tezos explained

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What is Tezos? The Beginner’s Guide

What is Tezos? Tezos has become one of the biggest and best-known Dapp and smart contract platform. It is challenging Ethereum, EOS, and TRON and attracting many investors with its unique baking. This article is a Tezos beginner’s guide. We’ll go through the Tezos history and have all the key features explained.

What is Tezos – a platform for Dapps

First, let’s place Tezos to the correct category in the world of cryptocurrencies.

As the subject reveals already, Tezos is one of the Dapp and smart contract platforms. These cryptocurrencies are also called ecosystems or Dapp operating systems. This means Tezos is competing with Ethereum, EOS, TRON and other well-known platforms.

It also means you shouldn’t really compare Tezos to Bitcoin or Litecoin or other cryptos, which are designed to be digital currencies. Tezos is an entire operating system and it gives a framework for software developers to build Dapps and create tokens.

Tezos platform has also a native token XTZ, also known as Tezos. People often use the word Tez, such as “I bought 10 Tez today”. The purpose of XTZ is similar to other platforms’ native tokens (ETH EOS, TRX). It’s used to pay transactions and run smart contracts and Dapps.

Tezos beginner’s guide – the history of the project

Tezos project is founded by Arthur Breitman, who’s educated in applied physics and maths. He moved from France to the US in the early 2000s to study quantitative finance. Breitman also worked in the well-known investment bank, Morgan Stanley.

Arthur’s wife, Kathleen Breitman, has been heavily involved since the beginning. The couple met each other in 2010 in an anarcho-capitalist event. Kathleen and Arthur Breitman still give a face to the whole project (Image source: screencap from this video).

tezos breitmans

Arthur Breitman has been involved in the crypto scene for a long time. He was visioning a way to govern Bitcoin already in the early 2010s.

Things started to happen in 2014 when Vitalik Buterin had published the Ethereum white paper. Arthur Breitman went through the Ethereum program code and noticed that Buterin’s vision was very close to his own.

However, Breitman didn’t like the governance system of Ethereum. He felt that the project should be governed by its community, which would eliminate the need for hard forks. Arthur Breitman published his own white paper and position paper with an alias L.M. Goodman in 2014.

“Most importantly, Tezos supports meta upgrades: the protocols can evolve by amending their own code. To achieve this, Tezos begins with a seed protocol defining a procedure for stakeholders to approve amendments to the protocol, including amendments to the voting procedure itself.”

Breitman tried to get funding to his vision from multiple sources, but his ideas didn’t receive much appreciation at this point.

Tezos ICO and the recent drama

Arthur Breitman worked in Morgan Stanley until 2016. During this time, he also founded a company called Dynamic Ledger Solution, which owned all the intellectual properties of Tezos.

In 2016, Breitman finally resigned from the banking world and planned an ICO for Tezos. He managed to get 612,000 dollars of pre-ICO funding, which was partly used to start the Tezos Foundation in Zug, Switzerland.

Despite this funding, Tezos was running badly out of money long before the ICO. They were saved by Tim Draper, who invested 1.5 million dollars and brought a lot of credibility to the project as well. If you are not familiar with Draper, he’s been an early investor in Skype, Tesla, Coinbase, Twitch, and many other tech projects.

Tezos eventually had their ICO in July 2017, which was near the peak of the ICO boom. Tezos received 66,000 BTC and 361,000 ETH, which had a value of 230+ million dollars at the time. Tezos ICO is still one of the biggest ever had.

Next, Breitman’s Dynamic Ledger Solutions company was supposed to sell all the intellectual properties to Tezos Foundation. This is when things got ugly. A massive argument broke off between Breitman’s company and Johann Geevers, who was the head of the Tezos Foundation at the time.

This fight also delayed delivering the XTZ tokens to investors. You can learn more from this case from the video below.

This fight was eventually settled, but there was more drama around the corner. Tezos was investigated by the SEC due to the inadequate KYC/AML process. SEC forced Tezos to implement KYC to all XTZ token holders, which made many people angry.

Arthur Breitman was also fined by The Financial Industry Regulatory Authority (FINRA) in 2018. According to FINRA, the 20,000 USD fine was due to Breitman not reporting any outside business activities while working at Morgan Stanley in 2014 and 2015. This was the time he was also pitching Tezos.

Hence, one could say there have been more than enough headwinds in the early stages of this project. If you want to learn even more, check out this article by the Wired magazine.

Tezos was able to launch its beta net in June 2018. The project really took off in 2019, when the staking of XTZ token was supported by Coinbase and Ledger. Tezos gained hundreds of percentages in value and moved even close to the top 10 in the cryptocurrency market cap list.

Tezos explained – formal verification

How does Tezos differ from Ethereum and other platforms? There are two things that make Tezos famous and separate it from the crowd: formal verification and governance. Let’s check the former, first.

Tezos offers a bit different framework for software developers compared to other platforms. It is using a unique programming langue for writing Dapps and smart contracts called Michelson. For example, Ethereum has Solidity, while other platforms support different languages.

Formal verification is the reason why Tezos is using Michelson as the programming langue. This is a mathematical way to verify a program code. It is a heavy method, which is why it’s normally used in the real-world applications, where human lives might be in danger (medical applications, nuclear power plants).

Formal verification is explained thoroughly in this and this article, if you want to take a deeper dive into it. See also the video below, where it’s explained in newbie-friendly fashion.

In formal verification, the program code is verified with a mathematical model. This helps to eliminate all logical errors from the code. Traditionally, program code has been checked by a human (the programmer himself), who always has a limited capacity to find errors.

Verifying the program code is critical especially with smart contracts. The whole idea of a smart contract is that it cannot be altered once its deployed on the blockchain. If there is a vulnerability, you cannot just stop and change a smart contract. This is why formal verification is valuable.

The Tezos ecosystem, meaning the framework for smart contracts, is built with OCaml programming language. You’ll find more information about OCaml from this link.

Tezos is governed by the community

The governance model of Tezos is perhaps its most interesting feature. Some say that Tezos is like Ethereum and Dash put together. If you aren’t familiar with Dash, it is a cryptocurrency controlled 100% by its network (community).

As mentioned earlier, Arthur Breitman had a vision of an ecosystem, which wouldn’t have a need for hard forks. This could be achieved through on-chain governance system. In other words, XTZ token holders will decide.

Tezos community members are making proposals of new features. These include technical specs and they can also include proposals of funding. Then it’s up to the community (= XTZ holders) to vote. If you want to know more about this process, see the following video.

XTZ token holders are also taking care of the Tezos blockchain maintenance. This is because Tezos is using the popular Proof of Stake consensus algorithm. There are debates if Tezos’ consensus should be called as DPoS (Delegated Proof of Stake), the very same that EOS and TRON are using. There is a slight difference, though.

DPoS was developed by Dan Larimer, who is also the founder of EOS. In this system, there is a small number of validators called as delegates. You could see them as representatives or government officials. Each token holder can cast their votes on any of the delegates.

In Tezos, you can become a validator after holding 8000 XTZ tokens (earlier 10,000). The idea is similar to other PoS systems: validators are always required to stake a certain number of tokens, hence the name “proof of stake”.

Tezos differs slightly from its competitors. In this system, XTZ tokens are locked in and the holder will be paid interest on them. It works almost like a bond. This is why the Tezos consensus is sometimes referred as bond-PoS.

Tezos, however, is calling their consensus algorithm as Liquid Proof of Stake (LPoS). The video above will explain this in more details.

Tezos Beginner’s Guide – staking and baking

Staking is the main reason behind the rise of Tezos’ popularity. It is connected to the blockchain maintenance and the previous chapter as well. There is a catch, though. Tezos has decided to call staking as baking. If you are one of the validator nodes staking XTZ tokens, you’ve become a baker.

If you want to be a baker in the Tezos ecosystem, you need to bake (= stake) 8000 XTZ tokens. This amount of Tez is called a roll. After this, you just need to run the Tezos software on your server. The same basic principle applies to other PoS systems too.

These validator nodes, or bakers, take care of the blockchain maintenance. It means they accept and validate new transactions and create new blocks to Tezos blockchain. As a reward, they get XTZ tokens. You can find active Tezos bakers at

tezos bakers

As you can see from the image, bakers receive about 5.5 to 6.2 nominal yield for their staked coins. More tokens you stake, more rewards you get.

Now we must also talk about delegation. Even if you’d own just 10 Tez, you can still receive block rewards. This is possible through delegating your XTZ tokens to one of the active bakers. The validator takes about 10-15% cut for himself and gives the rest of the rewards to you.

A baker (validator) for each block is chosen randomly. The reward is 16 Tez + 2 Tez for 32 verifying bakers of each block. This means, there’re 80 new XTZ tokens born every minute when a new block is baked.

Delegating XTZ tokens has become very popular. This is also because some popular exchanges and wallets started to support Tezos delegating in 2019. For example, you can delegate your tokens in Coinbase, Ledger Nano X or TrustWallet.

The following video shows how delegating works in a Ledger Nano.

The best part of delegating is that your tokens never leave your wallet. You don’t have to trust a third party to hold your precious XTZ while delegating. However, your tokens will be locked, so you can’t move them anywhere during this process.

Tezos is an inflammatory cryptocurrency, like Ethereum as well. The yearly inflation is currently a bit over five percent. Therefore shows two yields: nominal and real yield. The latter shows the actual yield after inflation is deducted.

Tezos Beginner’s Guide: Scaling with Marigold

Every blockchain project has its positive and negative sides. Tezos is certainly offering many interesting features, but there is also one clear weakness in the system. That is the TPS number, meaning Transactions Per Second.

If you want to move your Tez from Ledger Nano to Coinbase, you must wait for a full confirmation for about an hour. This is due to two factors: Tezos has a relatively long block time (1 minute) and Coinbase also requires up to 60 confirmations from the network.

One-minute blocks are slow even compared to Ethereum, which has about 12-15 second blocks. Tezos achieves about 40 TPS right now. This is much better than Ethereum, but it’s poor compared to other 3rd generation platforms. Tezos is also limiting the network capacity on purpose, but even without limitations it couldn’t go past 80-100 TPS with a current set-up.

Tezos is planning to solve this issue with a Layer 2 solution called Marigold. It is based on Plasma, which is a solution presented by Ethereum founder Vitalik Buterin in 2017. If you want to know more about Plasma, see the following video.

Plasma makes it possible to split the computing power and capacity needed by smart contracts and Dapps to multiple sidechains. Hence, they won’t clog the main chain and eat all the transaction capacity.

If this sounds a lot like the Lightning Network for Bitcoin, you are not far off. LN is a payment protocol though, but the purpose is similar. All micro transactions are moved out of the main Bitcoin blockchain to another layer, where they can be processed in almost real-time.

Marigold requires a lot of resources and Tezos needs to develop a whole new programming language for that. This is called Ligo. The work is currently done by a company called Cryptium Labs and the project is titled as Babylon.

What is Tezos as an investment?

Tezos is an interesting project with a long history. You could say it’s a child of Arthur and Kathleen Breitman. Tezos had lots of issues in 2017 and 2018 as explained earlier, but the project is moving forward and gaining popularity very fast.

Tezos also offers something different. It’s not going to be a threat to Ethereum for a long time, but many believe it could be a big player in the STO market. If you are not familiar with Security Tokens, check the following video.

STO is nothing new, there has been discussion about it for several years. In practice, STOs can be real-life instruments tokenized onto the blockchain. This could be stocks, real estate, art or anything of value.

When a financial instrument is tokenized, you could think of it as converting a piece of real estate to millions of tokens. This would make it possible for any small investor to buy one or ten of such tokens and own a small fraction of the property.

The previous video explains what advantages Tezos could have in this field compared to EOS and other competitors.

As mentioned earlier, Tezos has become very popular through its staking, baking and especially delegating. Since Coinbase and Ledger Nano added delegation features, XTZ price has more than tripled. More people you have staking and delegating, less tokens there are available in the market, which helps to create scarcity.

We should also remember that Tezos has a huge war chest from their successful ICO.

Tezos real-time price:


If you want to buy Tez with euros, the best places are Coinbase and Kraken. Tezos is also in Binance, where you can buy it with bitcoins. Delegation is also possible through these exchanges.

The most popular hardware wallets  Ledger Nano XLedger Nano S and Trezor Model T support Tezos and delegating. You can also use Trust Wallet mobile app, which is a very handy wallet with also delegating options.

The official page is and the main social media channels are and