Tezos

Tezos is a decentralized open-source blockchain that can execute peer-to-peer transactions and serve as a platform for deploying smart contracts. The native cryptocurrency for the Tezos blockchain is the tez which has the symbol XTZ.

Tezos was created by husband-and-wife team Arthur and Kathleen Breitman and first proposed in 2014. The non-profit Tezos Foundation, based in Zug, Switzerland, was created in 2017 to support the project and raised $232 million in Bitcoin and Ethereum in one of the biggest initial coin offerings (ICOs) at the time. Subsequently, the Breitmans and the head of the foundation, Johann Gevers, publicly feuded over control of the project. The disagreements led to delays in the deployment of Tezos, which caused investors to bring lawsuits alleging unauthorized sales of securities. In 2020, the Tezos founders settled the lawsuits with the Tezos Foundation paying $25 million.

The Tezos network achieves consensus using proof-of-stake. Tezos uses an on-chain governance model that enables the protocol to be amended when upgrade proposals receive a favorable vote from the community. This allows Tezos to avoid hard forks. Its testnet was launched in June 2018, and its mainnet went live in September 2018. As of August 2021, there are about 400 nodes validating blocks (referred to as bakers) on the Tezos network.

History
Tezos was founded by the husband-and-wife team of Arthur and Kathleen Breitman, and the Tezos Foundation was founded by Johann Gevers. Arthur studied applied mathematics, computer science, and physics in France and financial mathematics at New York University under Nassim Nicholas Taleb before working in quantitative finance. Kathleen studied at Cornell and worked at a hedge fund and as a consultant. Arthur was the leader of an anarcho-capitalist group in New York and Kathleen was a libertarian Republican who became interested in politics after listening to Rush Limbaugh at age 5; The two of them met at a crypto-anarchist lunch in 2010. Arthur was a follower of Patri Friedman, the founder of The Seasteading Institute, and he learned of Gevers when Friedman hired him for a project to build a libertarian city in Honduras.

While working at Morgan Stanley in 2014, Arthur Breitman released two papers proposing a new type of blockchain under the pseudonym "L. M Goodman", referencing a journalist at Newsweek who had misidentified the creator of Bitcoin. He chose the name "Tezos" after writing a program to list unclaimed websites that could be pronounced in English. In 2015, he registered Dynamic Ledger Solutions Inc (DLS) in Delaware with himself as chief executive. The Breitmans contracted French firm OCamlPro to help develop the software. Arthur worked at Morgan Stanley at the time, but he did not provide them with notice of his work on Tezos as required by the Financial Industry Regulatory Authority (FINRA), and he was eventually fined $20,000. He sought to raise $5 to $10 million from banks but was unable to find backers. By 2016, he left Morgan Stanley; Tezos received $612,000 from 10 backers while the Breitmans planned for an initial coin offering (ICO).

In 2016, Arthur travelled to meet Gevers in Zug, Switzerland, which is known for its effective corporate tax rate of zero and lax regulations. Setting up a Swiss foundation would avoid US securities laws, and in 2017 Gevers created the Tezos Foundation in Zug. At the time, he was also establishing Monetas, his own digital currency. They planned for the foundation to become a non-profit that would raise money through the ICO and acquire DLS, which owned the group's technology. They received a $1.5 million investment from Tim Draper and hired public relations firm Strange Brew to promote their project. The firm was alleged to have falsely claimed that large American financial firms were using Tezos.

ICO and legal disputes
The fundraiser for Tezos began on July 1, 2017 and received 66,000 bitcoins and 361,000 ethers, which had a market value of $232 million. The contributions were termed "non-refundable donations", which Kathleen Breitman likened to a pledge drive where people would receive tote bags, though some participants considered them to be an investment. If considered an investment rather than a donation, it would fall under the purview of the Securities and Exchange Commission (SEC). After the ICO, it was planned that the Tezos Foundation would pay to acquire DLS, and if the Tezos blockchain functioned for at least three months, the Breitmans would receive 8.5% of the ICO and 10% of the tokens.

By October, the Breitmans and Gevers were in a dispute over control of the project, with the Breitmans alleging Gevers pressured the foundation council into signing a contract giving him a bonus of $1.5 million. Gevers refused to give the Breitmans their payout, which was valued at around $70 million in cryptocurrency. By December, three lawsuits had been filed in the United States alleging fraud during the fundraiser and that Tezos was an unregistered security. In 2018, Gevers resigned and received $400,000, and the foundation board was replaced; Tezos went live that September. The Tezos Foundation paid $25 million in 2020 to settle its lawsuits before federal courts ruled on whether the ICO was a sale of unregistered securities. Arthur Breitman joined the foundation's council in 2021.

Design
The primary protocol of Tezos utilizes liquid proof of stake (LPoS) and supports Turing-complete smart contracts in a domain-specific language called Michelson. Michelson is a purely functional stack-based language with a reduced instruction set and no side effects, designed with formal verification in mind.

In Tezos' LPoS model, network nodes that validate blocks and add them to the blockchain – known as bakers –  are selected to perform those actions proportionally to their share of rolls of 8,000 XTZ that they put up for stake, and a baker receives staking rewards in the form of newly minted XTZ after successfully validating a block and adding it to the blockchain. Holders of XTZ can delegate their XTZ to bakers to share in the staking rewards that bakers receive. Holders of XTZ who do not stake or delegate their XTZ risk suffering a loss in value due to inflation as new XTZ are created and distributed to bakers for validating new blocks and adding them to the blockchain. The current annual inflation rate is 3.6%. As of January 2021, nearly 80% of all XTZ in circulation were either directly staked by bakers or delegated to bakers for staking.

The Tezos protocol allows itself to be amended by a staged process performed by committing operations to the stored blockchain to submit proposals (intended code changes) and to vote on those changes. If a proposal receives enough votes the protocol updates itself to incorporate the code changes.

The Tezos blockchain has been used for NFTs as an alternative to more energy-intensive projects, such as Ethereum.

Token standards

 * 1) FA1.2 (TZIP-7)
 * 2) * An ERC20-like fungible token standard for Tezos. At its core, FA1.2 contains a ledger which maps identities to token balances, providing a standard API for token transfer operations, as well as providing approval to external contracts (e.g. an auction) or accounts to transfer a user's tokens.
 * 3) FA2 (TZIP-12)
 * 4) * A standard for a unified token contract interface, supporting a wide range of token types and implementations.
 * 5) *Tokens might be fungible or non-fungible.
 * 6) *A token contract can be designed to support a single token type (e.g. ERC-20 or ERC-721) or multiple token types (e.g. ERC-1155) to optimize batch transfers and atomic swaps of the tokens.
 * 7) TZIP-16
 * 8) * A standard for accessing contract metadata in JSON format in on-chain storage or off-chain using IPFS or HTTP(S).

Reliability
In March 2019, the audit company Least Authority published the results of five audits, performed for Tezos Foundation during 2018.

With high probability, Tezos protects against chain reorganizations and selfish-baking, which are two common issues in blockchains using Nakamoto-style consensus. A subsequent analysis confirms that selfish baking in Tezos results in insignificant profits, even when the baker attempting it has a very large portion of the stake. One study revealed a potential flaw in the current consensus proof of stake mechanism that Tezos uses, providing a theoretical analysis of the feasibility and profitability of a block stealing attack referred to as "selfish endorsing". A change to the protocol was proposed to reduce the profitability of this dishonest behavior.