What is Tezos?
Tezos (XTZ) is a decentralized blockchain protocol that aims to solve the problems, which the Bitcoin and Etherium networks are experiencing. Blockchain Tezos, built from the ground up with interoperability in mind, provides a communication bridge between the different blockchains in its ecosystem. However, its uniqueness lies in its architecture. Tezos is built with the future in mind, as any future update will not result in a protocol hack or hard-fork, as in the case of Bitcoin and Etherium. Instead, updates will be easily integrated into the Tezos blockchain without affecting the normal operation of the protocol. It is a self-renewing, open-source platform designed to create and host applications and assets. Participants are responsible for managing updates to the underlying protocol, including amendments made to the management process.
Who created Tezos?
In 2014, L.M. Goodman published a technical document, describing Tezos. In this document, he described the technical characteristics of Tezos. The information attracted the attention of programmers, until finally a couple, Arthur and Caitlin Brightman, decided to take up work on this project. This resulted in Dynamic Ledger Solutions, which in 2015 published the source code of the project. A beta version of the protocol was subsequently released, and eventually, when everything was ready, the couple created the Tezos Foundation. The launch of XTZ was characterized by significant fundraising of $232 million. The company was organized in 2017, and while this ICO was indeed successful, it was followed by a number of conflicts in project management. And finally, the Tezos main network was launched in September 2018.
How to get Tezos?
Before you start working with XTZ, you have to choose whether you want to make a quick buck on the price of Tezos or purchase the coins yourself. If you are looking for the second option, you will need a cryptocurrency broker, as they will allow you to trade CFD or futures contracts. You can use them to bet on the price of Tezos and make money. If you want to buy XTZ coins, you will most likely use a cryptocurrency exchange and buy XTZ either directly or through trading. However, it's important to understand that buying coins from an exchange involves creating an XTZ wallet and being responsible for the security of your funds. If you choose Guarda, you don't have to worry about storing and securing your XTZ.
A systematic and effective consensus mechanism is crucial in blockchain as it facilitates communication between network nodes to ensure transaction security. Tezos goes against the rules by using Proof of Stake (PoS) consensus. Speaking more specifically, Tezos uses the Liquid Proof-of-Stake mechanism. This protocol is based on the idea of Liquid Democracy and consumes much less power than Proof-of-Work (PoW).
The Tezos PoS system works with validators, who put their Tezos tokens into play so that they can validate new blocks on the blockchain and get a vote. Users can bid in two different ways. They can vote as well as directly validate transactions, which is known as "baking".
- Tezos Node – A network node that provides decentralization and accelerates the flow of transactions.
- Baker – A delegate that participates in new coin mining (DPoS).
- Staking Power – The superiority of the user's voice, which is at the mercy of the total number of coins in the XTZ wallet. Which affects how often the pool can bake new blocks.
- Right to Bake – to find new blocks (and get rewarded for it), you need to register a node and take a place in the queue (among other participants).
- Approval – block approval. This mechanism allows you to earn an extra profit (~ up to a maximum of 2 XTZ per block). Another security deposit of 64 XTZ is required for operation.
How to «bake» Tezos to get passive income
As the platform does not have miners, the people who verify and validate transactions are called "bakers. To become a so-called "baker," a person must own at least 10,000 XTZ. When a user becomes a baker, s/he has the ability to add blocks to the Tezos blockchain. This process is known as "baking''. The more XTZ a baker has, the higher his chance of being rewarded.
However, if users do not have 10,000 XTZ or the computing power to participate in the bake-off, they can delegate their tokens to the baker.
Simply put, delegation is much more profitable for the common user. Yes, Tezos backers get a bit more benefit because they don't pay a commission (but they do charge a fee), but they also pay for hosting, they spend time maintaining the node, and they also have the risk of losing money with a double backer. (For example, if the node was configured incorrectly). Thus, for the common user, delegation is the most preferable and safest way to participate in Tezos mining.