Tezos was founded in 2014 with the goal of creating a self-amending blockchain. Although the implementation was complex, the core concept of Tezos was straightforward.
Anyone who owned the XTZ cryptocurrency would be able to vote on any possible changes to the rules. Once the votes were approved, the software would automatically upgrade to reflect the changes.
Tezos created two distinct cryptocurrencies using this system to decrease the chance that its blockchain might fork.
However, the notion that a cryptocurrency could be upgraded within its own software was a bigger idea and sparked a discussion about "blockchain governance."
Tezos's arrival would change blockchain taxonomy and effectively seperate crypto assets into two groups: those with "offchain governance" from those with "onchain governance."
Tezos users could vote through a process called baking, in which they agreed that they would lock XTZ they had in special contracts to make the system work. To win XTZ, users could become bakers or delegate XTZ.
Tezos's unique design was so successful that it was able raise record-setting funding levels in 2017, before launching its live blockchain for the public in 2018.
What is the working principle of Tezos?
Many features are common to cryptocurrency with the Tezos blockchain.
Its software can be used by developers to create new programs (decentralized apps) or run custom programming logic (smart contract) that replicate products and services.
However, the voting features of this device required a completely different design.
In particular, the Tezos blockchain could be divided into two parts.
Shell - This is the code that modifies itself based upon user voting. It also interprets transactions and performs administrative operations
Protocol - This code is responsible for sending proposals and requesting review by the shell.
The Tezos LPoS Blockchain
Tezos uses liquid proof-ofstake (LPoS) to keep its network in sync.
Similar to traditional PoS mechanisms LPoS can be used by computers running Tezos software. It is used to secure the network and validate transactions, and to distribute newly minted XTZ.
Participants ("nodes") must stake XTZ in Tezos' "baking" process in order to be able to participate in governance. A node requires 8,000 XTZ (also known as a roll) to become a baker.
You can also assign tokens to other bakers and allocate votes to other users to earn XTZ rewards.
Bakers are motivated to be honest because they have the ability to switch between the bakers to which they delegate XTZ depending on their voting preferences.
Tezos Upgrades
Bakers can vote on code changes and participate in the governance of blockchain. There are four voting periods that can be used to vote, separated by approximately 23 days.
The Proposal Period: Any baker may submit a proposal to amend the Tezos blockchain. The next period is open to proposals that have received the most votes.
The Exploration Vote Period: Proposals with a supermajority (80%) of votes in support of the proposal move on to the next period
The Testing Period – The proposal is then moved to a temporary fork (48-hour fork), which was created to test if the proposed change works.
The Promotion Vote Period- Bakers vote to decide if the proposal will go through. If the vote is supermajority, proposals are approved.
Bakers may also attach invoices. If the proposal passes all four voting periods and is approved, the protocol will issue the invoice with the amount specified in it and pay it to baker.
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