What is the Tezos Blockchain and How Does it Work?
The Tezos blockchain is a decentralized platform that allows developers to build DApps on top of it. It utilizes a proof-of-stake (PoS) variant called liquid proof-of-stake (LPoS) to achieve consensus among its participants. In traditional PoS systems, validators are selected to create new blocks based on the amount of coins they hold, also known as their stake. In contrast, LPoS allows every validator to participate in block creation, but those with more stake (or XTZ) have a higher chance of being chosen.
To function as a validator on the Tezos blockchain, individuals must hold a specific amount of XTZ in a private key, known as a “roll.” The required amount of XTZ for a roll may change based on network governance. Validators can either provide their XTZ or have XTZ owners delegate their coins to them. In addition to block creation, validators also play a role in determining block consensus through “endorsing.” Both block creators (called “bakers”) and endorsers earn rewards for their contributions to the network.
One of the critical features of the Tezos blockchain is its ability to update itself without the need for hard forks. Hard forks are disruptive events when a blockchain splits into two separate chains due to disagreements among its participants. This can lead to a loss of user trust and negative impacts on the value of the cryptocurrency. In contrast, the Tezos blockchain utilizes XTZ-based governance to determine the project's future direction and implement updates smoothly.
XTZ: The Native Coin of the Tezos Blockchain
XTZ, also known as “tez,” is the native coin of the Tezos blockchain. It has multiple uses within the Tezos ecosystem, including paying fees for on-chain transactions and participating in governance decisions. XTZ holders can also earn rewards by participating in the LPoS consensus mechanism as validators.
Tezos is a mainnet blockchain platform that utilizes LPoS consensus and smart contract functionality. Its unique governance model allows updates to be implemented smoothly without needing hard forks. XTZ, the native coin of the Tezos blockchain, has multiple uses within the ecosystem and can be earned by participating in the LPoS consensus mechanism as a validator. The price and market cap of XTZ may fluctuate significantly over time.