The two weeks long tezos ICO ended today after raising $232,166,280 worth of assets at the current price, with investors sending 65,630 bitcoins and 361,122 eth.
In return, they are to receive tez, a new currency yet to launch which has its own blockchain, like bitcoin or ethereum, with seemingly the only innovation being governance.
Tez holders will be able to vote on proposals by developers, in the process deciding whether to incorporate any upgrade or otherwise.
Developers are rewarded for proposals that are incorporated, so the platform uses different incentives from the current models offered by bitcoin or ethereum.
In bitcoin, developers are not paid at all and only one man, Wladimir Van Der Laan, the current maintainer, ultimately decides what is merged in Bitcoin Core, which is used by some 90% of bitcoin nodes.
In ethereum, the developers are largely paid by the funds they raised during an ICO in 2015, while also being paid by the asset holdings of mainly eth and a small amount of btc.
Furthermore, ethereum has different clients, with the VC backed Parity Technologies managing Parity, one of the main clients after the Ethereum Foundation managed Geth.
As all three have very different incentives models, tez is somewhat interesting, but it has its own disadvantages, with the main one being that it’s doubtful any token holder will care to vote on nearly all decisions.
In the eight years of bitcoin’s history, there has been only one, or maybe two, decisions that would have benefited from a token holders vote. While for ethereum there has been only one such decision in its two years, a decision that was actually made after they held a holders vote.
But in a different timeline, ethereum’s decision could have gone differently because the holder’s vote is not really binding.
Developers could have, for example, simply discarded it, as arguably Bitcoin Core developers have in arguing for consensus. While miners could have discarded both holders and developers, creating significant chaos.
Both would have had their own counter-responses, but the process would have been a war of attrition, with whoever would have come on top enjoying a Pyrrhic victory.
As such, the tezos way might be a solution in those rare, but high impact, circumstances, as once the holders approve a proposal it is automatically implemented in the protocol without relying on developers or miners.
That has its advantages and disadvantages. A threshold of 80% is used for a vote to pass, which means that 21% of token holders can set the currency’s trajectory, clearly something very nonsensical.
Moreover, there is something to be said about giving the minority the freedom to chain-split, so adding competition and trying different things, with the best then gradually coming on top or even with all co-existing in their own niches.
Tezos does not exclude that freedom completely, but to split the currency would be a lot more complex and would require its own network, making it that much more difficult.
In any event, we’ll see how the project develops. Not least because they now have a sea of money, with their ICO being the biggest to date, so they should have plenty of resources to do their best.