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Like all cryptocurrencies, Tezos, which its founders say is the closest approximation in ancient Greek to ‘smart contract’ or as the founders call it, a “self-amending cryptographic ledger”, is a decentralised ledger system based on blockchain technology. As a smart contracts blockchain designed to allow developers to build decentralised applications, or DAPPs, then hosted on the Tezos blockchain, it can be considered a peer to Ethereum, EOS and NEO. However, the team behind Tezos attempt to take decentralisation to the next level by allowing users to directly control the rules, or protocol, of the peer-to-peer network. Tezos’s native cryptocurrency units are called Tez or Tezzies and their trading code is XTZ.
The Tezos blockchain platform utilises a proof-of-stake consensus mechanism. This means XTZ are not mined but released as a reward mechanism for stakeholders who participate in the proof-of-stake system. A crucial difference between Tezos and peers such as Ethereum is that the blockchain does not rely on development teams and mining communities for the evolution of the protocol. Changes are made by user consensus and the underlying blockchain updated without resorting to a ‘hard fork’ which splits it into two, often competing, blockchains, as happened in the case of Ethereum and Ethereum Classic.
1. Cryptocurrency traders: Tezos value is a natural addition to the investment portfolio of specialist cryptocurrency traders monitoring the wider market for attractive trade openings. XTZ value are also a potential hedge for trading positions in rival smart contract cryptocurrencies such as Ether or EOS.
2. Currency traders: traders whose favoured asset class is forex, indices or commodities, might cast their eyes towards the cryptocurrency market, including the XTZ price chart for additional volatility when their usual asset class is flat and lacking obvious trades.
3. Long-term investors: investors, rather than traders with a longer-term outlook, are often interested in cryptocurrency holdings such as Tezzies as a play on the long-term prospects of cryptocurrencies as an asset class. Major recent developments such as NYSE-owner Intercontinental Exchange, moving to set up a regulated cryptocurrency exchange, and Goldman Sachs stating its intention to open a cryptocurrencies trading desk, raise the prospect of the asset class maturing into a more mainstream financial markets play. If and when this happens, all of the strong cryptocurrencies with solid fundamentals and use cases stand to benefit and Tezos is no exception.
4. Tezos users: developers building DAPPs on the Tezos blockchain, or the users of those DAPPs, will need to invest in XTZ in order to pay for the platform’s bandwidth and hosting. Many may decide to keep some units to the side as an investment in the platform’s long-term prospects.
The main catalysts of the cryptocurrency market and individual cryptocurrencies are different to those which influence more traditional asset classes. Equities are tied to company performance and the local economies into which the companies they belong to sell their goods and services. Fiat currencies are tied to local economies, geopolitics and central bank monetary policy and commodities are tied to the strength of the world economy and supply constraints or gluts.
Cryptocurrencies show little correlation to these kinds of localised influences and their price direction is influenced by the wider developments of the mainstreaming process of cryptocurrencies as a technology and asset class as well as the success of the blockchain platform they belong to in the case of utility cryptocurrencies such as Tezzies. Broken down, the main drivers of Tezos (XTZ) price can be considered as:
Bitcoin: the rest of the cryptocurrency market is, however, very much correlated to the price direction of Bitcoin. The original cryptocurrency’s share of overall market capitalisation continues to recede but is still enough to strongly influence overall sentiment. Bitcoin is also at the centre of developments around institutional investors moving into the cryptocurrency trading space, which could be a huge boost to the whole sector. When Bitcoin’s price makes bigger movements up or down in the short term, the other cryptocurrencies, including the Tezos price chart, inevitably follow.
Tezos Blockchain Platform Traction: the greater the volume of users building DAPPs, and using them on the Tezos platform, the greater the demand for the Tezzies that pay for the resources used. The scale of the DAPPs is perhaps even more important as particularly popular applications, such as viral games, will attract large numbers of users. As such, the success of Tezos in taking market share from other smart contract platforms, and the number of overall smart contract blockchain platform users, is the foundation of long-term demand for Tezzies (XTZ). The greater the demand, the higher their value.
Presence on Major Cryptocurrency Exchanges: being listed on the biggest cryptocurrency exchanges is also very important for the price direction of Tezzies and other cryptocurrencies. The more cryptocurrency traders and investors have easy access to a cryptocurrency, the higher its profile and demand for it. The best product in the world will sell much more through a major supermarket chain than in the local corner store. And when it comes to exchange-traded financial instruments, buyer demand pushes the price up and down.
Tezos: Decentralised Smart Contracts Blockchain That Takes Decentralisation a Step Further
Tezos positions itself as an ‘evolving blockchain’ and takes the stance that hard forks are not the best option available. Tezos takes a different approach by creating governance rules for Tezzies holders to approve protocol upgrades which are then deployed without any fork or hard fork. They are even rewarded for participating in this process with a gift of Tezzies if they propose a protocol upgrade that is subsequently approved and deployed. Participation in the maintenance of the network is also rewarded with Tezzies.
Tezos launched with a 2017 ICO which succeeded in raising $232 million, making it one of the biggest blockchain capital raises of all time. However, the launch of the actual blockchain mainnet was delayed by a dispute between founder and president Johann Gevers and the two other key figures in its structure, husband and wife team Arthur and Kathleen Breitman, who owned the Tezos IP rights.
Gevers eventually stepped down from the board, alongside another board member, Diego Olivier Fernandez Pons, and were replaced by two community members. The Tezos mainnet finally launched in September 2018.
After the significant delay to the post-ICO launch of the Tezos mainnet severely tested the patience of investors that heavily funded the Tezos Foundation, the blockchain has to now make up for lost time and finally fulfil its potential. Investors and traders are all waiting to see if the alternative, community and blockchain protocol evolution approach will prove to be a winning formula for Tezos and its Tezzies (XTZ) native cryptocurrency.