Tezos, a new blockchain which aims to address protocol governance, has raised more than 128,000 eth and nearly 31,000 bitcoins worth a combined $110 million in just two days, with the token sale continuing for another 11 days.
They have no cap with the aim of ensuring the greatest distribution of token holders because they are launching a new decentralized blockchain with its own protocol and consensus system.
Their main innovation appears to be in governance. Currently, public blockchain protocol upgrades are undertaken by developers offering a new software client mainly to miners with discussions regarding what is to be merged and what choices or trade-offs are to be made mostly left to developers unless there is a controversial issue.
When there is a controversial issue, there can be a years long stale mate, as in bitcoin, or the ethereum process can be followed whereby token holder have a non-binding vote which miners have to ratify with developers having to offer what the token holders have chosen.
This process can be complex and the dissenting minority can split, but most importantly it relies on developers offering to token holder’s their chosen upgrade and on miners ratifying their decision.
If they don’t, someone else has to take the lead, with their chances of success diminished due to awareness and network effects, forcing them to become a minority coin.
That can be a real problem. Tezos thinks they have a solution by somewhat automating the process as developers are paid by tez holders for any proposal that is implemented, with the holders voting on what proposal should go through. If the proposal passes, then the upgrade happens automatically.
They have a technical whitepaper where they explain much of it, including an initial requirement of 80% of holders for a quorum and a vote of approval by 80% of holders for any proposal to pass.
Our brief investigation indicates tezos appears to be a lot more thorough and professional than many other projects we have seen in complete contrast to EOS which we just covered earlier.
That may be because tezos is being advised by very respected blockchain academics and experts, including Emin Gün Sirer, Cornell professor, and Zooko Wilcox, a respected cryptographer who was one of the first to respond to Nakamoto’s whitepaper announcement on the 31st of October 2008.
They also received funding from Tim Draper, a billionaire venture capitalist whose son, Adam Draper, probably dragged him into the bitcoin space, making an entry in 2014 after buying a significant sum of Silk Road seized bitcoins.
Since then, they’ve invested in many bitcoin focused start-ups, but Tezos is notable for being their first project outside of bitcoin.
That makes tezos interesting. A lot more than many of the other projects to the point, perhaps, where they can be considered as a contender for the third position in digital currencies, after bitcoin and ethereum.
We speculate so mainly because their development team seems to be very professional and grounded, focusing more on technical matters than marketing, based on published documents.
Tezos says most of their developers “have Ph.Ds in Computer Science and expertise in programming language theory,” with the team seemingly being led by Arthur Breitman who they describe as:
“Born in France and educated at École Polytechnique in math, physics, and computer science. He then went on to a career in quantitative finance, including positions at Goldman Sachs and Morgan Stanley.”
But the project does have drawbacks from a conceptual angle. Getting an 80% quorum, considering the many tez holders, will probably be as good as impossible.
They have seemingly accounted for that, with the algorithm lowering the quorum based on attendance, but an 80% vote may be difficult to achieve in some controversial scenarios.
What happens, for example, if 79% of the token holders are in favor, or 75%? The US constitution, which governs hundreds of millions of people, can be changed by a 66% vote, while Britain made a monumental decision to leave EU based on just 52%.
It is true we have not yet come across a controversial issue which would not gather 80%. In bitcoin, for example, polls have constantly shown 80% or more in favor of bigger blocks while for the Slockit DAO hardfork more than 80% of eth token holders were in favor.
But, there may well be instances when the answer isn’t too clear, leading to a 70/30 split, which would mean that if the vote did not pass, then the 30% in effect decided the outcome rather than the 70%, something which would be nonsensical.
Moreover, no one will want to vote on boring non-controversial matters, with another criticism being this idea of forcing the minority to come along, instead of allowing them or even encouraging them to go their own preferred way and lead the minority project in their own direction.
However, although the code has not yet been released as far as we are aware, it is all just software. So regardless of its rules, anyone can just fork the project and launch its own client with its own rules and even snapshot the accounts so in effect creating a chain split of sorts.
Therefore, despite these criticisms, tezos appears to be, overall, a real alternative, conceptually. Not least because it encourages us to think about all of these matters and test them in an experimental manner.
It’s automatic upgrade function is very interesting, if it does work in practice, because it places token holders fully in charge. It also changes the incentives of developers. They in effect become employees, paid on performance, rather than paid up-front or not paid at all. It further gets rid of short-term minded miners.
All of which suggests that whether it actually works or not or whether it is better is in many ways irrelevant at this stage because what tezos does is offer the market a choice in an on-going experimentation at bleeding edge frontiers where no man has walked before.
That’s valuable in itself, so we’ll be looking closely at how this project develops in the coming months and years, not least because the public blockchain race may have just become slightly more interesting.