Tezos (XTZ) is an innovative blockchain platform designed to enable decentralized applications (dApps) and smart contracts. Its key differentiator lies in its self-amending protocol. This flexibility allows Tezos to upgrade automatically without the need for hard forks, which is a common challenge for many other blockchains.
Delegated Proof of Stake (DPoS) and Liquid Proof of Stake
Tezos uses a consensus mechanism called Liquid Proof of Stake (LPoS), a variation of the traditional Delegated Proof of Stake (DPoS). In this system, XTZ holders can participate directly in securing the network by staking—or "baking," as it's called within the Tezos ecosystem.
The process of baking allows XTZ holders to be rewarded for validating blocks on the blockchain. To become a baker, one must hold at least 6,000 XTZ. Users who don’t have enough to meet this threshold have the option to delegate their tokens to professional bakers without transferring ownership. This mechanism strikes a balance between decentralization and efficiency, making the network more inclusive while maintaining security.
On-Chain Governance
Tezos emphasizes on-chain governance as part of its self-amending characteristic. Instead of relying on off-chain discussions or central authorities, Tezos allows its community to propose amendments and upgrades to the protocol. Any XTZ token holder can propose changes, and bakers (who act as validators) vote on these proposals.
The proposal and voting cycles consist of four stages: the Proposal Period, Exploration Vote, Testing Period, and Promotion Vote. Once a proposal receives enough support through these steps, it can be implemented directly into the blockchain without creating a fork.
This governance system mitigates one of the more significant risks in blockchain networks—community splits that can result in contentious hard forks. Tezos anticipates organizational changes and incorporates a formal process to make governance smoother and more responsive.
Smart Contracts and Formal Verification
Smart contracts are central to how Tezos operates. The smart contracts on Tezos are written in Michelson, a language specifically designed for formal verification. Formal verification refers to the ability to mathematically prove the correctness of code. By utilizing this feature, Tezos aims to reduce vulnerabilities and ensure that smart contract execution operates exactly as intended.
Formal verification is particularly important in highly sensitive use cases, such as in DeFi (Decentralized Finance) systems, where errors can lead to substantial financial losses.
Summary of Tezos' Unique Features
Tezos’ combination of Liquid Proof of Stake, self-amendment, on-chain governance, and a focus on formal verification make it a unique player in the blockchain space. The focus on seamless upgrades without hard forks and security through formal code verification addresses some of the key pain points identified in earlier blockchain designs.
