Tezos Blockchain: Everything to Know

By  Beluga Research September 21, 2023

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  • The Tezos blockchain is a decentralized cryptocurrency platform with on-chain governance, enabling smart contracts and seamless upgrades
  • Tezos is a self-amending blockchain that addresses challenges faced by existing platforms, such as scalability and governance
  • It uses a unique consensus algorithm called liquid proof-of-stake and features on-chain governance for efficient and inclusive decision-making
  • Tezos emphasizes formal verification for enhanced security and reliability, and promotes interoperability with other blockchain platforms


The Tezos blockchain is a decentralized cryptocurrency platform with on-chain governance, enabling smart contracts and seamless upgrades. Tezos stands out for its self-amendment capability. Unlike other blockchains that require hard forks for protocol upgrades, Tezos enables on-chain governance, allowing token holders to propose and vote on protocol amendments. This empowers the community to make decisions collectively, ensuring a more adaptable and sustainable blockchain over time.

A Brief History

Arthur and Kathleen Breitman conceived the Tezos project and released a whitepaper in 2014. In 2017, Tezos conducted an initial coin offering (ICO), raising over $230 million. However, legal and governance challenges caused delays in its launch.

After resolving internal conflicts, the Tezos mainnet went live in September 2018. The Tezos Foundation governs the platform, supporting its development, research and community initiatives.

Tezos Blockchain: Everything to Know

Consensus Algorithm. Tezos uses a unique consensus algorithm called liquid proof-of-stake (LPoS). Token holders can participate in consensus by "baking" tokens or delegating them to others. Bakers create new blocks, validate transactions and receive rewards in Tezos tokens.

On-Chain Governance. Tezos features on-chain governance, allowing protocol upgrades and changes to be proposed, voted on and implemented directly on the blockchain. Token holders can participate by submitting proposals, voting and delegating voting power to trusted entities called "bakers." This decentralized governance model aims for more efficient and inclusive decision-making.

Smart Contract Language. Tezos introduces Michelson, a low-level, stack-based smart contract language. Michelson enables formal verification, enhancing security and reliability of smart contracts. Formal verification mathematically proves program correctness, reducing vulnerabilities.

Self-Amendment. Tezos' self-amendment capability is a significant aspect. Through on-chain governance, the protocol can upgrade and improve without hard forks. This allows the network to adapt, incorporate new features and address vulnerabilities or limitations, fostering a cohesive and innovative ecosystem.

Interoperability. Tezos promotes interoperability with other blockchain platforms. Developers can create tokens and build decentralized applications (dapps) using smart contract standards like the Tezos FA standard. Interoperability enables seamless communication and collaboration between different blockchains, unlocking possibilities for DeFi, NFTs and other use cases.

Getting Started

To start with Tezos, it's important to understand its basics. Tezos operates on a proof-of-stake (PoS) consensus mechanism, which means it doesn't rely on energy-intensive mining like Bitcoin. Instead, token holders can participate in the validation process, offering advantages such as increased scalability, reduced energy consumption and a more democratic governance structure.

To interact with the Tezos blockchain, a wallet that supports XTZ, the native cryptocurrency of the Tezos network, is needed. There are various wallet options, including hardware and software wallets. XTZ tokens can be acquired through exchanges or by participating in Tezos baking, which involves staking and validating transactions on the network.

Unique Aspects

A unique aspect of Tezos is its emphasis on formal verification. This mathematical method is used to prove the correctness of smart contracts and protocols, minimizing the risk of bugs, vulnerabilities and security breaches. Formal verification enhances the reliability and trustworthiness of the Tezos platform, making it attractive to developers seeking a secure environment for their applications.

Tezos also introduces a unique consensus algorithm called liquid proof-of-stake (LPoS). LPoS combines the benefits of traditional PoS with a delegated governance model, where token holders can delegate staking rights to others. This promotes decentralization by allowing token holders without technical expertise or resources to participate indirectly in the validation process. It also provides an opportunity for token holders to earn rewards by delegating XTZ to bakers, who validate blocks.

Additionally, Tezos incorporates a formalized funding mechanism called the Tezos Foundation. The foundation supports the development and growth of the Tezos ecosystem by providing grants to projects and initiatives that contribute to the platform's advancement. This funding model fosters innovation and ensures the long-term sustainability of the Tezos network.


  • Self-Amendment. Tezos has a self-amendment feature that enables stakeholders to propose and vote on protocol amendments, avoiding the need for hard forks. This on-chain governance mechanism allows for a more efficient and decentralized decision-making process, ensuring platform evolution without creating divisions within the community.
  • Formal Verification. Tezos incorporates formal verification, which mathematically proves the correctness of smart contracts and protocols. This enhances the security and reliability of the platform, reducing the risk of vulnerabilities, bugs and security breaches.
  • Liquid Proof-of-Stake. Tezos utilizes liquid proof-of-stake (LPoS), where token holders can participate in block validation and earn rewards by staking their tokens. A "baking" mechanism allows token holders to delegate their staking rights, promoting decentralization and wider participation in the consensus process.
  • On-Chain Governance. Tezos implements a robust on-chain governance model, empowering token holders to actively participate in decision-making. Stakeholders can propose and vote on protocol amendments, ensuring adaptability and responsiveness to community needs. This democratic approach fosters ownership and inclusivity.
  • Energy Efficiency. Tezos consumes significantly less energy compared to proof-of-work blockchains like Bitcoin. LPoS, relying on staking rather than computationally intensive mining, reduces energy requirements. This energy efficiency is environmentally friendly and makes Tezos more accessible and cost-effective for participants.


  • Learning Curve. Tezos introduces unique concepts and features, resulting in a steep learning curve for newcomers. Understanding self-amendment, formal verification and on-chain governance requires technical comprehension, potentially deterring some users.
  • Limited Ecosystem. Tezos lags behind more established platforms like Ethereum in terms of dapps and developer activity. This limitation restricts the variety and availability of applications and services built on the Tezos blockchain. However, as the platform evolves, this limitation is expected to diminish.
  • Market Adoption. Tezos faces competition from other projects, and gaining widespread market adoption can be challenging. Convincing developers and businesses to choose Tezos over established platforms requires a compelling value proposition.
  • Scalability. Tezos, like many other blockchains, faces scalability limitations. Increased users and transactions may lead to congestion and slower confirmation times. While Tezos has implemented solutions like rollups and layer-two solutions, achieving high transaction throughput is an ongoing area of improvement.
  • Regulatory Uncertainty. The evolving regulatory landscape introduces uncertainty for Tezos and other projects. Compliance with complex regulatory requirements that vary across jurisdictions while maintaining decentralization and privacy is a challenge.