History of Tezos

The History of Tezos (XTZ): From Concept to Execution

Tezos (XTZ) was conceived as a self-amending blockchain, aiming to solve governance and upgradeability issues inherent in earlier blockchains. Founded by Arthur and Kathleen Breitman, the project began development in 2014 under Dynamic Ledger Solutions (DLS), with the goal of enabling on-chain governance and eliminating hard forks. The concept gained momentum with its 2017 initial coin offering (ICO), which raised over $230 million in Bitcoin (BTC) and Ethereum (ETH), making it one of the largest ICOs at the time.

However, internal conflicts soon emerged. The Tezos Foundation, led by Johann Gevers, clashed with the Breitmans over control of funds and decision-making. This power struggle delayed the network’s launch, causing frustration among investors. Lawsuits ensued, alleging securities violations and mismanagement. These legal obstacles and governance disputes slowed Tezos' progress, nearly crippling the project before it even launched.

In 2018, Gevers resigned, and Tezos underwent restructuring, allowing the project to move forward. The network officially launched in June 2018 and began its on-chain governance mechanism, which enabled token holders to vote on protocol upgrades. Unlike Ethereum or Bitcoin, Tezos' governance model aimed to prevent contentious hard forks by enabling upgrades without splitting the network. This feature positioned Tezos as a potential game-changer in blockchain governance, similar to concepts explored in https://bestdapps.com/blogs/news/decoding-chainlinks-decentralized-governance-model.

Despite its innovative approach, Tezos struggled with adoption in its early years. Projects such as Ethereum and Chainlink dominated smart contract and oracle development, leaving Tezos to carve out niche use cases. The network attracted interest within the security token offering (STO) space and some institutional partnerships, but adoption remained a challenge compared to more established blockchain ecosystems.

Moreover, criticisms emerged regarding centralization concerns. While Tezos was designed as a decentralized self-governing blockchain, the initial foundation dispute raised questions about governance transparency. Additionally, its "baking" (staking) mechanism required significant capital, limiting early participation to wealthier stakeholders. These governance-related concerns mirrored issues raised in https://bestdapps.com/blogs/news/critiques-of-chainlink-centralization-and-transparency-issues.

Over time, Tezos has attempted to refine its governance model and scalability features, continuously upgrading through its on-chain amendment process. However, competition within the Layer 1 space and the rise of alternative smart contract platforms have kept its growth in check. While Tezos remains operational and actively developed, its long-term trajectory depends on broader adoption and sustained blockchain advancements.

How Tezos Works

How Tezos (XTZ) Works: A Deep Dive into Its On-Chain Governance and Smart Contract Infrastructure

Tezos (XTZ) operates on a self-amending blockchain that facilitates seamless protocol upgrades without hard forks. This is achieved through an intricate on-chain governance system that allows stakeholders to propose, vote on, and implement protocol changes autonomously. Unlike Ethereum, which requires network-wide consensus forks for fundamental updates, Tezos incorporates a formalized amendment process to ensure continuous evolution.

On-Chain Governance: A Differentiator in Blockchain Consensus

Tezos' governance framework follows a four-phase process: proposal, exploration vote, testing period, and promotion vote. Any stakeholder can submit upgrade proposals, which the network then evaluates based on stakeholder voting. This design minimizes contentious hard forks seen in other blockchains. However, centralization concerns have emerged, with criticism directed at the influence of large validators despite formal decentralization mechanisms.

For comparison, other governance models, such as those explored in Decoding Chainlink's Decentralized Governance Model, incorporate different strategies for governance dynamics.

Liquid Proof-of-Stake (LPoS): Balancing Security and Participation

Tezos leverages a unique Liquid Proof-of-Stake (LPoS) consensus mechanism, where token holders can delegate their XTZ voting power without transferring ownership. This provides flexibility for participants while reinforcing security via validators (termed "bakers") who secure the network. Yet, a known issue within LPoS is the risk of delegation centralization, where a few prominent bakers may amass disproportionate influence, contrary to decentralization ideals.

Smart Contracts and Michelson: Strengthening Formal Verification

Tezos supports smart contract deployment through Michelson, a stack-based programming language designed for high-level formal verification. Unlike Solidity on Ethereum, Michelson prioritizes security, making Tezos a preferred choice for applications where correctness is critical, such as financial instruments and institutional blockchain solutions. However, Michelson’s steep learning curve has slowed developer adoption, leading to fewer projects compared to Ethereum’s extensive ecosystem.

The role of oracles in Tezos’ smart contract interactions is fundamental, similar to the principles discussed in Chainlink: The Data Backbone of Cryptocurrency, which explores how decentralized oracles enhance smart contract reliability.

Self-Amending Protocol: The Roadblock of Adoption

While Tezos’ self-amending feature streamlines upgrades, its adoption rate among developers and enterprises has been inconsistent. Some argue that the governance model’s complexity deters rapid innovation, as all proposals undergo extensive voting periods and network-wide testing before deployment. This deliberate process fosters stability but can limit agility in responding to emerging blockchain demands.

Tezos remains an ambitious experiment in governance-driven blockchain evolution, yet remains under scrutiny for scalability constraints, validator centralization risks, and developer adoption hurdles compared to the broader smart contract landscape.

Use Cases

Tezos (XTZ) Use Cases: Smart Contracts, Governance, and Beyond

Self-Amending Smart Contracts and On-Chain Upgradability

Tezos differentiates itself with a self-amending blockchain, enabling protocol upgrades without hard forks. This mechanism allows XTZ holders to vote on proposed changes and prevents fragmentation seen in networks like Ethereum. While this grants Tezos flexibility in governance, sluggish adoption by developers has limited its decentralized application (dApp) ecosystem compared to ecosystems like Ethereum and Solana.

DeFi and Financial Applications

Tezos supports decentralized finance (DeFi) protocols, including decentralized exchanges (DEXs), lending, and yield farming platforms. However, DeFi adoption on Tezos remains niche, with much lower total value locked (TVL) compared to major networks like Ethereum. Liquidity fragmentation also poses a challenge, making it less competitive with platforms such as Uniswap.

Non-Fungible Tokens (NFTs) and Digital Art

Tezos has carved out a role in the NFT space, particularly for artists and eco-conscious creators. Its Proof-of-Stake (PoS) consensus minimizes energy consumption, making it an attractive blockchain for sustainable digital collectibles. Marketplaces like Hic et Nunc and Objkt have gained traction, though Tezos NFTs lack the trading volume of Ethereum-based markets. Limited interoperability with Ethereum-based assets also constrains adoption.

Institutional Adoption and Security Tokens

Tezos has positioned itself as a blockchain for financial institutions, with projects experimenting with asset tokenization and security token offerings (STOs). Its formal verification capabilities, which mathematically prove smart contract security, appeal to regulated industries. However, legacy financial entities remain hesitant, with Ethereum and private blockchains dominating institutional blockchain adoption.

Decentralized Governance and Community Control

XTZ holders participate in on-chain governance, influencing protocol changes and project funding without needing hard forks. While this creates a transparent governance model, the process has faced criticism for being slow-moving and sometimes opaque, limiting innovation speed. By comparison, governance-focused projects like Chainlink have implemented mechanisms to improve governance efficiency (read more about Chainlink's governance here).

Gaming and Metaverse Ecosystem

Tezos has seen some adoption in gaming and virtual economies via blockchain games and metaverse integrations. However, this sector remains underdeveloped compared to networks like Polygon, which have secured partnerships with major game developers. Scalability and developer ecosystem limitations have prevented Tezos from capturing a larger share of the GameFi market.

Challenges and Competitive Disadvantages

While Tezos offers a feature-rich platform, key challenges include a smaller developer ecosystem, lower DeFi adoption, and competition from faster blockchains with higher liquidity. Its governance system, while innovative, can be slow-moving, affecting the pace of upgrades and adoption. The blockchain industry continues to evolve rapidly, and without major network growth, Tezos risks falling behind competitors prioritizing speed, user adoption, and developer incentives.

Tezos Tokenomics

Tezos (XTZ) Tokenomics: Inflation, Governance & Supply Dynamics

A Self-Amending Ledger with Inflationary Incentives

Tezos employs a liquid proof-of-stake (LPoS) consensus model where validators, known as bakers, secure the network while earning block rewards in XTZ. Unlike fixed-supply assets, Tezos has a built-in inflationary mechanism: new tokens are continuously minted to incentivize network participation. This design contrasts with hard-capped assets like Bitcoin, where scarcity plays a key role in value accrual.

The annual inflation rate of Tezos fluctuates based on network participation. If more XTZ holders delegate their stake or operate full baking nodes, the effective inflation remains distributed among a larger participant base, mitigating dilutive effects. However, if staking participation declines, inflation disproportionately benefits active participants, potentially leading to an uneven wealth concentration within the ecosystem.

Decentralized On-Chain Governance and the Token's Economic Influence

XTZ holders play an integral role in protocol upgrades through Tezos' on-chain governance. Bakers not only validate transactions but also vote on and propose protocol changes. While this system improves adaptability compared to off-chain governance models, it also introduces potential risks: large baking entities can wield substantial influence, raising concerns about centralization of decision-making over time.

Governance decisions directly impact the tokenomics of XTZ. Proposals can modify block rewards, transaction fees, or baking incentives, altering the economic structure of the token. This dynamic governance contrasts with projects that rely on rigid consensus models, offering flexibility but also necessitating active engagement from stakeholders to prevent dominance by a few entities.

Staking, Liquidity, and Inflation Pressure

The staking mechanism in Tezos allows for both self-baking (operating a node directly) and delegation (assigning XTZ to bakers). Delegated staking ensures that smaller holders receive staking rewards without running infrastructure, fostering participation. However, as liquid staking derivatives emerge across blockchain ecosystems, Tezos lags behind in seamless derivative implementation, potentially affecting its competitiveness in DeFi applications.

Despite staking incentives, excessive inflation could put long-term pressure on XTZ valuation if network usage fails to absorb new supply. This risk is exacerbated if validators sell staking rewards instead of reinvesting into ecosystem growth—a concern observed in many inflationary PoS models.

Comparisons to Other Crypto Ecosystems

The economic model of XTZ shares similarities with governance-driven assets like Chainlink (LINK) and Uniswap (UNI), which use native tokens for both governance and incentivization. For insights into how tokenomics influence blockchain projects, explore Decoding Chainlink LINK Tokenomics A Comprehensive Guide and Decoding Uniswap UNI Tokenomics.

Tezos Governance

Tezos Governance: On-Chain Self-Amendment and Challenges

Tezos (XTZ) is often regarded as a pioneer in on-chain governance, enabling protocol upgrades without hard forks through its self-amendment mechanism. Unlike many competing blockchains that rely on off-chain governance or centralized decision-making, Tezos integrates governance processes directly into its protocol. This system allows token holders to influence protocol changes in a transparent and automated way. However, despite its ambition of facilitating decentralized governance, several challenges persist that influence the efficiency and decentralization of Tezos’ governance model.

The Governance Process: A Structured Upgrade Path

Tezos' governance process consists of four phases: proposal, exploration, testing, and promotion. Developers can submit proposals to modify the protocol, which are then voted on by XTZ stakers (bakers) in a multi-step process. Approved proposals enter a testnet phase before full integration into mainnet, ensuring upgrades undergo sufficient scrutiny. This self-amendment mechanism theoretically reduces contentious hard forks by providing a structured pathway for consensus-driven upgrades. Unlike governance systems that depend heavily on external bodies, Tezos integrates upgrade mechanisms directly within the blockchain's architecture.

The Role of Bakers in Decision-Making

XTZ holders delegate their stake to bakers, who act as validators and play a crucial role in governance voting. While this delegation model is meant to uphold decentralization, it often leads to power concentrations among large bakers, similar to issues seen in delegated proof-of-stake (DPoS) systems. Significant voting power is typically held by a few large entities, which can influence network upgrades disproportionately. This raises concerns about whether governance decisions genuinely reflect the broader community's interests or lean toward entities with substantial stake concentration.

Low Participation Rates and Governance Fatigue

One recurring challenge in Tezos’ governance is low participation rates from smaller token holders. While self-amendment reduces coordination overhead, it does not guarantee community engagement. Many XTZ holders delegate their voting rights without actively participating in governance decisions, leading to a passive stakeholder community where voting power remains centralized among a few dominant bakers. This raises concerns about governance fatigue, where only a handful of entities shape the network’s future while a majority remain disengaged.

Comparisons with Other Decentralized Governance Models

Other projects like Chainlink have experimented with decentralized governance approaches to ensure wider participation. Chainlink’s governance model, for example, has been explored in depth here. While Tezos’ self-amendment is unique in its execution, it faces similar governance centralization issues that affect many blockchain ecosystems. Additionally, concerns over whether stakeholder incentives align with protocol security and long-term sustainability remain critical.

Smart Contract Upgradability vs. Governance Stability

Unlike Ethereum, where protocol upgrades depend on off-chain coordination, Tezos facilitates seamless smart contract and network upgrades through governance votes. This theoretically enhances adaptability but also introduces risks where governance mismanagement can push controversial upgrades, potentially alienating developers and ecosystem participants. Additionally, reliance on stakeholder voting assumes an engaged and well-informed user base, which has proven difficult to achieve consistently.

Technical future of Tezos

Tezos (XTZ) Technical Roadmap: Innovations and Challenges

On-Chain Upgrades and Protocol Enhancements

Tezos continues to refine its self-amending blockchain mechanism, leveraging its on-chain governance to implement protocol upgrades efficiently. Recent developments have focused on reducing gas consumption, optimizing smart contract execution, and improving finality times. One key area of progress is the introduction of optimistic rollups, enhancing Layer 2 scalability and significantly increasing transactions per second (TPS). However, despite these efforts, Tezos still faces competition from newer blockchains implementing Zero-Knowledge Rollups (ZK-Rollups), a solution that some argue offers better security and privacy.

Scalability Solutions: Rollups and Layer 2 Advancements

Tezos' strategy for scalability revolves around rollups, with optimistic rollups already in testing phases. These enable cheaper and faster transactions while ensuring compatibility with existing smart contracts. Future developments aim to integrate ZK-Rollups, potentially improving efficiency and privacy. However, the delay in full ZK-Rollup deployment raises concerns regarding whether Tezos can match the rapid advancements seen in competitors like Ethereum’s Layer 2 networks. Projects like Uniswap have benefited significantly from L2 adoption, as discussed in https://bestdapps.com/blogs/news/demystifying-uniswap-the-future-of-crypto-trading.

Smart Contract Development: Michelson & WASM Compatibility

Tezos smart contract language, Michelson, remains niche compared to Solidity and Rust, limiting developer adoption. Although high-level languages like SmartPy and LIGO simplify contract writing, broader adoption remains a challenge. To counter this, Tezos is working toward WebAssembly (WASM) smart contract compatibility, aiming to attract developers familiar with mainstream languages like Rust and C++. The transition to WASM, however, poses a risk of fragmentation or reduced optimization compared to native Michelson execution.

Governance and Decentralized Coordination

Tezos' on-chain governance system is often praised, but it has also led to slower decision-making compared to off-chain governance models used by platforms like Chainlink, explored in https://bestdapps.com/blogs/news/decoding-chainlink-s-decentralized-governance-model. While Tezos upgrade processes prevent hard forks, the reliance on stakeholder voting sometimes causes friction when reaching consensus for critical changes. If governance participation declines, it could weaken the ecosystem’s development momentum.

Future Goals: Enhancing Security and Privacy

Future upgrades will likely emphasize privacy features, including confidential transactions and enhanced cryptographic primitives. However, delayed implementation risks Tezos falling behind other privacy-centric blockchains. In comparison, protocols focusing on confidential transactions have gained traction in sectors requiring regulatory compliance.

Tezos' roadmap reflects an ambitious effort to balance scalability, governance, and security. However, maintaining its competitive edge requires faster execution of rollups, expanded smart contract support, and ensuring active governance participation.

Comparing Tezos to it’s rivals

Tezos (XTZ) vs. Cardano (ADA): Key Differences in Governance and Smart Contracts

When comparing Tezos (XTZ) and Cardano (ADA), two core differentiators stand out: their governance mechanisms and smart contract execution environments. While both claim to emphasize scalability, security, and decentralization, the practical implementations reveal distinct trade-offs.

Governance: On-Chain vs. Off-Chain Approaches

Tezos utilizes a self-amending blockchain, with formalized on-chain governance that allows upgrades without hard forks. Changes are proposed, voted on by bakers (validators), and implemented automatically if they pass. This approach reduces contentious splits and enhances adaptability. However, it also raises concerns about governance centralization—a small number of entities have historically exerted significant control over the decision-making process.

Cardano, in contrast, relies on off-chain governance through Catalyst, where ADA holders vote on ecosystem development funding. While it promotes community participation, the reliance on off-chain mechanisms creates delays in decision-making and inconsistent adoption of proposals. Future upgrades aim to rectify these inefficiencies (see Decoding Cardano's Innovative Governance Model).

Smart Contract Development: Michelson vs. Plutus

Tezos employs Michelson, a stack-based language designed for mathematical provability and formal verification, minimizing the risk of smart contract vulnerabilities. This focus on security appeals to certain institutional and high-value applications but presents a steep learning curve for developers unfamiliar with low-level programming paradigms.

Cardano, on the other hand, introduced Plutus, a functional programming language based on Haskell. This facilitates modular and reusable smart contracts but has been criticized for higher resource consumption and slow deployment rates compared to alternatives like Ethereum’s Solidity (see A Deep dive into Cardano (ADA) - March 23 2025).

The Trade-Off Between Flexibility and Formal Rigor

Tezos prioritizes upgradeability and allows for seamless protocol evolution through on-chain voting mechanisms, making it more adaptable. However, the low developer adoption and limited DeFi ecosystem hinder its broader utility.

Cardano, despite being backed by rigorous academic research, struggles with slower deployment of upgrades and ecosystem fragmentation. Moreover, Cardano's staking model, which emphasizes delegated proof-of-stake (DPoS) pools, receives criticism for concentrating influence within large staking pools, reducing true decentralization (see Cardano (ADA): Unpacking Its Major Criticisms).

Both networks address blockchain scalability and decentralization differently, making their rivalry a case study in governance and smart contract philosophy.

Tezos (XTZ) vs. Cosmos (ATOM): A Detailed Comparison

Consensus Mechanism: Liquid Proof-of-Stake vs. Tendermint BFT

Tezos employs a Liquid Proof-of-Stake (LPoS) system, allowing users to delegate tokens without locking them or losing control. This governance flexibility enables token holders to vote on protocol changes, ensuring a highly decentralized and adaptable upgrade process. In contrast, Cosmos uses Tendermint BFT, a Byzantine Fault Tolerant consensus that focuses on fast finality and chain interoperability but relies on a set of validators with more concentrated control.

While Tezos’ LPoS enhances decentralization and lowers barriers for participation, its governance model has been critiqued for being slow-moving due to complex voting procedures. Cosmos, on the other hand, achieves faster consensus but faces challenges related to validator centralization, as stake concentration can lead to governance cartelization.

Smart Contract Capabilities and Developer Ecosystem

Tezos is built with Michelson, a formally verifiable smart contract language, strengthening security and reducing vulnerabilities—essential for financial and enterprise-grade applications. However, Michelson's complexity can deter developers unfamiliar with functional programming. Cosmos, on the other hand, supports CosmWasm, a WebAssembly-based smart contract platform that allows developers to write contracts in Rust, Go, or AssemblyScript, which are widely adopted languages.

While Cosmos provides greater flexibility for developers, Tezos' rigorous formal verification process ensures that smart contracts deployed on the network have stronger security guarantees, reducing the risk of exploits that have plagued other ecosystems.

Interoperability and Cross-Chain Interaction

One of Cosmos’ main selling points is its Inter-Blockchain Communication (IBC) protocol, facilitating seamless asset transfers across different chains built within the Cosmos ecosystem. This modularity has helped build a network of app-specific blockchains that can communicate effortlessly. Conversely, Tezos does not have native cross-chain communication capabilities like IBC but has focused on sidechain developments and Layer-2 solutions to scale transactions.

While Cosmos leads in cross-chain interoperability, IBC adoption beyond its ecosystem remains limited. Tezos, meanwhile, prioritizes secure on-chain upgrades, ensuring that every participant can seamlessly transition into newer protocol versions without forking or fragmenting the network.

Governance and Upgrade Mechanisms

Tezos is well known for its self-amendment mechanism, which enables protocol upgrades without forks, voted on directly by stakeholders. This model prevents community splits and ensures continual innovation without network disruptions. In contrast, Cosmos' governance relies on validator votes, with proposals passing based on stake-weighted decisions. This validator-heavy system can sometimes lead to governance centralization, where the largest stakeholders wield disproportionate influence.

Both governance models have trade-offs: Tezos prioritizes protocol cohesion and formalized governance, leading to stability, while Cosmos embraces a more flexible but validator-driven approach, which can result in governance conflicts when large stakeholders dominate decision-making.

Network Security and Validator Incentives

Cosmos validators are incentivized through staking rewards and network fees, but the system requires slashing for misbehavior (e.g., double-signing or prolonged downtime). While this enhances security, smaller validators face higher risks and operational complexities. Tezos, through LPoS, mitigates such risks by reducing delegation constraints and making participation more accessible to regular users.

However, Cosmos benefits from a broader validator set compared to Tezos' more centralized baker model, where a smaller number of highly trusted bakers play a dominant role in network validation.

DeFi and Ecosystem Growth

Both ecosystems have seen DeFi adoption, albeit at different paces. Cosmos boasts a strong infrastructure for app-specific chains, meaning DeFi projects can build customized blockchains that cater to specific use cases. Tezos has focused more on institutional-grade DeFi, with regulatory-compliant financial applications leveraging the chain’s upgradeability and formal verification.

For those interested in DeFi, understanding how decentralized oracle networks function can be crucial. A related deep dive into Chainlink’s role in blockchain applications provides valuable insights: https://bestdapps.com/blogs/news/unlocking-chainlink-transforming-blockchain-applications.

Final Thoughts on XTZ vs. ATOM

The XTZ vs. ATOM debate ultimately hinges on security vs. interoperability. While Cosmos leads in multi-chain communication and fast finality, Tezos benefits from on-chain governance security, formal verification, and continuous upgradeability. Each network caters to different stakeholder interests—Tezos prioritizing secure, self-governing blockchain governance and Cosmos driving forward a scalable, interconnected blockchain economy.

Tezos (XTZ) vs. Ethereum (ETH): A Comparative Analysis

Ethereum (ETH) has long been the dominant smart contract platform, setting the standard for decentralized applications (dApps) and developer activity. However, Tezos (XTZ) differentiates itself in key ways, particularly in governance, scalability, and upgradeability.

Governance & Upgrades: On-Chain vs. Off-Chain

One of Tezos' biggest strengths is its on-chain governance model, which allows protocol upgrades to be proposed, voted on, and deployed without requiring contentious forks. This structure ensures smoother protocol evolution and increased community engagement.

In contrast, Ethereum follows an off-chain governance model, where decisions are made by Ethereum Improvement Proposals (EIPs) and driven predominantly by developers and miners. While Ethereum’s model has worked so far, it has occasionally resulted in community splits, as seen in the Ethereum Classic (ETC) fork.

Tezos' on-chain governance gives it an advantage in terms of coordination and upgrade efficiency, enabling improvements without major network disruptions. However, critics argue that on-chain governance can lead to voter apathy, where only a small percentage of token holders actively participate in decision-making.

For a deeper dive into decentralized governance models, you can check out Decoding-Chainlinks-Decentralized-Governance-Model.

Smart Contract Language: Michelson vs. Solidity

Ethereum’s Solidity is by far the most widely used smart contract language, making it the go-to for developers looking to build decentralized applications. This developer dominance means Ethereum benefits from a vast ecosystem of tools, resources, and community support.

Tezos, on the other hand, uses Michelson, a stack-based programming language designed for formal verification—allowing for mathematically provable smart contract correctness. This makes Tezos potentially more secure, especially for financial applications where bugs can result in catastrophic losses.

The drawback? Michelson's steep learning curve and limited adoption hinder developer onboarding, making it difficult for Tezos to compete with Ethereum’s extensive developer network.

Scaling Challenges and Layer 2 Solutions

Ethereum's scaling struggles, particularly high gas fees and network congestion, have been well-documented. The network has been transitioning to Ethereum 2.0 and Layer 2 solutions, such as rollups and sidechains, to improve efficiency.

Tezos employs an enhanced version of Liquid Proof-of-Stake (LPoS), which allows for faster transactions and reduces energy consumption. However, while Tezos scales better at the base layer, Ethereum's Layer 2 ecosystem—bolstered by projects like Optimism, Arbitrum, and ZK-rollups—makes it highly adaptable to future scaling demands.

For more insights on Ethereum scaling and governance models, consider reading What-Happened-To-Anthony-Sassanos-Ethereum-Journey.

Adoption & Network Effect

Despite Tezos' innovative features, Ethereum benefits from first-mover advantage, developer ecosystem dominance, and enterprise adoption. Major DeFi applications, NFT marketplaces, and institutional-grade projects are primarily built on Ethereum.

Tezos has had notable use cases, including tokenized assets and partnerships in the gaming and financial industries, but it still lags in terms of overall adoption. Its more efficient governance and security-first approach make it appealing for enterprises, but without a strong developer push, it risks being overshadowed by Ethereum’s ecosystem growth.

Both platforms continue to evolve, but Ethereum’s network effect remains its strongest moat over competitors like Tezos.

Primary criticisms of Tezos

Primary Criticism of XTZ Tezos

Governance and Upgrade Challenges

Tezos (XTZ) prides itself on its self-amending blockchain, allowing on-chain governance to facilitate upgrades without forks. However, this system has often been criticized for being slow and inefficient. While the intent is to avoid contentious hard forks, the actual governance process can result in prolonged decision-making. Proposals must go through multiple voting phases, making adaptations slower compared to other agile blockchain projects. This governance bottleneck has led to concerns that Tezos struggles to remain competitive in a rapidly evolving crypto landscape.

Adoption and Ecosystem Growth Concerns

Despite its early promise, Tezos has struggled to gain significant adoption. Compared to other smart contract platforms like Ethereum, Solana, or even newer competitors, Tezos has failed to attract a robust developer community. The number of decentralized applications (dApps) and active projects on Tezos remains relatively low, limiting its overall network effects. Without a strong influx of users and developers, the ecosystem risks stagnation and becoming a niche platform rather than a widely utilized blockchain solution.

Centralization Criticism in Baking System

Tezos’ delegated proof-of-stake (DPoS) consensus mechanism, known as "baking," has also faced scrutiny. Critics argue that the system tends to favor large stakeholders, leading to centralization risks. A small number of high-stake participants control a significant portion of the staked supply, making governance decisions and block validation disproportionately concentrated. This centralization aligns with concerns raised in other blockchain ecosystems about whether DPoS-based models truly achieve decentralization or merely redistribute control among a smaller, wealthier subset of participants.

Read more about how governance challenges impact blockchain networks.

Lack of Strong DeFi Presence

DeFi (Decentralized Finance) is one of the most dominant trends in blockchain today, but Tezos has failed to make a significant impact in this sector. While there are a few DeFi projects within the Tezos ecosystem, they lack the scale and liquidity of platforms built on Ethereum, Binance Smart Chain, or even newer chains like Avalanche. The absence of major DeFi applications and significant total value locked (TVL) reduces Tezos' attractiveness as a key player in DeFi.

Compare this to the DeFi challenges faced by Uniswap.

Marketing and Strategic Positioning Issues

Tezos has also faced ongoing criticism regarding its branding and marketing efforts. While other blockchain projects aggressively seek partnerships, developer onboarding programs, and institutional interest, Tezos has often been perceived as lacking clear strategic direction. Marketing efforts have been inconsistent, leading to weak community engagement. Without a strong narrative or clear competitive advantage, Tezos risks being overshadowed by more dynamic blockchain ecosystems.

Smart Contract Language Barrier

Tezos uses Michelson, a domain-specific language for smart contracts that is not widely adopted outside of its ecosystem. Unlike Ethereum, where Solidity has become a standard language for developers, Michelson presents a steeper learning curve. This limits developer adoption since many teams prefer to work in more well-known languages like Solidity or Rust, which dominate the smart contract development space.

Legal and Regulatory Overhang

Tezos was once embroiled in legal disputes due to its initial coin offering (ICO), raising concerns about its regulatory standing. Although some of these issues were settled, the reputation damage persists. Regulatory uncertainty continues to be a general risk factor for many blockchain projects, but Tezos’ history of legal complications has added to skepticism within investment and developer communities.

While Tezos has made attempts to address these concerns, they remain key areas of discussion among critics and users evaluating the long-term viability of the platform.

Founders

Meet the Founders Behind Tezos (XTZ): The Journey and Challenges

Tezos (XTZ) was founded with a bold vision—self-amending blockchain governance. The founding duo behind this innovation, Arthur and Kathleen Breitman, played a crucial role in shaping the project but also faced notable controversies along the way.

Arthur Breitman, a computer scientist with experience in quantitative finance at Goldman Sachs and Morgan Stanley, conceptualized Tezos as an improvement over Bitcoin and Ethereum. His vision was to create an on-chain governance model that would minimize contentious hard forks, enabling the blockchain to upgrade itself seamlessly. This set Tezos apart from contemporaries like Ethereum and Chainlink, where governance often remains a heated topic, as discussed in Decoding-Chainlink-Decentralized-Governance-Model.

Kathleen Breitman entered the space from a different angle, bringing operational efficiency and business strategy to the project. Previously working at institutions like R3 and Bridgewater Associates, she played a significant role in navigating the decentralized governance model of Tezos while ensuring compliance with regulatory frameworks.

Despite the promising concept, Tezos' launch was marred by legal conflicts and internal disputes. After raising $232 million in one of the largest Initial Coin Offerings (ICOs) at the time, the project ran into hurdles due to disagreements between the Breitmans and the Tezos Foundation, the entity responsible for managing the ICO funds. This friction delayed the launch of the Tezos mainnet and led to a class-action lawsuit, as investors grew frustrated with the lack of control over their pledged funds.

Governance has remained a point of contention in the broader cryptocurrency community. While Tezos champions its on-chain governance system, critics argue that it hasn’t fully delivered on its promise of a true decentralized decision-making process. Comparisons can be drawn to projects like Uniswap, where governance challenges have also surfaced, as explored in Uniswap-Criticisms-Challenges-in-Decentralized-Finance.

Furthermore, the departure of Kathleen Breitman from direct involvement in Tezos raised concerns about the project's long-term strategic vision. While Arthur Breitman has remained engaged with the ecosystem, the perceived instability of its leadership has occasionally drawn skepticism from investors skeptical of Tezos' ability to compete with more established smart contract platforms.

Authors comments

This document was made by www.BestDapps.com

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