If you’re one of the blockchain investors or just starting to explore this sphere you’ve probably heard about Tezos. The attitude to this cryptocurrency among investors is rather controversial. Some consider it the most adaptive cryptocurrency on the market. The others believe it’s just hype. This article will provide you with a comprehensive analysis of Tezos, its working principles, benefits for investors, and the risks you might meet.
What is Tezos?
Tezos (XTZ) is a transparent decentralized and highly-secure blockchain network. Its digital token is called a Tez and the network links to it. Tezos has several specifical features, which make it different from other cryptocurrencies:
- On-chain governance model — applying this model the blockchain can perform any changes automatically. It allows avoiding the hard fork when one currency can split into two as Etherium or Bitcoin did. In such a case, cryptocurrency can be easily adopted by the general public. The other interesting thing here is that stakeholders influence the platform’s development directly.
- Proof of stake (PoS) — using this mechanism users confirm transactions and get their payments without any requirement for mining and without any expensive technology or software. As you probably know, typical blockchains depend on the mining communities, whereas XTZ focuses on its own community and does not involve minors.
- Staking — you can perform it using two procedures. You can confirm transactions yourself and in this case, you perform “baking”. The other possibility is to ask the technical expert to confirm the transaction and in this case, you’re “delegating”. The idea of mining is different in this framework. Users win the newly minded XTZ whether they are bakers themselves or delegate this function to experts.
- Consensus mechanism — all Tezos stakeholders participate in the consensus and get rewards. Such an approach guarantees the stability of Tezos.
- Self-amendment network — the members of the network directly influence its development, they can implement any change once it’s required
Staking is the unique feature of the Tezos blockchain network, as it attracts new users by the potential reward. At the moment, the staking award reaches 7–8% and it can increase further if any members leave the network in the future.
Let’s clarify further the staking mechanism within the Tezos network.
- An expert designates coins to exchange validators through a unique contract on Tezos blockchain.
- Bakers vote to take part in the exchange. Once bakers win any specific reward they can delegate their voting power to experts.
- When bakers vote for bad transactions, they don’t procure a prize (and neither do their delegators). It means they cannot use their coins, hence you have to check your potential baker before delegating any XTZ to him.
Many investors consider staking a more powerful mechanism in comparison to Proof of Work as it does not require any special technology, mining devices, or electricity expenses.
Arthur and Kathleen Breitman created Tezos in 2014 and only in three years, the coin went through one of the biggest ICO on the market in July 201. During this ICO Tezos raised $232 million. Tezos’ organizational structure was typical for many blockchain projects in that period, focused on the reduction of tax payments. It had a Switzerland company holding assets and a USA firm that performed all the project’s development. Unfortunately, Tezos finally suffered from this model in 2019 as the Swiss head Gevers started a dispute with Breitmans and this conflict negatively influenced the project development. At this point, the Swiss firm disappeared from the scene and the project experienced a significant downturn and lost its market positions.
Fortunately in mid-2019 Tezos experienced a new rise driven by its appearance on large exchanges such as Coinbase. It was a turning point in the project’s development as the large exchange gave the income stream and increased demand for the coin. The new epoch in XTZ cryptocurrency just has started. Before we’ll get deep into Tezo’s price predictions and the main factors, influencing its future development, it’s important to explore how this project works.
How does Tezos work?
The Tezos blockchain empowers numerous features typical for digital currencies.
Developers can utilize its product to run custom programming rationale (smart contracts) and plan new projects (decentralized applications) intended to recreate items and administrations.
However, its democratic highlights required an alternate plan.
All the more explicitly, the Tezos blockchain would be broken into two sections:
Shell — The code that alters itself dependent on the client casting a ballot, it is additionally liable for deciphering exchanges and authoritative tasks
Convention — The code answerable for sending recommendations to the shell for audit.
The Tezos LPoS Blockchain
To keep its organization in a state of harmony, Tezos utilizes a minor departure from an exemplary proof-of-stake (PoS) agreement called liquid proof-of-stake (LPoS).
Like conventional PoS systems, LPoS is a calculation utilized by PCs running the Tezos programming to secure the network, approve exchanges and convey recently minted XTZ.
All together for the members (“nodes”) to take an interest in governance, they have to stake XTZ in a cycle Tezos calls “baking.” To turn into a baker, a node needs 8,000 XTZ (likewise called a roll).
Clients can likewise designate their tokens to different bakers, distributing votes to different clients so they can gain XTZ compensations on its live blockchain.
Users can perform transactions themselves, in light of the fact that clients have the adaptability to effectively switch between the bakers they delegate XTZ to, contingent upon their voting inclinations.
Bakers partake in the administration of the blockchain by deciding on proposed code changes.
The democratic cycle comprises of four unmistakable voting periods, each isolated by around 23 days.
The Proposal Period — Any baker can present a proposition to revise or redesign the Tezos blockchain. The proposition with the most votes proceeds onward to the following time frame.
The Exploration Vote Period — Proposals that arrive at a sufficient share (80% of votes for the proposition) proceed onward to the following time frame
The Testing Period — The proposition at that point moves to an impermanent test chain (48-hour fork) curated to check if the change works and is alright for the organization to embrace.
The Promotion Vote Period — Bakers vote to decide whether the proposition will be executed. Recommendations experience if the vote arrives at a super-larger part in favor.
Bakers can also attach invoices to their recommendations. In case the proposition is endorsed after every one of the four voting periods, the convention will mint the predefined sum in the receipt and pay it to the baker.
Tezos price prediction
Tezos’ price experienced several peaks this year. One peak happened in February, and the second one in September when the price was the highest since the year’s start — $4.38.
At the moment the price has dropped, however, the XTZ has not lost its positions completely. It still beats most altcoins and has a positive forecast till the year-end. The Wallet Investor predicts the price growth until $3.83 in a year and $9.97 in five years with potential volatility in the next years.
What Are the Factors Driving XTZ Cryptocurrency Growth?
Various individuals referenced that a significant part of the Tezos recovery in 2019 is originating from three central issues:
- “STO Pipeline” of projects in which XTZ will participate. These projects will raise the demand for XTZ cryptocurrency. It is likely that both the growth of the transactions and the growth of security token will take place
- Tezos capitalization
- Technological innovations
Let’s explore each of the factors in detail.
Here come the STOs
Many members of the crypto community believe that Tezo’s development will mark the new age of STOs. As per one view, over $2.6 billion worth of STOs are at present during the time spent being spun up utilizing the Tezos convention. The three reasons this viewpoint advances for the mass selection of Tezos for STOs are the security of savvy agreements, authority, and upgradeability.
All the more as of late, the extremely dynamic Tezos Commons page posted a relative report concerning why Tezos will beat Ethereum with regards to STOs. Artisan Borda, the CEO of TokenSoft, even ventured to such an extreme as to state that inside a year, 25%–35% of all STO issuances through TokenSoft would be on Tezos.
Some back-of-the-napkin science demonstrates that, if those previously mentioned ventures are esteemed at $2.6 billion, the market would be taking a gander at $500 million of deals all set four months not far off.
The second driver of Tezos price rise is the potential $600 million in the foundation the project has. This rumor seems relevant as XTZ raised its price multiple times since its start on ICO from $0.47. The other factors contributing to the positive price predictions are: staking of coins on the Coinbase plus the interest of investors in staking-as-a-service offerings and lending of the idle assets.
It’s the innovation
The final driver of Tezos price is the technology that the project utilizes. This is also the most disputable factor as different experts have various opinions on the project’s technology perspectives. Tezos utilizes a super dark programming language Michelson that has both advocates and doubters. On one side this approach secures both the code and the network because there are a few coders who can access the platform. On the other side, the limited amount of developers reduce the innovation pace as well as the possibility that the community will rapidly increase.
There is no final conclusion whether the dark language is good or bad for Tezos. However, the Ethereum and EOS currently surpass Tezos in terms of development tools, community, and quality of documentation. It means that the amount of developers is not the key factor in the success of the platform. In this respect, the possibility to make smart contracts in other languages could positively influence the project’s growth and development.
Tezos itself does a lot to help the developers, preparing a number of professional certifications and courses for those who construct applications on the platform or contribute to the smart contract database. Hence, regardless of the fact that the developers’ network is small, it is very active and innovative, which means that Tezos is likely to develop in future years.
Is Tezos the future, or is it just FOMO?
As with many other crypto projects, Tezos does not avoid the “fomonomics” rumors. It means that some market members consider Tezos hype. To put it simply they believe that all the talks about future STOs, various innovations, and capital growth are just created to make the potential investors think that Tezos price predictions are positive. However, it does not seem the case for Tezos, as its recent development according to the roadmap and the significant improvements within the platform show that it’s a real perspective project.
For example, this can be illustrated by the improvements in testing, the involvement of the new skilled developers, the innovations in the privacy protocol. All these measures show that the project develops in the right direction, following its roadmap, and is on the way to achieving its ambitious goals.
What is the future of Tezos cryptocurrency?
Overall, the Tezos price prediction is positive. In recent years, all the announced changes were implemented and the peaks in price experienced in the first and third quarters of 2020 show the positive dynamics of the platform. At the same time, significant volatility still raises questions concerning the perspectives of the project in the long run. At the moment the active trading and benefits of Coinbase partnership contribute the most to the project development. But Tezo’s constant innovation, effective listing on large exchanges, and control of the security issues raise positive expectations concerning its future development.