How Does Tezos Blockchain Work?
The early pioneering blockchains such as Bitcoin and Ethereum were the frontrunners of decentralized blockchains. However, over time, they handed the critical development and design decisions to the core development teams and mining communities, making them rather centralized. Unsurprisingly, this not only led to a lack of versatility and flexibility but major setbacks that resulted in splits and forks in these networks. For instance, the Decentralized Autonomous Organization (DAO) hack resulted in Ethereum splitting into groups Ethereum Classic and Ethereum, running on different philosophies.
Hence, in 2014, Arthur Breitman and Kathleen Breitman, with a group of core developers proposed the idea of Tezos and launched the project in 2018. If you are wondering what even is Tezos blockchain, or how does Tezos work? We will answer them in a jiffy.
What is Tezos?
Tezos is an open-source and self-upgradable blockchain network modeled to create and host decentralized applications (dApps) and assets. The network's stakeholders are entrusted with governing the updates for the protocol along with the modifications made to the governing process itself. These governance rules are created for stakeholders to empower them to make big decisions such as approving or disapproving network changes and upgrades without relying on hard forks.
In case a developer wants to make a specific change, they can propose a protocol upgrade by attaching an invoice. Additionally, it encourages stakeholders to partake in development and upgrade processes, hence democratizing and decentralizing Tezos blockchain governance and decision making.
Connecting your Tezos Address to ZenLedger For Your Crypto Tax Forms
- To import your Tezos transactions into ZenLedger for your crypto tax forms, all we need is your public address.
- Select the proper blockchain or wallet from the dropdown list.
- Paste your address into the address field in ZenLedger.
- Select if the wallet is based in the USA or not.
- Then hit the ADD COIN button.
How does Tezos Work?
Tezos unique architecture delivers features similar to other digital currencies, but its system of operation is quite different. The blockchain has two different parts:
- Network Shell: This piece of the code handles administrative operations, transactions, and recompenses itself according to the users' votes.
- Network Protocol: This piece of the code dispatches proposals to the Shell for assessment.
Tezos blockchain uses liquid proof-of-stake (LPoS), a variation of the classic proof-of-stake (PoS). Tezos’ users ensure smooth functioning of the network by staking or in Tezos’ terms “baking” XTZ. A single node has to bake 8,000 XTZ to become a baker and in return, they are awarded a 6 percent APY. A baker plays an instrumental part in the governance of the network as they can vote on changes recommended by developers.
What Makes Tezos Unique?
Tezos blockchain wants to become the best reward-providing ecosystem in the world. Other than that, Tezos blockchain is both self-governing and decentralized.
One of the main goals of Tezos is to become a blockchain that is capable of creating the best reward structure in the world. The network can automatically upgrade and update itself and the users can easily vote against or in favor of the intended updates making it a truly decentralized blockchain network.
What Makes Tezos Beneficial?
Being among the finest blockchain networks, Tezos has all the traditional as well as a myriad of unique features that offer plenty of benefits.
This feature offers the following benefits:
- Self-upgrade of the protocol without going through a hard fork
- The absence of a hard fork saves the resources from fragmenting, diluting the rewards, and strengthens the community
- Self-amendment allows swift execution of future upgrades
Every XTZ stakeholder or baker can partake in the network’s governance with an election interval that offers an organized approach to stakeholders to reach a unanimous consensus over an intended change or upgrade. On-chain control in combination with the self-amendment procedure improves the election process for higher-quality regulation in the future.
The amendments proposed by developers could carry payments to users that relentlessly work to improve the protocol. A baker can provide the necessary funding by accepting these proposals, which further decentralizes the network upkeep and encourages participation. It can also help Tezos blockchain establish a passionate, dynamic, and open community of developers that is well rewarded while making worthwhile offerings to the network.
Steps to Buy Tezos
Buying the token is a simple process. Here’s how you do it:
Step 1: Open an Online Account
To buy Tezos, you need a crypto exchange account and Coinbase is the best platform to buy the token in the United States as it is well-regulated and insured. Another great alternative is SoFi and it gives free cryptocurrency to new users. To open an account on these platforms, you need to provide your full legal name, phone number, email, address, photo ID, and Social Security Number (SSN).
Step 2: Buy a wallet
If you are planning to trade daily then keeping your XTZ on the exchange is a safe option. However, if you are looking to hold the token for a long time, investing in a good wallet should be your priority.
You can opt for software wallets as they are free and easily accessible. If you want to beef up the security then you need to look into hardware wallets. Look at it as storing gold in a safe. They are physical devices that hold your tokens and you can access them when you connect the wallet to your computer via USB.
Step 3: Make your Purchase
After opening a crypto exchange account and buying a crypto wallet, add funds to your online account and buy Tezos. After the purchase, safely store them in your wallet.
Tezos has one of the largest ICOs in history as it raised $232 million in 2018. The open-source project was plagued by management and legal issues but they have been resolved and the token is gaining traction due to its staking mechanism.