A beginner’s guide to Tezos

Linda Xie
4 min readAug 3, 2017


What is Tezos?

According to the Tezos (“Tay-zos”) website, “Tezos is a new decentralized blockchain that governs itself by establishing a true digital commonwealth.” A commonwealth is a group that chooses to be linked together because of their shared goals and interests. Tezos aims to have their token holders make decisions together to govern the platform and improve it over time. This post should help those who are new to Tezos to understand how it is different than other smart contracts platforms like Ethereum. Please see my beginner’s guide to Ethereum for those new to the concept of smart contracts.


Tezos is a smart contracts platform like Ethereum but one of the main differences is that Tezos incorporates a process for upgrading the protocol over time through on-chain governance. This governance system is designed to allow for a smooth evolution of the blockchain rather than having to hard fork, which is a split of the blockchain into two separate versions. The team believes that hard forks, which both the Bitcoin and Ethereum blockchains have been subject to in the past, shouldn’t be the standard way to upgrade over time. Their view is that hard forks should only occur as a last resort, when the community needs to be split into two due to irreconcilable differences over how each group envisions the protocol evolving.

In Tezos, developers are able to independently submit proposals for protocol upgrades wherein they include a request for compensation for their work. Tezos token holders can then vote on whether the proposal should be approved. Adding this compensation structure provides incentives for developers to continue improving upon Tezos rather than having to work for free, relying on donations, or being sponsored by a centralized entity. This innovative structure is intended to enable Tezos to support independent developers that contribute to the protocol over time.

Delegated Proof of Stake

Ethereum is currently working towards switching from Proof of Work (PoW) to Proof of Stake (PoS) while Tezos plans to launch with delegated PoS from the start. PoW is an effective but resource intensive method of maintaining consensus across a peer to peer network, in fact, currently Ethereum miners are already using more electricity than a small country like Cyprus. With PoS, validations are conducted through virtual mining rather than physical mining. In order to participate you only need to own the tokens rather than spend money purchasing mining hardware and electricity. An added benefit of PoS is that it enables economic penalties if someone tries to attack the network. Delegated PoS means that Tezos token holders can delegate someone else to validate on their behalf if they do not wish to participate in staking directly (e.g. lack of time, knowledge, or resources).

Formal Verification

Tezos also differs from Ethereum in that its smart contract programming language, named Michelson, is a functional language which facilitates formal verification. Formal verification essentially allows developers to mathematically prove the correctness of their smart contract code. Formal verification proves that some properties of the contract will be maintained, but does not necessarily mean that the code is 100% correct. Formal verification is used in industries where there is little room for error (e.g. nuclear reactors, aircraft, medical devices).

There have been instances of bugs within poorly implemented Ethereum smart contracts that could have been avoided had formal verification been applied. This does not mean that Ethereum itself had bugs, but it does provide a strong argument for creating formal verification tools that developers may use to facilitate ensuring smart contracts will behave as expected. For this reason, there is a push for creating formal verification tools and new programming languages for writing Ethereum smart contracts. The trade-off with formal verification is that it can be difficult for developers to apply properly, leading to a false sense of security as all of the correct assumptions must be baked into a proof for it to be useful.


The co-founders of Tezos are Arthur Breitman (ArthurB) and Kathleen Breitman (KathleenB) who have been developing Tezos since 2014 with a team of core developers. Currently they are expected to be several months away from launching the Tezos network.

Starting July 1, 2017 the Tezos team raised a historic $232 million in an uncapped fundraiser over a period of about 2 weeks, accepting contributions of both bitcoin and ether. The Tezos Foundation, based out of Switzerland, will manage the funds raised from the crowdsale. In the first year of the network, the foundation will have veto power on proposals but will not have any privileged power in submitting proposals. In addition, the foundation plans to eventually phase itself out unless Tezos token holders vote to keep funding it using the on-chain governance system.

I believe that Ethereum, Tezos, and other smart contract platforms will coexist as they each aim to serve different purposes and the token holders have different ideals. When cross-blockchain infrastructure like Cosmos and Polkadot are fully developed we will hopefully see Ethereum and Tezos tokens move freely between both platforms.


Tezos is an exciting project trying to tackle a number of issues they see with existing protocols. Below are some links that may help you understand Tezos further and keep up with the news.

Understanding Tezos

Keeping up with Tezos

Thank you to Will Warren and many Coinbase employees especially Maksim Stepanenko, Reuben Bramanathan, Jordan Clifford, and Emre Tekisalp for reviewing this post.

Please note all opinions in this post are my own. Disclaimer: I own XTZ.



Linda Xie

Co-founder @ScalarCapital. Previously Product Manager @Coinbase. Advisor @0xProject.