Presentation of the Tezos token (XTZ)

What is Tezos?

Tezos is a blockchain of the same type as Ethereum that allows you to execute smart contracts. It aims at the development of decentralized applications (DApps), in particular within the framework of decentralized finance. Tezos differs from Ethereum with three major differences:

Tezos works by proof of stake (liquid), which gives it greater scalability.
Tezos' contracting system is based on a secure programming language called Michelson.
Tezos is a scalable blockchain that has an internal governance system that allows it to self-amend.

Proof of liquid stake

Tezos' consensus model is based on proof of stake (PoS), and more specifically on a variant of delegated proof of stake called liquid proof of stake (LPoS). The validators, called bakers or bakers, must have placed in receivership a minimum of 8000 ꜩ is necessary to become one. These bakers are rewarded according to the number of XTZ tokens they have and which have been delegated to them: the more there are associated tokens, the more likely they are to validate / approve a block and to receive the reward. Those who delegate their tokens receive validation rewards (while still paying fees to the baker), hence the “liquid” nature of the proof of stake. This action is called staking. In addition to its decentralized and democratic aspect, this possibility of delegating allows protection against inflation for token holders, who will proportionally affect part of the money creation. Thus, despite the 80 ꜩ created every minute, ie a monetary creation rate of 5% per year, the tez holder would only be impacted by the costs paid to his baker. Since these are 10% on average, this would represent, at equal demand, a loss of purchasing power of 0.5% per year.

Smart contracts within Tezos

Another important part of how Tezos works is its smart contracts. In fact, in this sense, smart contracts are controlled in a very similar way to Ethereum smart contracts. In other words, the actions and their programming have a certain gas cost, which must be paid in XTZ tokens, in order to be able to be executed. But far from this resemblance, Tezos smart contracts are programmed in Michelson language, instead of Solidity as happens in Ethereum. Michelson is the domain-specific language used to write smart contracts on the Tezos blockchain. Thanks to Smart contracts, Tezos offers the possibility of managing NFTs as well as DEFI type operations (decentralized finance).

Tezos' native token, XTZ

Tezos' native token is XTZ, and it's a versatile token. You can acquire it and use it as a means of payment or as a means of interacting with the services that make life on the Tezos blockchain and its smart contracts. However, the potential of this token focuses primarily on controlling and interacting with smart contracts, the governance of the blockchain and its block generation process. In fact, the use of this token on the blockchain is very similar to what Ether has in Ethereum. Each interaction in Tezos generates a cost in “Gas”, which then translates into its respective commission in XTZ tokens.