About Tezos (XTZ)

Tezos Frequently Asked Questions (FAQ)

What are the core features that distinguish Tezos from other blockchain networks?


Tezos distinguishes itself with its on-chain governance model, which allows stakeholders to vote on protocol upgrades directly, avoiding hard forks for updates; its Liquid Proof-of-Stake (LPoS) consensus mechanism, which promotes a more equitable and energy-efficient validation process; formal verification of smart contracts, ensuring higher security and correctness; and self-amendment capability, allowing the protocol to upgrade itself without having to split or fork the network.




How does the Tezos governance model work and what role do XTZ holders play in it?


The Tezos governance model is a formal and systematic process designed to facilitate upgrades to the protocol without the need for hard forks. XTZ holders play a crucial role in this model by participating in a series of voting periods. They can propose, delegate, or directly vote on proposed upgrades. This on-chain governance allows stakeholders to effectively determine the future direction of the Tezos network, incentivizing active involvement and aligning the interests of those who hold XTZ with the success and evolution of the platform.




What is 'baking' in the context of the Tezos blockchain and how does it differ from staking?


In the context of the Tezos blockchain, 'baking' is the act of producing and validating new blocks through a process similar to 'mining' in other blockchain protocols. It involves Tezos token holders ('delegates') participating in the consensus mechanism and being rewarded for their contributions. Baking specifically refers to the use of a unique Liquid Proof-of-Stake (LPoS) system within Tezos, where delegates can 'bake' blocks if they have a minimum of 8,000 XTZ, called a 'roll', and are selected based on their stake. This differs from generic 'staking', which typically refers to the broader concept of holding cryptocurrency in a wallet to support the operations of a blockchain network in return for rewards, and it can encompass different consensus mechanisms including but not limited to LPoS, Delegated Proof of Stake (DPoS), and others. Baking is a form of staking particularly tailored to Tezos' operation and governance model.




Who are the founders of Tezos and what was their vision for the project?


Tezos was founded by Arthur Breitman and Kathleen Breitman. Their vision for the project was to create a decentralized blockchain that features a formal process through which stakeholders can govern the protocol and implement future innovations and upgrades, preventing hard forks and promoting a self-amending ledger.




Can you explain how the Tezos proof-of-stake consensus mechanism operates?


Tezos operates on a liquid proof-of-stake consensus mechanism. Participants, called 'bakers', can 'bake' or validate blocks by staking (or 'bonding') a minimum of 8,000 XTZ as a security deposit. Other token holders can also 'delegate' their tokens to a baker without transferring ownership. When a block is baked, rights are randomly assigned to bakers with the weight of the rights proportional to the amount of XTZ bonded. Bakers earn block rewards and fees for their participation, and the stake ensures they act honestly, as malicious actions lead to security deposits being forfeited. This system allows Tezos to secure its network and process transactions without the significant energy consumption associated with proof-of-work systems.




What is the maximum supply of Tezos (XTZ) coins, and what was the outcome of their ICO?


There is no maximum supply cap of XTZ coins. The Tezos ICO, which concluded in July 2017, was one of the largest initial coin offerings at the time, raising over $230 million worth of Bitcoin and Ether.




How is the Tezos network kept secure against fraudulent activities and attacks?


The Tezos network employs various mechanisms to ensure its security. Key features include a Liquid Proof-of-Stake (LPoS) consensus algorithm, which incentivizes network participation and secures the network through decentralized validation of transactions and blocks by stakeholders. By requiring security deposits from validators (bakers), it discourages dishonest behavior. Furthermore, the on-chain governance process allows for upgrades to be proposed, tested, and implemented without the need for hard forks, maintaining network continuity and allowing for the timely resolution of vulnerabilities. Formal verification methods and smart contract languages like Michelson designed for strong security guarantees also contribute to reducing smart contract errors and potential fraud.




What is the process for proposing and implementing protocol upgrades in Tezos?


In Tezos, the process for proposing and implementing protocol upgrades follows a unique on-chain governance model. This process is broken down into several periods: Proposal Period, Exploration Vote Period, Testing Period, Promotion Vote Period, and Adoption Period. Firstly, developers submit upgrade proposals to the network. Tezos token holders then vote on these proposals during the Proposal Period. The most supported proposal moves to the Exploration Vote Period, where a supermajority is required to approve the proposal. If successful, the proposal enters the Testing Period, where it is deployed on a test network for further examination. After this, the Promotion Vote Period begins, with another supermajority vote needed to finalize the upgrade. Once approved, the proposal is automatically implemented during the Adoption Period. This governance mechanism allows for a decentralized and democratic upgrade process within the Tezos ecosystem.




What are the benefits of participating in Tezos staking for individual holders and exchanges?


Individual holders participating in Tezos staking, also known as 'baking,' can benefit from receiving additional XTZ tokens as rewards for helping secure the network. This allows holders to compound their holdings and earn passive income. Exchanges that offer Tezos staking services attract users looking to stake their XTZ, increasing platform engagement and liquidity. They may also charge fees for the staking service, thus generating additional revenue.




What is the purpose of Tezos Nodes and how does it support the baking community?


Tezos nodes are fundamental components of the Tezos network, responsible for maintaining the network’s integrity and security. They participate in the consensus process, validate transactions, and ensure that the blockchain's state is consistent across the network. For the baking community, which consists of validators in the Tezos ecosystem, nodes provide the necessary infrastructure to create ('bake') new blocks and earn rewards. By running nodes, bakers can actively engage in the block creation process, vote on protocol upgrades, and contribute to the decentralized nature of the network.