Tezos’ core features include:
To mitigate the governance issues faced by many blockchain protocols, Tezos employs a number of pioneering features, which are rooted first and foremost in the underlying consensus algorithm. The term Liquid Proof of Stake was chosen to differentiate the model employed by Tezos from Delegated Proof of Stake (DPoS) chains such as EOS or NEO. While DPoS blockchains split block production rights evenly between a set of active block producers, LPoS assigns the probability of block production based on the proportion of stake held by each validator; and there is no limit to the number of bakers in the system.
Tezos uses inflationary block rewards and transaction fees to incentivize validators (or “bakers” in Tezos terminology) to participate in consensus. Bakers contribute their computing power to the network to validate transactions. To participate, bakers must own at least 8,000 XTZ (or 1 roll). Rolls are aggregated at the baker level, which means a baker’s baking power is proportional to the number of tokens (or “tez”) held, rounded down to the nearest roll. The more rolls held by a baker, the higher the chance they will bake the next block.
Bakers and Endorsers (i.e., bakers that check block validity) are chosen randomly every cycle (approximately every three days or 4096 blocks). Baking rights also follow a priority order, which is randomly selected by the protocol per block. Should an appointed baker fail to broadcast a block within a one minute time frame, responsibility shifts to the second baker on the priority list. Each block is baked, and then endorsed (witness the block and checked that it was valid) by 32 other randomly assigned bakers. All Bakers and those endorsing must post a deposit for each block in which they play a role validating.
This deposit is forfeited if any malicious activity occurs. An award of 40 XTZ is awarded for baking a block, in addition to the sum of the transaction fees. Meanwhile, each Endorser is awarded 1.25 XTZ per block.
Liquid Proof of Stake allows XTZ holders to transfer, or delegate, validation rights to other token holders without transferring token ownership. Holders who possess 8,000 XTZ (1 roll) but do not wish to participate directly in baking can simply allocate their holdings to a baker, which in turn grants that baker a higher probability of validating blocks. The baker then shares a portion of the revenue received for participating in consensus (in addition to collecting a fee) with all token holders who delegated tokens. Bakers compete for holders’ XTZ by charging lower fees than others. An aggregated list of baking services is available here. Binance Staking supports Tezos staking with no baking fee.
On-chain governance is a mechanism for facilitating the self-amending feature of the Tezos blockchain. Tezos employs this system to incentivize developers by rewarding them for their contributions, in addition to democratizing the evolution of the protocol itself through the voting process, which provides a viable alternative path to a hard fork.
Self-amendment is implemented to reduce the disruption and costs associated with hard forks, while simultaneously opening an avenue to seamlessly and democratically integrate innovative changes.
The self-amendment process is split into four periods: the Proposal Period, Exploration Vote Period, Testing Period and Promotion Vote Period. Each of these four periods lasts eight baking cycles (i.e., 32,768 blocks or roughly 22 days, 18 hours), which is approximately three months from proposal to activation. A more detailed breakdown of each period follows:
As the primary actors maintaining the network, bakers also are responsible for casting votes in the formal upgrade process. Voting rights are assigned to baker delegates based on the number of rolls in their stake at the beginning of each voting period as follows: 1 vote = 1 roll = 8,000 XTZ. Both voting periods function in the same manner. During the vote period, a delegate can cast a single Yea, Nay,or Pass. A vote is only successful if a. It has a supermajority and b. the participation reaches the current quorum. In line with the decentralized ethos underlying Liquid Proof of Stake, XTZ holders can choose a baker whose vote is aligned with theirs and delegate their stake, thereby electing a representative on their behalf.
In July 2017, Tezos raised $232 million in BTC and ETH through an Initial Coin Offering, making it one of the largest ICOs in the industry. The genesis block began in June 2018, with 608 million XTZ entering into circulation; it maintains no supply cap at this moment.
Tezos’ block time is one minute and the current annual inflation is 3.6%, implemented with the Carthage 2.0 upgrade.
The previous inflation rate of XTZ was 5.5%. The average transaction fee stands at $0.00232. Nearly 80% of the current supply is staked and the current circulating supply is 704,111,107 XTZ (as of March 2020).
The Tezos Foundation, based in Switzerland, is responsible for the promotion and management of the protocol. The Foundation is subdivided into six committees which focus on various respective facets. The foundation consists of the Foundation Council, Executive Committee, Audit Committee, Investment Committee, Technical Advisory Committee, and Nomination Committee.
The following list comprises the current members of the Executive Committee, who are responsible for the operational management of the Tezos Foundation.