Tezos, A Launch Story: What's Left Before the $232 Million Tech Goes Live?

The Tezos Foundation has a message for the community: the code belongs to its users.

Revealed in a statement on Monday, the non-profit is now directly pledging to take steps that will find it less involved in operations once the much-anticipated blockchain is launched. It's a move reminiscent of the recent EOS launch, which has had a rocky start after Block.one, the corporate creator of the blockchain, handed over its tech to its community, and one that could signal a trend as more and more ICO projects go live in 2018.

In the statement, the Tezos Foundation states, "Tezos' potential rests in the hands of its community, and we have no doubt that the Tezos community is among the strongest and most exceptional in the cryptocurrency ecosystem."

Speaking exclusively to CoinDesk before the announcement, Ryan Jesperson, the chair of the foundation, went further saying, "The prior board had considered having a veto power for a year after it launches, but the new board has chosen not to have that power."

He continued:

"At the foundation, the way we view our role is to deploy resources to support participants in the community."

It's a statement on the foundation's realignment with users after months of tension between members of the project's team that ended in February. And while the alphanet (where only the team could use and test the system) for the project has been running for about a year, the Tezos team is looking to launch a blockchain that people can use very soon.

The initial goal was to launch a so-called "betanet" of the blockchain by the end of Q2. But with this being the last week of the quarter, that remains to be seen (though Jesperson did elaborate on how the betanet would work).

For instance, the project, which remains one of the largest initial coin offerings in history raising $232 million, will have some oversight initially.

According to Jesperson, when the betanet goes live, users that have completed the recently announced know-your-customer (KYC) process will be able to freely trade the native crypto tokens called tezzies. While the team behind the Tezos project can take the betanet offline at any time for further development or bug fixes, user's transactions will be authentic, meaning that state of the ledger will persist onto the mainnet.

Block producers and bakers

Once Tezos becomes a live blockchain, though, the idea is that it'll be ready to stay up for good and for reliable for entrepreneurs to start using as they explore new ventures.

But with the Tezos development team taking the back seat then, how will decisions be made? In some ways, comparing Tezos to EOS again is helpful here.

Both projects use a delegated proof-of-stake (dPOS) consensus algorithm, which means validation of the blockchain is done by nodes that set aside, or "stake," a certain amount of the protocol's native tokens. Staked tokens aren't lost, but if the node unstakes their tokens to spend, they will lose their position as a validator.

Validators are incentivized for their work, though, as the protocol pays them out in new tokens.

In the case of EOS, the protocol specifically indicates that only 21 validators are needed, and these validators are constantly being swapped in and out based of how other users of the protocol stake their tokens to vote for specific organizations to do the job.

On Tezos, on the other hand, the validator pool is left entirely open. There's no limit to the number of validators, which are called "bakers" on Tezos, that can be working for the network, but there is a high bar for becoming one – 10,000 tokens staked.

Users are all encouraged to stake, but if they don't have 10,000 tokens, they can delegate their tokens to other bakers.

When enough users delegate tokens to a baker's stake, that baker should win more opportunities to validate and both parties should end up earning more tokens.

Also similar to what happened for EOS, some companies have already lined up to take on these baker roles ahead of the Tezos launch. Tezos Rocks is a portal for all sorts of information about the protocol, and it shows five different groups that have announced their intention to serve as bakers, asking other token holders to delegate their own tokens to them.

This is far fewer than what EOS had before launch; in EOS' case, dozens of organizations were vying for validator spaces before the launch. And now, there are hundreds trying to work their way into one of the top 21 spots.

The difference may be explained by another key strategic difference in how Tezos was deployed versus EOS.

EOS' ICO ran for about a year and carried out hundreds of short auctions. These auctions also put tokens into investors' hand immediately since EOS launched on ethereum first, using the ERC-20 token as a temporary coin before the EOS blockchain went live and tokens were moved there.

Tezos on the other hand only kept the token sale active for about two weeks and no tokens were handed over at that time.

Without that ebb and flow of token prices live on exchanges, it may have been more challenging for Tezos to build excitement among potential validators ahead of the protocol's launch.

Yet knowledgeable sources have told CoinDesk that more bakers will be announcing themselves after the betanet launch.

The rules of the blockchain

Just as EOS and Tezos have similar deployment processes, the reasoning behind their creation is also akin – they both set out to change blockchain governance.

Indeed, both protocols embrace a central vision that's about putting future decision-making in the hands of users so they can be responsible for building it out from the ground up. The architecture of the two protocols also allows for the rules of the software to change according to the needs of the community at the time.

In a talk at last year's Blockstack Summit, Arthur Breitman, the creator of the Tezos software, said:

"We have blockchains and blockchains are coordination technology, so let's actually use it for making governance decisions."

And while governance may not sound that exciting, with the rabid infighting among the different stakeholders of blockchain projects, many wonder if there's a better way to allow various politics to continue without splitting the communities behind the coins.

"Politics is like weather, it's going to happen no matter what," Breitman said in his talk.

And as such, the Beitmans (Arthur created Tezos with his wife Kathleen) set out to hard code that better way.

While it's unclear whether Tezos architecture will lead to less drama, the project's interest in taking the launch process slowly could mean that its launch is less fraught with confusion and misunderstanding than the EOS launch has proven.

EOS launched without finalizing the rules of its system – its "constitution" – and as such, several account freezes have happened (some with reason and others without) causing turbulence throughout the community and outside observers.

Contrary to EOS, Tezos will go live with some of the systems' rules in place, but also not nearly as many as what EOS plans to ratify. For example, the Tezos code does not have a statement about violence; instead, all the rules focus on enabling the community to decide on new features, better governance practices and tweaking basic parameters (such as the rate of inflation, rewards to validators, etc).

As such, Tezos focus on technical upgrades seems like a safer place to start, rather than trying to enforce the "good faith" of its users. Although, until the blockchain launches, the industry won't know, and many of Tezos investors and also the broader crypto community are waiting with baited breath.

"The long anticipated wait could end up being a blessing in disguise," James Sowers, a Tezos investor told CoinDesk, adding:

"The blockchain has evolved and they have had more time to learn from the mistakes of others."

Space rocket engines image via Shutterstock

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