What is Tezos (XTZ)?

Expert consultations for this material were provided by the founder of the startup on the audit and evaluation of the work of the TEZOS BAKING BAD BAD Vladimir Zarechnev.

What is Tezos?

Tezos is a multifunctional decentralized blockchain platform with support for smart contracts and the possibility of creating tokens and decentralized applications.

Who invented Tezos and when?

The creator of Tezos is Arthur Breitman, the son of the famous French playwright, writer and actor Jean-Claude Dere. Arthur Breitman studied applied mathematics, computer sciences and physics at the Paris Polytechnic School, after which he moved to the USA, where he studied financial mathematics at the University of New York. He worked in the investment banks Goldman Sachs and Morgan Stanley, in Google X and Waymo.

For several years, Breitman has been one of the organizers of the seminars and meetings of anarcho-capitalists in New York. Participants in this movement positioned themselves as “radical libertarians advocated for the unbridled growth of capital, intensive technological progress and high life standards of the capitalist system”, as well as for refusing confrontation with the state.

At the next meeting of the anarchy-capitals in 2010, Breitman met American Kathleen McCaffri, a student from New Jersey. In 2013, Arthur and Katlin got married. Having graduated from Cornell University, Kathlin worked at the Bridgewater Associates Head Fund, Accenture, as well as in R3 CEV, specializing in the development of distributed databases. From the very beginning of the development of Tezos, Kathlin helped her husband in work on the project.

In August 2014, Arthur Breitman under the pseudonym “L. M. Goodman ”was published by a memorandum dedicated to Tezos, and in September 2014 – White Paper project. Pseudonym l. M. Goodman contains a allusion to the journalist of Newsweek Leah McGrath Gudman, who was known after it attributed to the authorship of Bitcoin to the American Japanese descent Dorian Pontisa Satoshi Nakamoto.

In the memorandum and White Paper, Breitman noted such weaknesses of bitcoin as the inability to provide a more inclusive control system and create new tokens, predicted that in the near future there would be many one-day tokens, and also presented their own blockchain solution: the first “self-improved” cryptocurrency in the world Tezos.

The name of the cryptocurrency was generated by the algorithm of Breitman, looking for the names of unclaimed domains pronounced in English.

How TEZOS develops?

In 2015, Breitmans founded Dynamic Ledger Solutions (DLS), which was supposed to write the source code for Tezos. At that time, Breitman served as financial mathematics in the bank holding Morgan Stanley. Not wanting to lose his job, he chose not to disclose his participation in the project (in April 2016 he left the bank).

During the registration of the company in the United States, Breitman, in violation of the Rules of the Agency for the Regulation of the Activities of Financial Institutes (FINRA), hid the fact of its participation in “other commercial activities”. Because of this, in April 2018, Finra fined Breitman at $ 20,000 and forbade him to carry out transactions with broker dealers for two years.

In 2016, DLS released the source code of the project. In February 2017, the alpha network of the protocol was launched on the basis of the source code.

Since the Swiss laws in the interests of society can create independent support funds for open code platforms, the TEZOS Foundation Non -Profit Foundation was registered in Tsuge. Breitmans asked the president of the South African entrepreneur and founder of the Swiss financial company Monetas Johanna Gevers.

The Fund received control over income from Kraudsale of the project, intellectual property was controlled by Breitman DLS.

At the end of the ICO, the Breitmans planned to sell DLS TEZOS Foundation, after which the TEZOS source control was in the hands of the leaders of the fund. However, by the time of the start of the ICO, planned for May 2017, the project began to experience a lack of funds. Kathleen Breitman turned to the venture capitalist Tim Draper, who invested $ 1.5 million through Draper Associates and received a minority stake in DLS.

On July 1, 2017, ICO Tezos launched: in two weeks, 32,000 users purchased approximately 607.8 million XTZ tokens created and distributed at the time of the creation of a genesis block in the TEZOS network when launching beta versions. The organizers attracted about $ 232 million in Bitcoin and Ethereum (although they planned to collect a maximum of $ 20 million).

According to official figures on the TEZOS Foundation website, the tokens were distributed as follows:

• ICO participants: ~ 88.43% (607 489 040.89 XTZ);
• Early sponsors and contractors: ~ 0.46% (3 156 502.85 XTZ);
• Tezos Foundation and Dynamic Ledger Solution, Inc. (DLS).

In an agreement with investors, the attracted funds were defined as “irrevocable donations”, and not “venture investment”. The company warned investors that the release of tokens may not take place.

According to Gevers in October 2017, the fund contract with the Breitmans provided that if the DLS sales will not take place in the “stipulated time”, TEZOS Foundation will receive it for free. However, Gevers did not manage to present a copy of the agreement to reporters. In case of successful work of the company within three months after the sale, DLS shareholders (Breitman and Tim Draper) were supposed to receive 8.5% ($ 19.7 million) funds from crowdsale and 10% of all TEZOS tokens released. But the deal did not take place, since a conflict arose between the Breitmans and Gevers.

According to Gevers, disagreements flashed due to the fact that the couple opposed the decision of the Fund to hire certain people. According to him, DLS retained control over “domains, websites and e-mail servers” of the fund.

As a result, work on the project and expansion of the staff of the developers went extremely slowly, and XTZ tokens were not distributed among investors at the appointed time. Angry investors filed several group lawsuits against the fund and DLS. In mid -February 2018, Gevers and some members of the board of directors of Tezos Foundation left their posts. After that, the work on the development of the protocol resumed, and in June 2018, Tezos Foundation launched a beta version of the platform, and in September 2018-the main network.

On May 29, 2019, the TEZOS protocol under the name Athens a took place. Athens a suggested a few incompatible changes. The first change in the protocol made it possible to increase the gas limit in order to increase computational capabilities and the capacity of the network. The number of tokens necessary for obtaining a base status has also decreased – from 10,000 XTZ to 8000 XTZ.

On October 18, 2019, Babylon 2 updated was activated.0, thanks to which the consensus algorithm has changed, the functionality of smart contracts and the control mechanism. The development of smart contracts was simplified, the system of remuneration for basics (network validators) has changed, stimulating them to the maximum participation in the approval of the blocks, and it also became easier to delegate the XTZ coins to baseers. Earlier for this, users created special addresses KT1. After the update, you can delegate funds from the main address.

In March 2020, Tezos holders voted for updating Carthage 2.0, designed to optimize the code and solve a number of problems. In particular, the update will allow 30% increase the gas limit to the block and the operation, which will give the developers the opportunity to launch more complex applications.

How is the emission of TEZOS tokens carried out?

Native Token TEZOS blockchain – TEZ, stock ticker – htz.

Tezos uses the inflationary model: annual inflation should be about 5.5%. XTZ tokens are issued in the process of creating new blocks, some of the tokens can be destroyed as a fine for the unfair behavior of validators.

Another version of the emission – when Baker offers the renewal of the protocol, he can make a fee in XTZ. In case of successful adoption of this update, the author receives this amount as a result of additional emission.

XTZ tokens can be used as follows:

• As a reward for participation in the creation and approval of new blocks (direct participation or delegation of tokens).
• As votes in the decentralized control system.
• As a payment tool for transferring values.
• For gas payment (GAS) – units of value for the payment of commissions. GAZ is used not only for conventional transactions, but also when interacting with smart contracts, for the operation of decentralized applications.

Separate projects (for example, Ethereum) are faced with a high inflation problem, which is caused by unlimited issue, but as part of the Tezos control system, users can offer changes in the emission model that are accepted with the support of most users.

What is the consensus mechanism in Tezos?

Tezos operates on the basis of the Liquid Proof-OF-STAKE (LPOS) consensus mechanism. Since the algorithm uses the process of the so-called delegation, sometimes it is mistaken that Tezos operates on the basis of Delegated Proof-Of-Stake (DPOS), like Tron and EOS. In the past, some official documents of the project used the name “Proof-Of-Stake with Delegation”. In order to avoid misunderstandings, subsequently the designation Liquid Proof-OF-Stake (LPOS) was introduced.Within the framework of the LPOS algorithm, the new blocks are created by an accidentally selected participant (delegate), and 32 other accidentally selected participants approve him.

The process of creating new blocks is not called mining, but by “baking” (from English. baking, “baking”). Accordingly, miners are called baseers or “bakers”.

As in the Proof-OF-Stake consensus mechanism, the rights to create new blocks are distributed between delegates, depending on their size in the tokens rate.

In order to speed up the process of choosing delegates, XTZ tokens are aggregated in rolls, each of which contains 8000 XTZ. The number of rolls determines the weight of the delegate.

Since not all network users are interested in beaking, participants can delegate their tokens to other participants without transferring ownership: the recipient of tokens does not have the right to spend them. Delegated tokens become part of the delegate bet (steak). The delegation of tokens means the transfer of rights to participate in the provision of consensus and vote rights within the network management system.

To create new blocks from among delegates who want to participate in the process, participants in two categories are selected:

• The creators of the blocks (bowers) are one participant for each block that creates and signs a new block. Each validator randomly assigns priority for each block. Priorities go from 0. If the Baker with a priority 0 for some reason misses its block, then the right to create it goes on to the next.
• Confirming nodes – thirty -two participants for each new block, which confirm that they saw and failed a new block.

For the creation of new blocks, delegates receive a reward:

• 1.25 XTZ confirming nodes.
• 40 XTZ + Commission to the creator of the Bloc (Baker).

If the block is not confirmed with 0 priority, the amount of remuneration to the confirming nodes is 0.833333 XTZ, and the to the base is 0.1875 XTZ * [Number of supporting nodes]. Remuneration for creating a block with priority 0 is also reduced if the number of confirming nodes < 32 and amounts to 1.25 * [number of confirming nodes]. The total amount of remuneration for the creation of a new block is not more than 80 XTZ.

To increase the safety of the network and reduce the likelihood of unfair work of delegates, a warranty deposit is used. The warranty deposit for creating a new block is 512 XTZ, for confirmation – 64 XTZ.

Blocks are aggregated in cycles, each of which contains 4096 blocks. The warranty deposit is frozen for the time of the “Preserved_cycles”, which is equal to five cycles in the past and is at least 14 days, 5 hours and 20 minutes. With the current parameters of the network, a delegate who wants to potentially participate in the creation of new blocks should store about 8.25% of the total number of tokens in the deposit (that is, should own 8.25% of tokens delegated to it).

If the participant notices the unscrupulous behavior of the delegate (for example, an attempt to create two blocks at the same height) and provides evidence of violations, as a reward he receives half of the guarantee deposit, the second half is burned.

Payments of remuneration to users who delegated tokens are not automatically made, but manually. The conditions of public delegates, such as the commission, the minimum threshold, the payment schedule, may vary. There are no such restrictions in the TEZOS protocol itself, so users must find this information on third -party resources.

What architecture does Tezos have?

Tezos platform is written in the functional language of Ocaml programming. Michelson programming language is used to write smart contracts. Like OCAML, Michelson is a strictly typed language optimized for writing smart contracts that provide formal verification of the system (checking the software code according to a certain algorithm, which allows you to identify the inconsistencies of the code of specifications).

The illustration below shows the TEZOS architecture scheme:

• The protocol (depicted in green) is responsible for the interpretation of transactions and the implementation of other administrative operations.
• The protocol identifies blocks with errors.
• The protocol knows about the existence of only one basic blockchain branch, starting with the genesis block, and does not provide that nodes can offer alternative chains.
• The shell (depicted blue) knows about the possibility of the existence of several chains and is responsible for the choice of proposals from the creators of blocks (baseers).
• The shell selects and loads alternative chains into a protocol that checks them for errors and assigns an absolute assessment.
• Then the shell selects a valid chain with the greatest rating – this part of the shell is called a validator.
• The shell contains a P2P-layer, a disk storage system of blocks, operations for transmitting blockchain data to new nodam and the version of the registry.
• RPC-layer (REMOTE PROCEDURE CALL, the service of calling remote procedures, depicted yellow) supports the JSON and HTTP protocol format, with which third-party customers perform requests and analyze the state of the node.

One of the key features of Tezos is the ability to improve the protocol. It is implemented due to the fact that two functions are implemented in the protocol to install a new version of the protocol in a test or main network.

Suppletion proposals can be made using the control system. Proposals may contain a code that is first installed in a test network and after a sufficient check is transferred to the main network.

The possibility of changing the protocol in accordance with users’ requests contributes to minimizing the number of forks and weakens the threat of the split of the community.

TEZOS has two types of accounts:

-an account that may contain a smart contract or token code. The address of such an account begins with kt.
• Implicit Account/Manager – an account that does not execute the code and may act as a manager for other accounts. Can be used for conventional storage, delegation and baseing. This type of account begins with TZ.

How decentralized control of the TEZOS network is carried out?

Tezos control is carried out by means of a system of canine voting, which takes place in four stages:

Proposal Period

As part of the period, delegates can make up to twenty proposals. Bringing a proposal, the delegate automatically votes for it. At the end of the period of the voice and proposals are calculated, and the leading offer goes in the next period.

Testing Vote

As part of this period, delegates may vote for one proposal. If the vast majority of votes supports it, it goes into the next period; If there are not enough votes, the system is returned to the period of making proposals.

Delegates can vote “for”, “against” and “refrain”. Most of the vote is a case when the votes of the pros make up more than 80% of the “pros” + “against”. The participation coefficient is calculated as all the voices received/possible number of votes.

Quorum begins with 80% of the vote, after which during each vote is updated according to the formula NewQ = OldQ * 8/10 + Participation * 2/10, where:

• NewQ is a new value of the quorum;
• Oldq – the old value of the quorum;
• Participation – participation coefficient.

Testing Period (Testing)

During this period, a proposal is tested for effectiveness and correctness. The TEZOS test network is carried out for 48 hours, during which the proposal is tested.

The period of voting on the implementation of proposal (Promotion Vote Period)

During this period, delegates can give one vote in favor or against the proposal that has passed the test period. If the quorum is reached, the proposal is activated on the main network. Otherwise, there is a transition to the period of making proposals.

Each period lasts about three weeks, the full cycle takes about three months.

What else do you need to know about Tezos?

• In December 2018, the leading TEZOS developers founded Nomadic Labs, which is engaged in scientific research and developments for the Tezos Protocol. The company has more than thirty specialists, including Benjamin Kan, Greguar Henri and Pierre Shambar, leading Tezos architects who previously cooperated with Ocamlpro. Nomadic Labs regularly publishes reports on the progress of work.
• TEZOSProjects website presents projects developing solutions for the Tezos ecosystem.
• Tezos Foundation supports the program for issuing grants to projects as part of the Tezos ecosystem. Projects that have submitted applications pass several stages of selection. Read more on FORKLOG.
• On the official website of the project, the second version of White Paper is published, which presents changes in the implementation of the platform in comparison with the initial plans.
• In the section for developers on the official website of the project, all technical documentation is available with a description of the features of the platform work.
• The news section Tezos Foundation contains weekly project development reviews.
• Working groups are created on important integration issues, for example, a working group on wallets, in which Arthur Breitman takes part.
• A third -party Paradigm Fund project regularly publishes on the Medium blog reviews of events in the Tezos ecosystem.

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