Tezos is an
open-source
Open source is source code that is made freely available for possible modification and redistribution. Products include permission to use the source code, design documents, or content of the product. The open-source model is a decentralized sof ...
blockchain
A blockchain is a type of distributed ledger technology (DLT) that consists of growing lists of records, called ''blocks'', that are securely linked together using cryptography. Each block contains a cryptographic hash of the previous block, a ...
that can execute
peer-to-peer
Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the network. They are said to form a peer-to-peer n ...
transactions and serve as a platform for deploying
smart contracts
A smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the re ...
. The native
cryptocurrency
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It i ...
for the Tezos blockchain is the tez (
ISO 4217
ISO 4217 is a standard published by the International Organization for Standardization (ISO) that defines alpha codes and numeric codes for the representation of currencies and provides information about the relationships between individual cu ...
: XTZ;
sign
A sign is an object, quality, event, or entity whose presence or occurrence indicates the probable presence or occurrence of something else. A natural sign bears a causal relation to its object—for instance, thunder is a sign of storm, or me ...
: ꜩ). The Tezos network achieves consensus using
proof-of-stake
Proof-of-stake (PoS) protocols are a class of consensus mechanisms for blockchain
A blockchain is a type of distributed ledger technology (DLT) that consists of growing lists of records, called ''blocks'', that are securely linked togethe ...
. Tezos uses an on-chain governance model that enables the protocol to be amended when upgrade proposals receive a favorable vote from the community.
Its
testnet
In blockchain technology, a testnet is an instance of a blockchain powered by the same or a newer version of the underlying software, to be used for testing and experimentation without risk to real funds or the main chain. Testnet coins are separat ...
was launched in June 2018, and its mainnet went live in September 2018.
History
Tezos, first proposed in 2014, was created by husband-and-wife team Arthur and Kathleen Breitman.
While working at Morgan Stanley in 2014, Arthur Breitman released two papers proposing a new type of blockchain under the pseudonym "L. M Goodman", referencing a journalist at ''Newsweek'' who had misidentified the creator of
Bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
.
He chose the name "Tezos" after writing a program to list unclaimed websites that could be pronounced in English.
In 2015, with the goal of developing Tezos, Arthur Breitman registered a company called Dynamic Ledger Solutions Inc (DLS) in Delaware, with himself as chief executive.
He contracted French firm ''OCamlPro'' to help develop the software.
Arthur worked at Morgan Stanley at the time, but he did not provide them with notice of his work on Tezos as required by the
Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization (SRO) that regulates member brokerage firms and exchange markets. FINRA is the successor to the National Associati ...
(FINRA),
and he was eventually fined $20,000.
He sought to raise $5 to $10 million from banks but was unable to find backers. By 2016, he left Morgan Stanley; Tezos received $612,000 from 10 backers while the Breitmans planned for an
initial coin offering
An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. It is often a form of crowdfunding, although a private ICO which does not seek public investment is also possible. In an ICO, a quantity of cr ...
(ICO).
They received a $1.5 million investment from
Tim Draper
Timothy Cook Draper (born June 11, 1958) is an American venture capital investor, and founder of Draper Fisher Jurvetson (DFJ), and hired public relations firm Strange Brew to promote their project.
The firm was alleged to have falsely claimed that large American financial firms were using Tezos.
Tezos Foundation and initial coin offering
In 2011, Arthur Breitman first met South African cryptocurrency entrepreneur Johann Gevers through his friend
Patri Friedman
Patri Friedman (born July 29, 1976) is an American libertarian, neoreactionary,
anarcho-capitalist, and theorist of political economy. He founded The Seasteading Institute, a non-profit that explores the creation of sovereign ocean colonies.
...
, the founder of
The Seasteading Institute, who had hired Gevers for a project which Breitman had followed closely.
In 2016, the Tezos Foundation was established in Zug Switzerland by Arthur and Kathleen Breitman, Swiss law firm MME and Gevers, to support an
initial coin offering
An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. It is often a form of crowdfunding, although a private ICO which does not seek public investment is also possible. In an ICO, a quantity of cr ...
(ICO) for the Tezos platform.
They planned for the foundation to become a non-profit that would raise money through the ICO and acquire DLS, which owned the group's technology.
In addition to Switzerland's relatively lax financial oversight and effectively zero corporate tax rate, the benefits for Tezos of being in a foundation under the
Swiss Civil Code
The Swiss Civil Code (SR/RS 210, german: Schweizerisches Zivilgesetzbuch (ZGB); french: Code civil suisse (CC); it, Codice civile svizzero (CC); rm, Cudesch civil svizzer) is a portion of the second part (SR/RS 2) of the internal Swiss law ("Pr ...
included the ability to treat fundraising transactions as donations, and acting as an additional layer of institutional security to protect donations.
Gevers became the foundation's first president.
On July 1, 2017, the Tezos Foundation raised $232 million in Bitcoin and
Ethereum
Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether (Abbreviation: ETH; sign: Ξ) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capita ...
in one of the biggest
initial coin offering
An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. It is often a form of crowdfunding, although a private ICO which does not seek public investment is also possible. In an ICO, a quantity of cr ...
s (ICOs) at the time.
The contributions were termed "non-refundable donations", which Kathleen Breitman likened to a pledge drive where people would receive tote bags, though some participants considered them to be an investment.
If considered an investment rather than a donation, it would fall under the purview of the
Securities and Exchange Commission
The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
(SEC).
After the ICO, it was planned that the Tezos Foundation would pay to acquire DLS, and if the Tezos blockchain functioned for at least three months, the Breitmans would receive 8.5% of the ICO and 10% of the tokens.
By October, the Breitmans and Gevers were in a dispute over control of the project, with the Breitmans alleging Gevers pressured the foundation council into signing a contract giving him a bonus of $1.5 million.
Gevers controlled the assets held by the foundation which stood at $820 million by December, including the Breitmans' share.
The disagreements led to delays in the deployment of Tezos, which caused investors to bring lawsuits alleging fraud during the fundraiser and unauthorized sales of securities.
In 2018, Gevers resigned and received $400,000, and the foundation board was replaced; Tezos went live that September.
In 2020, the Tezos founders settled the lawsuits, with the Tezos Foundation paying $25 million, before federal courts ruled on whether the ICO was a sale of unregistered securities.
Arthur Breitman joined the foundation's council in 2021.
In October 2021, Tezos became a sponsor of the
New York Mets
The New York Mets are an American professional baseball team based in the New York City borough of Queens. The Mets compete in Major League Baseball (MLB) as a member of the National League (NL) East division. They are one of two major league ...
.
In February 2022,
Manchester United F.C.
Manchester United Football Club, commonly referred to as Man United (often stylised as Man Utd), or simply United, is a professional football club based in Old Trafford, Greater Manchester, England. The club competes in the Premier League, ...
announced Tezos as its official blockchain partner in a multi-year deal, reportedly worth over £20 million per year. In November 2022, Manchester United F.C. launched their first-ever NFT digital collectibles based on the Tezos blockchain platform.
Design
The primary protocol of Tezos utilizes liquid
proof of stake
Proof-of-stake (PoS) protocols are a class of consensus mechanisms for blockchains that work by selecting validators in proportion to their quantity of holdings in the associated cryptocurrency. This is done to avoid the computational cost of p ...
(LPoS) and supports
Turing-complete
In computability theory, a system of data-manipulation rules (such as a computer's instruction set, a programming language, or a cellular automaton) is said to be Turing-complete or computationally universal if it can be used to simulate any Tur ...
smart contracts in a
domain-specific language
A domain-specific language (DSL) is a computer language specialized to a particular application domain. This is in contrast to a general-purpose language (GPL), which is broadly applicable across domains. There are a wide variety of DSLs, ranging f ...
called Michelson. Michelson is a purely functional stack-based language with a reduced instruction set and no side effects, designed with
formal verification
In the context of hardware and software systems, formal verification is the act of proving or disproving the correctness of intended algorithms underlying a system with respect to a certain formal specification or property, using formal metho ...
in mind.
[
]
In Tezos' LPoS model, network nodes that validate blocks and add them to the blockchainknown as bakersare selected to perform those actions proportionally to their share of tez that they put up for stake (minimum 6,000 tez), and a baker receives staking rewards in the form of newly minted tez after successfully validating a block and adding it to the blockchain.
Holders of tez can delegate their tez to bakers to share in the staking rewards that bakers receive.
[ Holders of tez who do not stake or delegate their tez risk suffering a loss in value due to inflation as new tez are created and distributed to bakers for validating new blocks and adding them to the blockchain. As of January 2021, nearly 80% of all tez in circulation were either directly staked by bakers or delegated to bakers for staking.]
The Tezos protocol allows itself to be amended by a staged process performed by committing operations to the stored blockchain to submit proposals (intended code changes) and to vote on those changes. If a proposal receives enough votes the protocol updates itself to incorporate the code changes.
The Tezos blockchain has been used for NFT
A non-fungible token (NFT) is a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain, and that is used to certify authenticity and ownership. The ownership of an NFT is recorded in the ...
s as an alternative to more energy-intensive projects such as Ethereum
Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether (Abbreviation: ETH; sign: Ξ) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capita ...
.
Reliability
In 2018, the Tezos Foundation commissioned the audit company Least Authority to perform five audits which were published in March 2019. These audits determined that Tezos protects against chain reorganizations and selfish-baking, which are two common issues in blockchains using Nakamoto-style consensus. A subsequent analysis confirms that selfish baking in Tezos results in insignificant profits, even when the baker attempting it has a very large portion of the stake. An independent 2020 study revealed a potential flaw in the consensus proof of stake mechanism that Tezos was using at the time, by providing a theoretical analysis of the feasibility and profitability of a block stealing attack referred to as "selfish endorsing". A change to the protocol was proposed to reduce the profitability of this dishonest behavior. With implementation of the Tenderbake protocol amendment, the described behavior was mitigated and is no longer actual.[Tenderbake Protocol Draft https://gitlab.com/tezos/tzip/-/blob/master/drafts/current/draft_tenderbake.md]
Founders
Tezos co-founder Arthur Breitman studied applied mathematics, computer science, and physics in France and financial mathematics at New York University
New York University (NYU) is a private research university in New York City. Chartered in 1831 by the New York State Legislature, NYU was founded by a group of New Yorkers led by then-Secretary of the Treasury Albert Gallatin.
In 1832, the ...
under Nassim Nicholas Taleb
Nassim Nicholas Taleb (; alternatively ''Nessim ''or'' Nissim''; born 12 September 1960) is a Lebanese-American essayist, mathematical statistician, former option trader, risk analyst, and aphorist whose work concerns problems of randomness, ...
before working in quantitative finance. Kathleen Breitman (née McCaffrey) studied at Cornell University
Cornell University is a private statutory land-grant research university based in Ithaca, New York. It is a member of the Ivy League. Founded in 1865 by Ezra Cornell and Andrew Dickson White, Cornell was founded with the intention to teach an ...
and worked at a hedge fund and as a consultant. Arthur was the leader of an anarcho-capitalist
Anarcho-capitalism (or, colloquially, ancap) is an anti-statist, libertarian, and anti-political philosophy and economic theory that seeks to abolish centralized states in favor of stateless societies with systems of private property enforce ...
group in New York, and Kathleen was a libertarian Republican; the two of them met at a crypto-anarchist
Crypto-anarchism or cyberanarchism is a political ideology focusing on protection of privacy, political freedom, and economic freedom, the adherents of which use cryptographic software for confidentiality and security while sending and receivin ...
lunch in 2010 and married in 2013.
References
External links
*
Tezos Foundation website
Tezos Commons website
{{Cryptocurrencies, State=Expanded
Cryptocurrencies
Blockchains
Currencies introduced in 2018
2018 establishments
Cryptocurrency projects