Tag: xtz

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Crypto Guides

Is Tezos The Most Robust Cryptocurrency?

Introduction

Introduction

Introduction

Tezos is a decentralized, highly secure, transparent, and smart contract enabled blockchain governed by itself. It is a blockchain network associated with a digital token known as Tez or Tezzie (XTZ). Tezos doesn’t mine Tez. Instead, the token holder is rewarded under the consensus mechanism for participating in the proof-of-stake system.

A digital commonwealth group, sharing common interests and goals, is linked together to govern the Tezos platform. Tezos aims to become the most robust cryptocurrency blockchain by working together with its token holders to build more democratic protocol with the time. 

What is Tezos Attempting to Achieve? 

Tezos team wants to develop the most adaptable cryptocurrency project. It provides a token holder with equal governing power and is trying to avoid a hard fork situation. In which a community splits and starts competing with each other like in Bitcoin cash and Ethereum DAO. Tezos is implementing soft forks in which the community regularly updates the blockchain for constant growth. They are using (DAO) Decentralised Autonomous Organization system where every decision is taken after community discussion. This will make this more self amendable and upgradeable system.  

How Tezos Works? 

Tezos uses a proof of stake algorithm, and it can support 40 transactions/second on the network. It uses the Michelson coding language, which proceeds with formal verification to avoid any bugs in the network. To create error fee smart contracts, they use a mathematically provable code. In this network, the stakers are known as bakers.

To make delegate changes, you need to have 10,000 Tezos tokens and a bond. Most probably to make the system more democratic, Tezos has removed the miners to reduce their control power in the network. It is absorbing good elements from different blockchains to make it self-governing, self-evolving, and adaptable. If you notice anything appealing in any other blockchain, you can propose it to the community that approves the change for the Tezos network. 

Tezos Architecture

The protocol is divided into layers:

Network Protocol  – Here, the peer-to-peer communication is done to broadcast the decisions between the nodes.

Transaction Protocol – Here, the blockchain accounting model is implemented. 

Consensus Protocol – This consensus protocol verifies the agreement to confirm transactions. 

The Tezos Accounts

Implicit Account – It’s the most commonly used account. It has a public key and private key held by the account owner to secure the account balance. 

Originated Account – The formally verified smart contract account with the implicit account is known as an originated account.

Tezos Unique Capabilities

  • Self-amending and on-chain governance
  • Formal verification of smart contracts
  • Liquid proof of stake system 

Is Tezos a Good Investment?

Tezos is the youngest of all existing cryptocurrencies and focused upon the chain governance system. They claim to become a future-proof platform through on-chain governance that attracts a huge number of investors. Thus, Tezos seems to be a good investment. The good news is that most of the popular cryptocurrency investors are getting involved in Tezos. We should also consider that they don’t have a clear road map for the future, but the other dominating cryptocurrencies community is working in a specific direction. To conclude, despite Tezos being one of the most robust cryptos out there, its success or failure depends on active community decisions. 

Categories
Forex Assets

XTZ/USD – Trading Costs Involved While Trading This Crypto-Fiat Pair

Introduction

Introduction

Introduction

Tezos is a platform that supports the development of DApps and smart contracts. It was created by an ex-Morgan Stanley analyst Arthur Breitman who launched an Initial Coin Offering (ICO) in 2017, raising $232 million. The next year, Tezos launched its beta network in July.

Tezos works by giving incentives to users willing to participate in the development of its protocol. Note that the complete network is decentralized. Users cannot mine Tezos coins as it based on the Proof-of-stake mechanism, unlike the Proof-of-Work in Bitcoin blockchain. Tezos is powered with its own XTZ token, which is created through a process called “baking.”

Understanding XTZ/USD

The price of XTZ/USD depicts the value of the US Dollar equivalent to on Tezos. It is quoted as 1 XTZ per X USD. For example, if the XTZ/USD’s market price is 2.9157, then each XTZ will be worth 2.9157 US dollars.

XTZ/USD specifications

XTZ stands 11th in terms of market capitalization on CoinMarketCap. Forex brokers typically allow trading of only the top 3 or top 5 for trading. So, most brokers do have XTZ enabled for trading. Thus, you will have to approach a cryptocurrency broker instead. They work quite differently from that of the forex broker. For example, instruments are traded in lots with forex brokers, unlike cryptocurrency exchanges.

Spread

Spread is the difference between the buying and selling price of the cryptocurrency. These prices are set by individual traders and not the exchange.  Thus, the spread always varies. Hence, we shall not be considering the spread in further calculations.

Fee

There are a number of fees charged by exchanges for trading cryptos. Below are some types of fees levied by most exchanges.

  • Execution fee (Taker or Maker)
  • 30-day trading volume fee
  • Margin opening fee, if applicable

Note that, the taker or maker fee is charged twice – for opening and closing the trade.

Example

  • Long 1,000 XTZ/USD at $2.9169
  • 30-day volume fee is 0.12%
  • Order is executed as Maker
  • Without Leverage

Total cost of the order = 1,000 x $2.9169 = $2916.9

Assuming the maker fee to be 0.16%, the opening fee will be – $2916.9 x 0.16% = $4.66

In addition, there is 0.12% fee for 30-day volume fee – $2916.9 x 0.12% = $3.50

Since the trade is opened without leverage, the margin opening fee will be $0.

If the order is closed at $2.9605, the total cost of closing will be – 1,000 x $2.9605 = $2960.5. The fee for closing will be:

$2960.5 x 0.16% = $4.73

Therefore, the total fee for this trade can be calculated as:

$4.66 + $3.50 + $4.73 = $12.89

Trading Range in XTZ/USD

The trading range in cryptocurrencies is different from that of foreign exchange. In forex, we calculated the pip movement using the ATR indicator and multiplied it with the pip value to find its worth. Since in cryptocurrency exchanges, there is no concept of pips. So, instead of representing the pip movement, we directly represent the value/worth of the price movement into the table.

The below table represents the value of the price movement for 1,000 quantities of XTZ/USD.

Note: the above values are for trading 1,000 units of XTZ/USD. If X units of the pair are traded, then the ATR values will be,

(ATR value from the table / 1,000) x X units

Procedure to assess ATR values

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

XTZ/USD Cost as a Percent of the Trading Range

Cost as a percent of the trading range represents the relative cost in terms of percentage. It is calculated by finding the ratio between the total cost and the ATR value. The comprehension of it shall be discussed in the subsequent topic.

Taker Execution Model

Opening = $7.58 | Margin fee = $0 | Closing = $7.69 | 30-day volume = $3.50

Total fee = Opening + Margin fee + Closing + 30-day volume = $7.58 + $0 + $7.69 + $3.50 = $18.77

*Assuming taker fee to be 0.26% the trade value.

Maker Execution Model

Opening = $4.66 | Margin fee = $0 | Closing = $4.73 | 30-day volume = $3.50

Total fee = Opening + Margin fee + Closing + 30-day volume = $4.66 + $0 + $4.73 + $3.50 = $12.89

Interpretation of Cost as a Percent of the Trading Range

Firstly, the trading range table, in simple terms, depicts the approximate dollar profit/loss on the trade. For instance, let us consider the average value on the 4H timeframe, which is 71.5. This means that one can gain or lose an average of $71.5 in a matter of 4 hours or so.

With respect to the percentage table, the value of the percentage signifies how expensive the costs are relative to the time frame and profit or loss generated. In other sense, the cost remains the same irrespective of the time frame you trade. For example, let us consider the average percentage on the 4H time frame, which is 18.03%, and the average on the 1H, which is 34.01%. In both cases, the overall is the same, but the cost relative to the profit made, the cost appears to be higher in the 1H time frame because the profit amount is lower than the 4H time frame because there is more price movement on the 4H time frame.

Trading the XTZ/USD

Tezos is under the top 15 in market capitalization according to the data from CoinMarketCap. This signifies that it is intensively traded in the market. Most of the buying and selling happens in the cryptocurrency exchanges.

There are two types of traders – short term and long term. A short term trader may trade the 1H, 2H, 4H, or the 1D time frame, while a long term trader may go with the 1W or 1M time frame. Also, irrespective of the time frame, one must trade when the market volatility is around the average, or maximum value to relatively reduce fees on the trade.

Categories
Cryptocurrencies

A Beginner’s Guide to Tezos

Tezos is one of the most controversial cryptocurrencies to grace the scene. After a wildly successful July 2017 ICO that collected $232 million, its launch was postponed with controversy after another. However, the crypto finally launched in September 2018, rising above the cacophony to become the tenth most successful cryptocurrency as of February 26, 2020.

Tezos is one of the most controversial cryptocurrencies to grace the scene. After a wildly successful July 2017 ICO that collected $232 million, its launch was postponed with controversy after another. However, the crypto finally launched in September 2018, rising above the cacophony to become the tenth most successful cryptocurrency as of February 26, 2020.

Tezos is one of the most controversial cryptocurrencies to grace the scene. After a wildly successful July 2017 ICO that collected $232 million, its launch was postponed with controversy after another. However, the crypto finally launched in September 2018, rising above the cacophony to become the tenth most successful cryptocurrency as of February 26, 2020.

And this crypto-only seems to be growing stronger – it’s one of the cryptos to witness a bullish first quarter of the year.

So, what is Tezos? Let’s do a deep dive into Tezos, its unique selling point, and the controversy that once threatened to derail it.

Who is Behind Tezos?

The team behind Tezos is Arthur Breitman and his wife, Kathleen Breitman. Between them, they have a wealth of computer science, Mathematics, and finance experience. Arthur has previously worked for Goldman Sachs and Morgan Stanley, while Kathleen has work experience from Bridgewater Associates and R3.

Tezo’s On-Chain Governance and Self-Amending Protocol

Before we dive into Tezos, we need to understand the meaning of a ‘fork’ in the context of blockchain.

Blockchain, like software, needs to be updated from time to time to improve its functionality in one way or another. A software upgrade is known as a fork – which can either a soft fork or hard fork. A soft fork is backward compatible, but a hard fork is not.

Backward compatibility means the ability of the new version to interact with the older version. Once a hard fork is implemented, there’s no going back whatsoever. If you don’t upgrade to the new version, you can’t access the latest update or interact with participants in the latest version in any way.

Now you need to understand that forks are not a bad thing: if anything, updates are what makes a blockchain amenable to changing times and user demands.  The only problem is when hard forks cause rancor within a blockchain community.

We are all aware of the most contentious hard forks of all time – the ones that split both Bitcoin and Bitcoin Cash. Bitcoin was split into Bitcoin and Bitcoin Cash, and shortly after, Bitcoin Cash itself split into Bitcoin Cash and Bitcoin Satoshi Vision (SV). The Bitcoin Cash split was especially marked by extreme animosity between the two camps complete with name-calling and threats and the so-called hash wars.

The hash wars were pretty much the two camps using their mining resources to outdo the other chain. Ultimately, it was unnecessary theatrics that actually plunged the whole crypto market and promoted a bad rap against the blockchain and crypto industry.

This is the kind of contention Tezos is trying to avoid. Kathleen Breitman, the Tezos co-founder, said this in an interview with BreakerMag: “The great irony of Bitcoin is that it’s ultimately a tool for community consensus, but it’s [marred by] a tremendous amount of animosity. Tezos allows for innovation to happen in a systemized way as opposed to one born of politics. You’ll not find two people who loathe politicking more than Arthur and me. That’s the idea behind Tezos: let’s formalize this extraordinarily informal process.”

The Tezos’ Way

Tezos hopes to avoid divisive hard forks via what they call ‘self-amendments and on-chain governance.’ The self-amendment concept is meant to prevent the chain from undergoing a hard fork when it needs to upgrade. On-chain governance, at its simplest, means that users will vote over any proposed amendment. Combining the two means that voting can be modified, or the chain can be amended when necessary. The result is a frictionless process that allows the evolution of the blockchain without a hard fork. 

This is how it works:

  • Developers independently submit proposals for protocol upgrades together with an invoice for compensation of their idea
  • The compensation is meant to incentivize developers to contribute to the network  
  • The community puts the proposal into a trial and points out areas that can be improved or removed
  • After rigorous testing, Tezos stakeholders vote on whether the protocol should be implemented or not
  • If the vote favors an upgrade, a ‘hot-swap’ is carried out, and the new protocol is set in motion

This process ensures a decentralized and democratic approach to protocol upgrades by ensuring approval from the bigger section of the community. It’s a peaceful and yet effective approach for improving the Tezos platform.

The Baking process

Amusingly, Tezos calls its staking process “baking.” The baking process is as follows:

  • Bakers are granted block validation rights according to the amount of stake they own in Tezos
  • A block is baked (produced) by a random stakeholder and endorsed by 32 stakeholders (bakers) who are also randomly chosen 
  • Upon verification, the block is recorded on the blockchain
  • If a block is successfully validated and added on the blockchain, the baker is given a block reward and a percentage of the fees from that transaction

Token holders can delegate their baking rights to other token holders without relinquishing their ownership of the tokens. When the baking process is completed, the baker shares its rewards with the other delegates. A baker will be punished for acting dishonestly e.g., not sharing rewards, charging high fees, or attempting a double spend or propagating blocks on different branches. 

Token holders can easily switch delegates and, as such, can threaten to delegate elsewhere – this fosters coordination instead.

Liquid Proof of Stake

To understand Tezo’s liquid proof of stake, we need to understand the proof of stake mechanism (PoS) and then the delegated proof of stake mechanism. PoS was invented to improve on Bitcoin’s proof of work mechanism, which is too slow and consumes too much energy.

The proof of stake mechanism works as follows: 

  • Validators commit some coins as stake
  • They initiate the block validation process i.e., they identify blocks that can be added onto the blockchain, then initiate the verification process by placing a bet on it.
  • When a block is successfully validated and recorded on the chain, the validators receive a reward proportionate to their bets

However, the PoS mechanism includes the entire community and may prove to be problematic for scalability in the long run. For this reason, newer blockchains are designed with a delegated proof of stake (DPoS) protocol. DPoS means delegates are selected beforehand.

The Tezos consensus mechanism is a lot like this but slightly different. Instead of a hard and fast rule about the choosing of delegates, it’s completely up to a network participant to decide if they want to be involved in the validation process or not. In short, delegation is optional, or ‘liquid.’

Tezos’ Architecture

Any blockchain utilizes the following three layers:

  1. Network protocol – responsible for discovering blocks and broadcasting transactions between nodes
  2. Transaction protocol – a transaction layer that defines what a valid transaction is
  3. Consensus protocol – determines how an agreement on the validity of transactions is achieved

Tezos combines the last two protocols to form a ‘Blockchain Protocol.’

Tezos breaks from this using a generic ‘Network Shell’ that’s compatible with the different transaction and consensus protocol mechanisms. The Network Shell facilitates interaction between the network protocol and the blockchain protocol and is agnostic (amenable) to both the transaction and consensus protocols.

Controversy Surrounding Tezos

The Tezos we know today almost never was – thanks to a cloud of controversy, it was mired in from the very beginning. Let’s look at the issues one by one below:

Intellectual Property Row

First off, the company behind Tezos is called Dynamic Ledger Solutions (DLS), while the one that was put in charge of the ICO contributions is the Tezos Foundation.

DLS retained intellectual property rights over the Tezos source code. As per the ICO agreement, the Breitmans would set up a foundation (the Tezos Foundation), which would then buy out DLS (including the property rights) for the sake of the community.

However, the agreement had been that the Breitmans and Tim Draper, a venture capitalist, would receive 8.5% of the funds raised from the ICO as well as 10% of the circulating Tezzos. A document outlining the relationship between DLS and Tezos foundation and for the “interest of privacy” was pulled from the companies’ websites with no explanation. 

Internal Power Wrangles

The next controversy was the Breitmans getting into a public dispute with a member of the board and the President of the Tezos Foundation, Johann Gevers. The story is that Gevers, being in control of the funds from the ICO, would not release the funds.

The squabble caused unrest within the community and caused the coin to plummet in value. The Breitmans put out a censuring statement on Gevers peppered with terms such as “self-dealing, self-promotion, and conflicts of interest.” The prolonged and adverse media attention eventually pushed Gevers, and the Tezos Foundation board members to step down. They were replaced by two community members Michel Mauny and Ryan Jesperson.

KYC/AML

For the next few months, updates from the Tezos foundation were scarce as the community waited for any sign. Then the Tezos foundation unexpectedly announced that Know Your Customer/Anti-Money Laundering checks would be required from the contributors to the ICO from the year prior. This caught investors off-guard since the ICO was already a year old by then. This announcement was met with disapproving reactions from the community. 

Tokenomics of Tezo

Tezos was trading at $2.59 as of February 26, 2020. It was ranking at #10 in market cap with the value of $1, 816, 801, 431, and a 24-hour volume of $237, 062, 869. Its circulating supply was 701, 996, 666, with an all-time of $4.46 on July 01, 2018, and an all-time low of 0.314631 on December 07, 2018.

Where to Buy and Store Tezos

You can buy Tezos directly from or trade another crypto such as Bitcoin or Ethereum and then exchange it for Tezos (XTZ) on crypto exchanges such as Binance, Coinbase, Kraken, Cointree, Huobi, Bittrex and so on.

There’s currently no official wallet for Tezos. Like for any other cryptocurrency, it’s highly recommended you store your XTZ on a hardware wallet. Some great options include Trezor and Ledger Nano.

Concluding Thoughts

Tezos brings an interesting perspective into the blockchain space – the idea of the autonomous amendment and on-chain governance. And its success after another may be an indication that the crypto was cut for the future despite what many believed. Its success will depend on how it continues to innovate in an ultra-competitive crypto space.