What is Tezos?
Tezos is a smart contract enabled blockchain. Tezos allows for a true Global Digital Commonwealth to exist by baking governance into its blockchain!
In order to understand and appreciate Tezos, one must first understand blockchain technology and smart contracts.
In the beginning there was Bitcoin! It allowed people with servers (a.k.a. node operators) on the internet or at home to come together with people who had fast processors and video cards (a.k.a. miners) to produce and agree on a financial ledger which no single person or group of people had control of. The server owners agreed to store the same exact copy of the growing ledger as all the other server owners. The people with fast processors and video cards agreed to use the same rules to solve computationally intensive puzzles to prove the validity of transactions people are making in exchange for a reward paid in $BTC coins. This system of transaction verification became known as PoW (Proof of Work) These agreements are held in place by computer software that's open source which runs the same on all computers. The constantly growing financial ledger itself is held in place by public key cryptography technology, the same one which allows us to have secure online banking.
Some people were not happy with Bitcoin because, while it allowed $BTC holders to exchange coins between each other without a central authority like a bank, it did not allow for the storage & execution of pre-determined contracts between the participants. A decision had to be made. Should Bitcoin change to allow for the execution of smart contracts OR should Bitcoin stay the same and change as little as possible in order to protect itself from the usual trial and error problems of software development? As a group, the miners and the node operators chose to keep Bitcoin as unchanged and pristine as humanly possible.
Enter Smart Contracts and Ethereum! Some people were not satisfied with the deficiencies of Bitcoin and decided to go ahead and improve it by adding smart contracts to a new blockchain ledger, independent from Bitcoin. That was how Ethereum started. It was a huge success which propelled cryptocurrencies into the mass consciousness in late 2017 when Bitcoin briefly reached $20,000 and Ethereum reached $1,400 per coin.
Ethereum uses $ETH as its monetary unit and further sub-divides it into units of "gas" which must be paid to the miners of its network for the execution of transactions and smart contracts. Smart contracts allowed other people to come along and create their own tokens on the Ethereum network and distribute them with pre-determined rules which were setup ahead of time. These tokens would then we used to purchase goods and services for whichever use case people wanted. Many people created tokens on the Ethereum network by the use of ICOs (Initial Coin Offerings) and this was the main mechanism that caused the original cryptocurrency bubble of 2017-2018. In the following 2 years, many use cases were realized where people tokenized assets on the blockchain and provided various cloud services, all with the use of their individual tokens and by using $ETH as "gas" for their transactions.
Yet again, some people were not happy with Ethereum because there was no formalized governance structure to go along with the decentralized ledger and smart contracts that Ethereum provided. Without an agreed-upon way to change the rules of the Ethereum network and with the need to make many changes in order to allow Ethereum to evolve with ever-increasing needs, the Ethereum community found itself in constant disarray and disagreement about their collective direction and focus.
That is how Tezos was born! The Tezos founders wanted to do for governance what smart contracts did for the flexibility of blockchain technology. They designed a brilliant system which did not depend on miners. They took the concept of node operators and upgraded them to "bakers" using a Liquid Proof of Stake consensus system (LPoS). Bakers use their own $XTZ (native coin on the Tezos network which pays for transactions and gas) combined with the $XTZ delegated to them from people who own coins in order to determine how many blocks they're supposed to...
(work in progress)
Founders explain what Tezos is and how it works...
Last modified 2yr ago