Tezos Guides


Tezos for beginners

Tezos is an alternative cryptocurrency, also known as an altcoin. In this guide we breakdown the basics of the Tezos coin and blockchain network.


The Tezos cryptocurrency and blockchain network are functionally different to many other cryptocurrencies. Its market cap is around is decidedly low in comparison to Bitcoin’s $62 trillion. This cryptocurrency is somewhat controversial and has been surrounded in regulatory issues and lawsuits since its incredibly popular Initial Coin Offering (ICO), in which it raised $232 million.

On-chain governance

Many cryptocurrencies, Bitcoin included, have a blockchain network that is distributed evenly through peer-to-peer networks. In Tezos, however, the stakeholders govern the blockchain protocol. All stakeholders have the privilege to partake in governing the protocol.

Tezos is notably different from other coins as it utilises an election cycle which provides a formal and systematic procedure for stakeholders to reach an agreement on any proposed amendments in the protocol. It incorporates self-amendments which allows Tezos to upgrade itself without having to implement a hard fork procedure. A hard fork refers to when a fundamental change occurs in the protocol, or, if there is a disagreement within the community about the future direction of a project. This process enables Tezos to incrementally upgrade itself over time instead of undergoing radical changes every time there is a fundamental flaw or disagreement in the community.

Anybody can freely submit proposals for protocol upgrades; it will then be up to the Tezos token holders to vote on whether to implement it. If the upgrade is approved, the developers can then begin the work. The proposals are expected to include compensation. The funds are then kept in an escrow service by the Tezos protocol and are distributed once an approved upgrade is implemented.


Smart contracts are special contracts that are written into the code of a blockchain. They will be executed once all parties have held up their end of the bargain. Tezos uses smart contracts written in their own programming language known as Michelson. This functional language is designed to facilitate the creation of smart contracts on the Tezos blockchain.

Michelson allows for formal verification of smart contracts. Formal verification, in this context, is a technique that can prove the correctness of the code. This grants users the ability to proof the properties of their smart contract, thereby increasing the security of one. Since Tezos self-amends, Michelson can continuously change as per the wishes of the community.

Delegated proof-of-stake

A lot of cryptocurrencies utilise a proof-of-work (PoW) algorithm, which is designed to reward miners for successfully solving cryptographic puzzles. In doing so, miners will be able to verify transactions in a ‘block’ of data and add that block to the blockchain. Other tokens make use of a proof-of-stake (PoS) system; which determines the creator of a block by their stake (wealth).

Tezos use a delegated proof-of-stake system (DPoS). A DPoS system is not dissimilar from a democratic process. People vote with their token holdings for delegates, who will then be able to verify a transaction and receive newly minted coins. The incentive for such a system is that people are rewarded for voting by receiving a share of the coins from the successful delegate. Choosing a delegate means you are choosing them to cast your vote when they are voting for a proposal.

DPoS allows for virtual mining as opposed to physical mining in a PoW system. In a PoW system, miners receive freshly minted coins for verifying transactions, but this is not the case in a DPoS one. Instead, Tezos’ system is an energy-efficient consensus protocol and each token holder can be part of the mining process by either being a delegate or by voting for one.

Baking Tezzies

Ethereum is the biggest example of a cryptocurrency and blockchain network that makes use of smart contracts. To do so, the network is sustained with ‘Gas.’ This is used to help determine an appropriate fee for a transaction. Tezos has something similar in its Tezzies (XTZ) token.

Tezzies are a store of value for payments of network transaction fees as well fuelling smart contracts. Because the Tezos blockchain employs a DPoS system, the token is also used for platform governance. Each token represents a vote. Validating transactions in Tezos is known as baking and is similar to Bitcoin mining, but on a PoS basis. Bakers (like miners) are rewarded with Tezzies for helping the blockchain validate transactions.

Zero-knowledge proof

You may have heard that cryptocurrencies have issues with scalability. To understand the issue of scalability, we will take Bitcoin as an example. Since Bitcoin’s origin, the transaction times have slowed and the fees have risen. Bitcoin fees are still cheaper than PayPal’s, but, it is notably slower. In Bitcoins circumstance, this issue is largely tied to its block size. Block sizes limit the amount of transactions that can be processed per second. Layer 2 scaling solutions have been devised to help remedy this.

Tezos has incorporated an approach that, in theory, will help sustain the long-term scalability of the platform. It uses a concept made popular by ZCash, and that is zero-knowledge proof. Zero-knowledge proof concepts are useful for smart contract execution as well as separating the execution and the verification completed by consensus nodes. In turn, this decreases the workload for consensus nodes. The nodes only verify the proof of a smart contract and do not need to execute the entire contract. This method could also reduce transactions costs.

Tezos is just one of many coins that offers an alternative to Bitcoin and looks to resolve some of its limitations. Before choosing a coin, be sure to do you research with Coin Rivet.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.