What Is Tezos?

1. What Is Tezos?

Tezos is a decentralized, open-source blockchain network designed to support smart contracts and decentralized applications (dApps). Known for its self-amending capabilities, Tezos allows the network to upgrade itself without the need for hard forks—making it a uniquely adaptive blockchain. It uses a liquid proof-of-stake (LPoS) consensus mechanism, enabling stakeholders to participate directly in governance and protocol upgrades. Tezos prioritizes formal verification, a process that mathematically proves the correctness of smart contracts, making it a strong choice for high-stakes use cases like financial contracts and digital assets.

2. Why Tezos Was Created

Tezos was developed to address key governance and upgrade challenges faced by early blockchains like Bitcoin and Ethereum. Traditional blockchains often struggle to evolve without divisive hard forks, which can fragment communities and dilute value. Tezos was created to solve this by embedding a formal governance process into the protocol itself. The aim was to enable smooth, on-chain upgrades through stakeholder voting, encouraging innovation while maintaining unity. Additionally, Tezos sought to create a more energy-efficient blockchain with advanced security features through formal verification.

3. How Tezos Works

1. Users stake (or delegate) their $XTZ tokens to become validators (“bakers”) or support existing ones, helping secure the network and earn rewards.
2. Developers build smart contracts using Michelson, Tezos’s secure and verifiable programming language.
3. Protocol upgrade proposals are submitted by bakers and voted on by token holders through a formal on-chain governance process.
4. Once a proposal receives enough support, it is automatically implemented without needing a fork.
5. Tezos’s LPoS consensus mechanism enables energy-efficient transaction validation.
6. The blockchain supports a broad range of applications, from NFTs and DeFi to institutional-grade tokenization.

4. Key Features of Tezos

• Self-amending governance for seamless protocol upgrades
• Liquid Proof-of-Stake consensus offering flexibility and decentralization
• Formal verification of smart contracts for higher security
• Energy efficiency compared to proof-of-work chains
• On-chain governance giving power to token holders
• Smart contract support with a focus on safety and correctness
• Support for NFTs, DeFi, and tokenized assets through FA1.2 and FA2 standards

5. Who Can Use Tezos?

• Retail investors interested in staking and earning rewards
• Developers building secure smart contracts and dApps
• Enterprises seeking customizable, upgradeable blockchain infrastructure
• NFT creators and marketplaces looking for scalable, low-fee platforms
• DeFi protocols that prioritize governance and sustainability
• Institutions focused on secure, compliant asset tokenization

6. What Is the $XTZ Token?

$XTZ is the native cryptocurrency of the Tezos blockchain. It plays a central role in maintaining and operating the network:

• Staking: Users delegate or stake $XTZ to participate in the consensus process and earn rewards.
• Governance: $XTZ holders vote on protocol proposals, influencing future upgrades.
• Transaction Fees: All operations and smart contracts require $XTZ to pay gas fees.
• Incentives: Bakers receive $XTZ as block rewards and fees for validating transactions.
• Access to dApps: Many applications on Tezos use $XTZ for access or in-app functionalities.