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What is XTZ

About Tezos (XTZ)

Tezos is a decentralized blockchain network that supports smart contracts and has its own cryptocurrency, XTZ. Like Ethereum, the network provides a platform on which developers can deploy decentralized applications — or DApps.

However, unlike previous blockchain implementations that risk a chain split whenever a hard fork upgrade is implemented, Tezos introduces an on-chain governance mechanism. Proposed upgrades are tested and discussed before XTZ holders vote on them. If a majority approves, the protocol automatically switches to the new software version — eliminating the risk of a chain split.

Tezos consists of a distributed network of nodes. To ensure these nodes come to agreement on previous ledger updates, the network uses a consensus mechanism known as liquid proof-of-stake, or LPoS. The system is similar to EOS's delegated proof-of-stake, or DPoS, in that it allows token holders to delegate their tokens to a block validator — known in Tezos as a "baker."

However, unlike DPoS systems, the delegator retains ownership of their XTZ and their delegated funds can move between bakers whenever they choose. Similarly, there is no chance of delegators losing their XTZ. The stake at risk comes from the baker in the form of a security deposit. Should they attempt to validate dishonestly, they forfeit part of this deposit.

XTZ price and tokenomics

The current Tezos price depends on the volume of XTZ buying versus selling at any given time. When demand exceeds supply, the XTZ price increases.

At the network's launch in 2018, those investing in the Tezos initial coin offering, or ICO, received a share of 608 million XTZ. Continued supply inflation via block rewards is intended to incentivize bakers to secure the network for as long as it exists. Therefore, there is no cap on the number of XTZ that can be created.

The network rules stipulate that bakers must hold at least 8,000 XTZ, but there is no minimum number of XTZ required to delegate. While this inflationary monetary policy creates downward pressure on the price of XTZ, the potential of LPoS to generate passive income all but ensures continued demand for Tezos. The fact that participation in the consensus mechanism is open to all further encourages the buying of XTZ.

An additional driver of demand is actual network usage. Developers and users must pay fees in XTZ to deploy or interact with Tezos smart contracts. Whereas some XTZ goes to the baker validating a transaction or computation, the protocol also burns any fees required to store data permanently to the blockchain. Continued future adoption of Tezos and the DApps built on it could, therefore, have a positive impact on Tezos price.

About the founders

Believing Bitcoin to be capable of much more and taking issue with Ethereum's reliance on a core team of developers, husband and wife team Arthur and Kathleen Breitman conceived of Tezos in 2014. They began working on it the following year.

The pair wanted to combine Ethereum's smart contract functionality with a decentralized, on-chain governance mechanism. Over two papers, Arthur described a cryptocurrency capable of integrating new ideas without risking network splits. At the end of the second paper, he stated: “Tezos truly aims to be the last cryptocurrency.”

After meeting Johann Gevers, one of those behind Ethereum's ICO, the Breitmans set about generating $20 million to develop the network. The Tezos sale actually raised $232 million, making it the largest ICO at the time. Despite concluding in mid-2017, disagreements between the Breitmans and Gevers delayed the launch. The mainnet eventually went live in September 2018.

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How to buy XTZ and store it safely?

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How to buy XTZ and store it safely?

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FAQ

  • What is the Tezos (XTZ) cryptocurrency?

    XTZ is the ticker symbol of cryptocurrency native to the Tezos blockchain. The network itself allows for the deployment of smart contract-based DApps and features an innovative on-chain governance mechanism to avoid contentious hard forks. Tezos uses a consensus mechanism called liquid proof-of-stake to ensure all validator nodes agree with a single network state. Known as "baking," those wanting to support the network by validating changes to its state must put up a deposit in XTZ. Any Tezos user can then delegate their own holdings to any baker to receive a share of the block rewards the network distributes for validation.
  • How to buy Tezos?

    To get started buying or selling XTZ, just sign up for an OKX account. Registration takes less than five minutes! When you've registered and logged in, head to the "Trade" section. You'll find it in the navigation bar. Next, select the trading pair your wish to trade from the dropdown list in the top-left corner of the screen. Fill in the amount of XTZ you want to buy and select an order type. Confirm your trade. As soon as your trade is filled, you'll receive your XTZ in your OKX account.
  • What is the difference between Tezos and Ethereum?

    Arthur Breitman, the co-founder of Tezos, believed hard forks — like that which created Ethereum Classic (ETC) — to be detrimental to a blockchain's utility. Tezos avoids such chain splits using an on-chain governance and self-amendment mechanism. Another difference is the consensus mechanism used. Tezos's LPoS is more environmentally sound than Ethereum 1.0's proof-of-work. It allows for more widespread participation than Ethereum 2.0's proof-of-stake, since any XTZ holder can delegate to a baker. Finally, Tezos's smart contract programming language, Michelson, allows developers to formally verify the mathematical assumptions of their smart contracts. This can help prevent costly bugs and vulnerabilities.
  • Is Tezos a utility token?

    Deploying smart contracts and interacting with DApps on Tezos requires XTZ. The cryptocurrency pays for computations and data storage on the network. In this respect, XTZ can be deemed a utility token. Similarly, its unlimited supply distances XTZ from those cryptocurrencies with finite issuance. Fixed supply coins, like BTC, have more in common with other investment vehicles. That said, XTZ may still represent a good investment. It's impossible to use the network without its native asset. Increased usage will create demand, which should put upward pressure on the price of Tezos.
  • How to stake Tezos?

    If you're interested in staking Tezos yourself, you'll first need to set up an XTZ node. This demands some technical know-how, as well as a commitment to remaining online and updating node software when necessary. Additionally, you'll need to hold — or be delegated — at least 8,000 XTZ. Depending on the current Tezos price, this can be quite expensive! If that sounds like too much hard work, you can always delegate XTZ to the OKX Pool's baking service. You'll earn between 5.3% and 6.3% in annual passive income while supporting the Tezos network's security. There's no minimum amount to delegate, and we offer both fixed-period and flexible options. Find out more about Tezos staking at OKX here.