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Strengths and Weaknesses


  • Staking – Tezos enables all users to participate in the governance and security of the blockchain
  • Security – about 76 % of all XTZ coins are stored in staking, which helps network security
  • Authentication – Tezos uses formal verification for every smart contract on the blockchain to prevent erroneous contracts


  • Low usability – Tezos suffers from a lack of real usage and an almost non-existent DeFi ecosystem
  • Security threats – Tezos has a high Gini coefficient, indicating a potential safety risk
  • Weak marketing – Tezos is still waiting for commercial acceptance

Basic Information

The Tezos blockchain works on the principle of LPoS (Liquidity Proof of Stake) consensus.

Tezos is a self-adapting blockchain that supports smart contracts and dApps. XTZ coin holders can vote on the future direction of the blockchain.

Voting is intended to prevent community division leading to hard forks or devaluing of the governance coin. The self-correcting nature of the Tezos protocol makes it easy to update and verify the latest innovations of the network.

Functioning of the Chain

Each block is created by a validator and contains several signatures of the previous block. For creating and signing the blocks the validators are rewarded. They put in a five-cycle security deposit that will be taken off their balance in case blocks or signatures are duplicated.

The protocol unfolds in cycles of 4,096 blocks. At the beginning of each cycle is a random number, derived from the numbers of the previous cycle, and is revealed in the last block. Using this random number, a “follow the coin” strategy (each coin created has a serial number that allows it to be tracked and randomly selected) is used to assign rights to specific addresses for minting and signing for the next cycle.

Four cycles of PoS:

Wiki Tezos

Tezos uses an LPoS consensus called Emmy+.

It is divided into 5 main parts:

Block Creation (Baking):

In the Tezos blockchain, users creating blocks are called bakers (which are validators). To become a baker (validator), a user must own at least 8,000 $XTZ (1 roll). The more rolls a user owns, the more likely they are to be selected to bake (validate) the next block. If 10 rolls are needed to create the next block and the baker (validator) owns 2/10 rolls, he has a 20% chance of being selected.

The baking (validation) rights are set in terms of priority. For example, if 10 rolls are available, the protocol may randomly select a priority list as follows:

Priority 1 = 3 roll

Priority 2 = 7 roll

Priority 3 = 3 roll

Priority 4 = 1 roll




Priority 10 = 4 roll

This means that the baker (validator) who owns the 3 roll will have priority when designing the block. If he does not design and post the block by a certain time, a baker (validator) with 7 rolls can take over. The more rolls a baker (validator) owns, the more chance he has of high priority. A baker (validator) can also get multiple priorities.


In addition to baking (validating blocks), the participant can also approve blocks. The approval rights are set in the same way as the baking (validation) rights. For each block, 32 random rolls are selected whose owners are to validate the block. The validation serves as a vote on the block. Approvals on a block are included in the next block. Endorsing is a sign of activity – the more endorsements the blocks contain, the more secure the blockchain is.

Block Delay Rule:

The priority of a block and the number of confirmations it contains determine the minimum time within which the next block can be baked (block validation). The higher the priority and the more confirmations, the faster the next block can be baked (validated). The minimum block delay is set to 60 seconds.

Fork Choice Rule:

In case the user observes two different chains (forks), he applies the fork selection rule and decides which one is the correct one. The rule simply consists of selecting the longest blockchain and includes checking that the blocks have not been baked (validated) before it is allowed.


To encourage participation, baking (validation) and approval is rewarded with a protocol in the form of newly minted XTZ coins. The reward per block is a function of priority ‘P’ and number of validations ‘E’ according to Carthage. For priority 0, the reward for baking (validating) and confirming is equal to 1.25 times E $XTZ. This option prevents deflationary baking (block validation). For priority 1 and above, the bake (validation) reward for a block with E confirmations is 0.1875 times E $XTZ and the confirmation reward is 0.833333 times E $XTZ.

To avoid Nothing-at-Stake problems, it requires baking (validation) and confirmation of the backup. The security deposit is 512 $XTZ for baking (validation) and 64 $XTZ for confirmation. Backups are locked for 5 cycles (14 days).

In the event of a fraudulent duplication of baking (validation) / confirmation, the coins locked in the staking will be removed if proof of the accusation is included in a future block.

Example: baker (validator) A accuses baker (validator) B of double baking (validation) / confirmation which will be true.

Baker (validator) B will have his security deposits taken away, 50 % of which will be burned, and 50 % will be given to baker (validator) A as a reward for exposing the fraudster.

Miro medium
Nothing-at-Stake: a theoretical security threat in the Proof of Stake (PoS) consensus. The problem can occur at any time during a blockchain fork, either due to duplicate blocks or accidentally when two honest validators propose blocks at the same time.

Tezos blockchain update. This update brought valuable bug fixes and minor improvements, including a formula for network rewards.

: among the bakers (validators), a list of approvers is compiled for each block. Their task is to approve the blocks created by the baker (validator) for a reward.

To validate block N, each validator adds a signature operation that is contained in block N + 1. Once block N + 1 is baked (validated), no further validation operations are accepted for block N.

Each block has 7,000 approval slots. The baker (validator) is not obliged to fill the entire block. At a minimum, he must fill 4,667 slots, but if he fills more slots, he receives a bonus.

A validator can get multiple validation slots for a given block. He will then be rewarded for each validation slot filled.

4,667 approvals is enough to bake (validate) a new block. The maximum number of confirmations per block is set to 7,000 slots for greater network security. If the baker (validator) has more confirmation slots than 4,667, it will get a larger reward per block baked (validated) - the more filled confirmation slots, the more secure the block is.

Compared to other blockchains, it minimizes network fork or network hacking. If approvers perceive a suspected double block, they will not provide confirmation slots and the block will not be created.

Development History


  • Arthur Breitman under a pseudonym (L. M. Goodman) published a whitepaper with the principles of today’s Tezos


  • The Breitmans founded Dynamic Ledger Solutions company, which wrote the computer code for the Tezos blockchain


  • Tezos source code has been published


  • Tezos alphanet was launched in February
  • In July, the Swiss Tezos Foundation (Johann Gevers) together with the Breitmans organized an ICO fundraiser for Tezos. One of the most successful ICOs in the crypto world raised 232 million USD (65.7k $BTC and 361k $ETH) in just 2 weeks.


  • Distribution of the coins was delayed due to disagreements between the Breitmans and Gevers, who eventually resigned as president of the Tezos Foundation
  • Tezos testnet was launched in June
  • In July, the Tezos Foundation announced that all ICO participants must undergo KYC
  • Tezos mainnet launched in September


  • In March, centralized exchange (CEX) Coinbase announced the possibility of staking $XTZ for normal users and institutions


  • In March, the Tezos Foundation and DLS company paid 25 million USD to ICO participants who filed a class action lawsuit for withdrawing their investment
  • In November, Tezos Foundation verified 94 % of the ICO participants
Arthur Breitman was assisted in writing the whitepaper by his wife, Kathleen Breitman.



Arthur Breitman (CTO) previously worked as a quantitative analyst at Goldman Sachs and Morgan Stanley. Here he gained extensive experience in financial markets, market analysis and the application of mathematics in finance.

Kathleen Breitman (CEO) She spent 9 months at R3 as a Senior Strategy Associate for a blockchain consortium of over 70 financial firms. She has also worked at Accenture (1 year and 11 months), Bridgewater Associates (1 year) and the Wall Street Journal (3 months).

Tezos’ advisors include big names in the crypto world like Andrew Miller, Emin Gün Sirer and Zooko Wilcox.



$XTZ (tez) is the governance coin of the Tezos blockchain.

Use cases for $XTZ:

  • Rewards for bakers (validators)
  • Payment of transaction fees
  • Staking (increases network security)
  • Approving modifications in the network

Revenue & Tokenomics

The ICO of Tezos took place from June 28 to July 13, 2017. During this time, 65,681 $BTC and 361,122 $ETH were raised. Investors received 763,306,930 $XTZ, which were distributed as follows:

  • 79.58 % - allocated to ICO participants
  • 0.42 % - allocated to early bakers and partners
  • 10 % - allocated to Tezos Foundation
  • 10 % - allocated to the DLS company

The $XTZ allocated by the Tezos Foundation and DLS are locked with a 4-year release on a monthly basis. Tezos Foundation holds half of the coins in a vesting smart contract and the other half is released to DLS upon meeting certain points. Once these points are met, the DLS’ coins will also be moved into the vesting smart contract.


$XTZ does not have a maximum supply set.

New coins are created as rewards for baking (validating) a new block. The annual inflation rate is set not to exceed 5.51 %. Due to the variable structure of the validation rewards and the effective block generation time, the inflation rate may actually be less than 5.51 %.

XTZ coin is burned if the baker is caught in fraudulent behavior (duplicating blocks).

Polychain, one of the largest VC firms investing in cryptocurrencies, was an early investor in the Tezos blockchain and ICO. Polychain sold all of its XTZ coins (500k) in 2020 and 2021. With this divestment, the price and overall confidence in the Tezos blockchain started to drop.

The Uniqueness of the Chain

Tezos uses the OCaml programming language. The developers believe it offers better security features and a more powerful interface than C++, for example.

OCaml allows developers to check operations by using formal verification to detect errors or inaccuracies in the code.

The Tezos ecosystem is divided into networking, transaction, and consensus protocols. Transactional and consensus protocols operate separately and plug into the shell network. The shell network maintains the state of the blockchain and allows for internal checks of the protocols. Anyone can make suggestions for changes to the protocols. The coin holders decide whether to accept or reject them.

The Tezos blockchain can update itself through the protocol change process without the need for a fork. Performing upgrades in this way speeds up upgrades and reduces the likelihood of bad splits.

For developers developing the Tezos blockchain, it provides the ability to upgrade it and a strong guarantee of a protocol that will work for years. Tezos was built to stand the test of time.

Tezos chain was part of a European Central Bank experiment exploring the possibility of introducing a digital euro (CBDC).

How the Network is Secured

The Shell Network


Each block carries a time stamp. Blocks that have a timestamp several minutes before the system time are buffered. If the timestamp is more than a few minutes before the system time, the blocks are discarded. The protocol must tolerate reasonable time offsets between clients and assume false timestamps.

Chain selection algorithm:

The Shell Network controls and maintains one chain. Maintaining a block tree is better for network communication, but more vulnerable to hacker attack.

Still, it is possible for a node to lie about the authenticity of the blockchain. Bakers (validators) must process a larger number of blocks before they detect an incorrect chain.

Thanks to the Shell Network, a fraudulent chain shows only a few blocks. The baker (validator) knows after a few verified blocks that it is a fraudulent fork and does not need to continue with verification.

Network defense:

It tries to connect to many partners from different IP addresses. Detects disconnected peers and disables malicious nodes. To protect against DDoS attacks, the protocol provides block and transaction size limiting features.

In January 2019, a flaw was discovered in the code of popular Tezos wallets, including Tezbox and Tezos.blue. This flaw could have potentially allowed users’ funds to be drained off due to a bug in the server that the wallets shared. Tezos says the issue has been fixed and users’ funds are safe.


The Tezos blockchain uses a modified version of the Proof of Stake (PoS) consensus model called Liquidity Proof of Stake (LPoS). This model allows holders to lock up their coins and participate in the security of the network and the creation of new blocks. In the crypto world, this process is known as staking. However, Tezos calls it “baking.” The platform allows users to delegate coins to bakers (validators) without giving up ownership. The baker (validator) and the coin holder are rewarded with new XTZ coins. This system allows holders of a small number of coins to become a baker (validator) and participate in the validation process.


Two groups are involved in the block creation process:

1) A delegate, which can be:

  • A baker (validator) who contributes to the consensus by creating new blocks
  • An endorser that participates in consensus by validating blocks created by other bakers (validators)
  • Accuser, who participates in consensus by checking the work of bakers (validators) and endorsers

2) Delegators can delegate their coins, if they don’t have enough $XTZ to run their own validator node

How to become a baker (validator)?

The minimum deposit required for a baker (validator) is currently set at 8,000 $XTZ. This amount is called a roll. If you have fewer XTZ coins, you can delegate your $XTZ to the baker (validator) or have others delegate their $XTZ to you, which will fill the roll and bake (validate a new block).

If you want to create new blocks and be rewarded, you must meet certain conditions:

  • The device running the node must be online 24/7
  • At least 8,000 $XTZ locked in the staking
  • Properly configured node
  • Tezos wallet

Minimum hardware requirements:

  • 8 GB RAM
  • 2-core CPU
  • 256 GB SSD

Benefits of the baker (validator):

  • Receives all rewards for baked (validated) blocks and distributes them to delegates

How to become a delegator?

Most wallets supporting the Tezos blockchain offer built-in delegation to make the whole process easier. All you need to do is:

  • Open wallet
  • Select the number of XTZ coins to stake
  • Press “Delegate”
  • Select a baker (validator)
  • Press the “Delegate” button
  • It’s done

Do not underestimate the choice of a good baker (validator).

It is necessary to beware of:

  • Fees at bakers (validators)
  • Each baker (validator) is given an exact capacity of coins it can accept for staking
  • Reliability of the baker (validator) – whether they pay rewards on time
  • Checking the baker’s (validator’s) history regarding fraud and related coin removal

Benefits of delegators:

  • No HW complexity
  • Not responsible for newly verified blocks

These links can help you choose a good baker (validator) here and here. There is a calculator to calculate your potential rewards.

Road Map

CDN Sanity

The latest upgrade called Lima which introduced, for example:

Consensus key: this feature allows bakers (validators) to change their key for block signing and consensus operations without changing their public address.

Ticket enhancements: tickets are now part of the transaction confirmation. This brings clearer auxiliary indexes for tracking tickets. Zero amount tickets will also be canceled.

Network repairs Ghostnet: during the migration from Jakarta to Kathmandu, the permanent test network Ghostnet revealed two problems. These have been fixed in Lima.

Removing Liquidity Baking sunset: sunset is no longer needed because the subsidy can be turned off using the moving-average switch. This was introduced during the Jakarta update.

Temporary removal of function Timelock: due to the discovery of a bug, until a security mechanism is developed the creation of new contracts via Timelock was disabled.

Detailed information about the Lima upgrade can be found here.

Tezos has not yet updated its Road Map, but the "Mumbai" upgrade is planned in Q1-Q2 2023, which is the thirteenth protocol upgrade. Its main task is to bring stability and increase the throughput of the blockchain.

Let's take a look at the main changes it will bring:

- RPC for ticket balances
: adding two RPC endpoints improves visibility of custom tickets
- Transfer of tickets between accounts
: previously only tickets could be transferred between   smart contracts and rollup - with Mumbai updates you will be able to send your tickets to each   other
- Block creation
: the time will be reduced from the current 30 seconds to 15 seconds
- Smart Rollups
: rollups are a permissionless solution for scaling the Tezos blockchain. This   means that anyone can set up and run one or more rollups, allowing for an (almost) arbitrary   increase in the throughput of the entire ecosystem.


The Tezos ecosystem in DeFi lags behind and is not as well known as its competitors.

The biggest projects on Tezos:

  1. Youves – Synthetics
  2. Tezos Liquidity Baking – Yield
  3. Kolibri – CDP

The Tezos Foundation has created several tools for better work and provides grants for new projects.

Blockchain Tezos rewards developers for submitting a new improvement proposal. The reward is the minting of new XTZ coins, which are credited to the developers.

The condition for receiving them is the approval of the proposal and its implementation in the network.


Tezos has a very active and friendly community via Discord, where questions about problems of both developers and users are answered.

On Twitter, there is a daily update on news and general happenings in the crypto world.

New partnerships and videos about projects in the ecosystem are presented via YouTube.

Additionally, the Tezos Foundation hosts global conferences used to bring users and developers together to share new knowledge and innovations.


Latest Tezos chain partners include Manchester United soccer team and e-sport company Team Vitality.

Where to Buy

$XTZ can be bought on the larger centralized exchanges (CEX).

When buying on decentralized exchanges (DEX), it is best to use those on the Tezos blockchain:

  • Tezos Liquidity Baking

To buy on CEX, you can choose these:

Supported Wallets

Ledger Nano X – the most widely used hardware wallet (HW) on the market - when paired with your software wallet (SW), you get more security for your cryptocurrencies

TrustWallet – SW Wallet

Atomex – SW Wallet

Analyst Opinion

Tezos is a multi-purpose blockchain designed to keep pace with Web 3.0. Thanks to smart contracts, it is growing rapidly. The Tezos infrastructure allows for rapid upgrades to the blockchain and the addition of new features.

It remains to be seen whether the inflation mechanism can actually protect against loss over the long term due to an unlimited supply of coins.

However, the network control protocols and fork protection of the blockchain provide some advantages.

The future of the Tezos chain seems promising. The team continues to improve key features in the blockchain such as privacy, consensus, and scalability. In addition, the platform has several projects in the works (future network upgrades). It will be interesting to see how they will affect the functioning of the entire blockchain.

The team still has a lot of work to do to showcase the full potential of the Tezos blockchain in the crypto world.

Ondřej Tittl


Sorry, no more analyses.


Sorry, no more analyses.