Tezos (XTZ) Review: Technology, Consensus, Use Cases

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Even though most newcomers only know the few most popular coins, such as Bitcoin and Ethereum, there is much more to the crypto market like Tezos. With the industry becoming increasingly efficient, the BTC dominance tends to decrease, while the number of new promising projects tends to increase.  

Tezos — #40 in the crypto top 

Market cap1.4 billion
Daily volumes$17-$25 million
Circulating supply911,591,038.14 XTZ
All-time high$9.18
All-time low$0.3146

Tezos (XTZ) cryptocurrency is an altcoin with a mid-sized cap but a strong and dedicated community. Created in 2014 by Arthur Breitman and Kathleen Breitman, Tezos was designed to become a next-generation blockchain with high decentralization, smart contracts, and scalability. 

In 2018, the project held its successful ICO and secured 232 million in ETH and BTC. However, Tezos started getting some serious buzz in 2021 with the NFT boom. Its blockchain became a cheaper and faster Ethereum alternative for artists wanting to mint and sell non-fungible tokens.  

You may find more information about the latest updates at the official Tezos website:

How does Tezos blockchain work? 

Tezos is an open-source protocol often described as the first “second generation” blockchain that aims to create a decentralized network for issuing new tokens and launching new dApps. Smart contract technology is used for this purpose. 

What makes Tezos blockchain stand out is its self-amendment feature. It allows changes through on-chain protocol upgrades, eliminating the need for forks. In simple words, the Tezos code modifies itself automatically. As of now, the project experienced ten upgrades, most of which were aimed at increasing the speed and throughput and reducing the transaction costs. 

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Consensus: Liquid Proof-of-Stake 

Tezos blockchain is based on the Liquid Proof-of-Stale consensus mechanism that aligns with the project’s on-chain governance. To add new blocks to the chain, the network relies on bakers — they verify transactions and ensure the system’s correct functioning, receiving a reward in return. 

Baking is the new staking

Users can earn passive income in crypto by participating in baking. Although the term may be new and confusing, it is similar to your standard staking. However, the bakers are chosen randomly but proportionally to the staking balance, which helps maintain the network balance and lower corruption risks. 

To become a baker, the participant must hold at least 6,000 XTZ, roughly $8,500. Tezos allows bakers to keep staked coins at their addresses, ensuring a high level of security. Nevertheless, bakers cannot dispose of their holdings until the contract expires. To prevent bakers from fraudulent actions, such as transaction double-verifying, the network freezes Security Deposits from the baker’s funds, amounting to 10% of the stake at the beginning of each 68-hour cycle. In case the “misbehaves,” the system will confiscate this deposit. 

Delegating — in case you don’t have the skills or spare $8k

Baking requires special hardware and technical skills to set up a node and spare $8k. However, there is an alternative — deligating. Anyone can delegate their XTZ to a baker and collect rewards regularly. Delegators also preserve the rights to their coins, preventing bakers from spending the delegated funds. It also allows you to change the baker if needed quickly. 

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XTZ — native cryptocurrency of Tezos 

According to the project’s website, XTZ is a native coin used to interact with dApps, pay for fees, secure the network through staking, and provide a basic accounting unit on the Tezos platform. Currently, the project occupies 41st place in the crypto top with a market cap of $1,3 billion, while the daily volume amounts to $20 million. The coin is listed on numerous major exchanges, including Binance and Coinbase, making the cryptocurrency liquid and accessible. 

XTZ emission 

Tezos coin has an unlimited emission: as of October 2022, 932,730,586 XTZ have already been released into the market. Initially, 760 million tokens were issued after the ICO with the following allocation: 

  • 79.59% — ICO participants
  • 0.41% — Early Backers and contractors
  • 10% — the Tezos Foundation
  • 10% — Dynamic Ledger Solutions (DLS)

The system is designed to decrease the percentage of founders’ holdings compared to the entire supply. According to Messari, by 2027, Tezos foundation and DSL will own 14% of XTZ. 

Is XTZ a sound investement? 

All investment classes entail a certain level of risk, especially crypto, with its volatility. During the ongoing bear cycle, Tezos’ price decreased by 84% compared to its all-time high of $9.18. Nevertheless, the project does have a sound roadmap and development prospects, which could facilitate the token’s growth in the future.