Developer experience
Protocol optimizations

Ecosystem Growth

Adoption metrics:

Continued baker participation
NFT platform activity
Enterprise deployments
Developer programs

Future Roadmap

Development priorities:

Scaling: Smart Rollups expansion
EVM: Compatibility improvements
Performance: Protocol optimizations
Adoption: Enterprise and consumer
Governance: Continued evolution

Conclusion

Tezos demonstrates that on-chain governance can work in practice, having completed numerous protocol upgrades without contentious forks. The formal verification capabilities provide unique advantages for security-critical applications.

The challenge lies in competing for developer attention and ecosystem growth against larger, more visible platforms. The technical foundation is solid, but network effects favor established ecosystems.

For applications requiring governance certainty and formal verification—particularly institutional and high-value use cases—Tezos provides unique capabilities. Its long-term success depends on translating technical advantages into ecosystem growth and mainstream adoption.

Technology Stack