On September 17, the mainnet of Tezos, one of the most promising blockchain projects, was launched. The holders of the Tezos (XTZ) token, included in the top 20 cryptocurrency list, waited for this event for a whole year. The launch of the network marked the end of the beta testing period, which began on July 1. "The future of Tezos rests in the hands of its community," as the report said on the occasion. And this is not an exaggeration, as the concept is based on the idea that people should decide their own destiny independently without outside support.
After the successful ICO, the Tezos project has come a long way to launch through scores of scandals and criticism. But the founders of Tezos, the Breitman couple, are not going to surrender and are going to fight for the title of the main blockchain platform for decentralized applications.
Anarcho-Capitalism for Blockchain
One of the main ideas of the Tezos project comes from the political beliefs of its founder, Arthur Breitman.
He was born and raised in France, where he studied applied mathematics, computer science, and physics. Then he entered the University of New York, worked in investment companies Goldman Sachs and Morgan Stanley. In New York, however, Breitman became one of the organizers of the city's meetup discussion clubs for anarcho-capitalists, a radical trend of libertarianism, which advocates a complete rejection of state institutions and the placing of their functions on society.
At one meeting in 2010, Breitman met his future wife, Kathleen, who worked in a hedge fund. At the end of 2013, they were married.
Arthur Breitman has been following cryptocurrencies since the appearance of Bitcoin in 2009. He was attracted to the idea of self-organization on the basis of consensus and the possibility of direct interaction between people without intermediaries.
He was not satisfied with the limited application of the first cryptocurrency, and too much influence of developers on the development of Bitcoin. Community members did not have the right to vote. Then, the Breitmans decided to adapt libertarianism to blockchain, as the fate of a common cause must be in the hands of its participants, and not at the mercy of any centralized force.
In January 2014, Vitalik Buterin published the white paper of the Ethereum project. He allowed the use of blockchain in almost any field with the help of smart contracts, but the direct participation of community members in the development of the network was still missing. Then Arthur Breitman decided to publish his ideas in the summer of 2014 in the form of two white papers. The project called Tezos was to become the first "self-amending" cryptocurrency and was supposed to replace Ethereum.
The Tezos system is built on smart contracts, like Ethereum. At the same time, the Tezos protocol can accept new changes, thus avoiding hard forks (Breitman was convinced of the necessity of this function after the collapse of the DAO).
How are the new changes introduced? Here, the idea of community participation comes to the rescue. Everyone can offer a code update. The holders of the XTZ ("Tezzi") tokens vote for acceptance of the changes, and the Tezos team does not have a veto. Voice weight is determined by the number of tokens. Thus the mechanism of democracy and self-management is realized in the Tezos system.
The updates are automatically verified before the voting. To do this, the Tezos team has developed a special language for smart contracts, Michelson. This approach does not provide full reliability, but guarantees compatibility and security.
The protocol of delegated proof of stake (DPoS) ensures the equality of the token holders for the validation of the blocks. The number of validators (called "bakers") is not limited, as they are chosen according to a lottery principle, that is, theoretically anyone with any amount of tokens can become a validator, but the chances grow proportionally to the number of tokens. Token holders can also pool their shares. In order to qualify for the position of a "baker," users need to make a deposit of 10,000 XTZ. In addition, the validation of blocks in Tezos does not require any mining equipment.
Thus, the community reigns supreme in the kingdom of Tezos. At least in theory. While the voting system is not fully implemented, the founders are responsible for the development of the project.
Corporate Internecine Strife
Arthur Breitman could not find like-minded people and investors for his project for a long time. The solution was found when Ethereum conducted a successful ICO in the summer of 2014, after which this method of attracting money and attention gained popularity in the crypto community.
The Breitmans did not expect to raise more than $20 million, but Tezos attracted "big money," In February 2017, Polychain Capital, one of the largest cryptocurrency funds, announced the allocation of funds for the project. The real hype came after Tim Draper, a billionaire and an investor from Silicon Valley, announced his support for Tezos.
As a result of a two-week token sale in July 2017, the Breitmans managed to raise $232 million (now the amount should be even more). This money became a headache not only for the Tezos team, but for all investors in the project, as under the terms of the release of XTZ tokens could only be possible after the network was launched.
To manage the company's finances in Switzerland, the non-profit Tezos Foundation was opened. Its head was an expat from South Africa of German origin, Johann Gevers, who helped the Breitmans conduct an ICO. Arthur Breitman also established the U.S. company Dynamic Ledger Solutions (DLS), which transferred the rights to the source code of Tezos. Both organizations received 10 percent of XTZ tokens, the remaining 80 percent were distributed among ICO participants to maintain the principle of decentralized management.
A harsh reality intervened in the libertarian dream of Arthur Breitman. Gevers was too independent, and soon a conflict over power broke out between the DLS and the Tezos Foundation. The Breitmans accused Gevers of trying to take possession of their intellectual property. He in response complained that the Breitmans are eager to manage the money of the Tezos fund as their own. All this hampered the development of the project itself.
At the end of October 2017, the Breitmans filed a lawsuit against Gevers, demanding that he resign. They managed to achieve this only by the end of February of next year.
Meanwhile, the DLS registration in the United States played a cruel joke with the Breitmans, as it allowed investors who were indignant at the inaction of the founders due to the corporate war to file several lawsuits against both Tezos companies. The Breitmans were accused of selling tokens through a Swiss company to circumvent U.S. securities laws, which allowed them to avoid responsibility before their investors.
To restore confidence in the company, the Breitmans had to hire PwC, the largest consulting company known for its activity in the blockchain industry, to conduct a comprehensive financial audit of Tezos.
Now the Tezos fund allocates grants for third-party developers and conducts a bounty program to identify bugs in the blockchain.
Is the Storm Over?
Another test for the project was the sudden introduction of the KYC procedure for ICO participants who were supposed to receive their tokens after launching the beta version. Many "Tezzi" were outraged by this situation, and they decided to implement a hard fork. As a result, a network called nTezos appeared, where the anonymity of the participants remained intact.
After the end of the dispute for money, Tezos took four months to start the network. The official beta release took place on July 1. Arthur Breitman published the code of the genesis block and announced the launch of the validation function.
Along with the beginning of beta testing of the platform and the release of tokens, listing of the XTZ also started. The pairs with the Tezos token are already traded on the exchanges HitBTC, Gate.io, Gatecoin, Coinone, and Bitpanda, and this list will be augmented.
Despite the growth of optimism in connection with the launch of the Tezos network, the start of trading instantly brought down the price of the coin from $4.5 on July 1 to $1.6 by September 20. But the market capitalization of XTZ held at about $1 billion, and the daily trading volume is several million dollars.
The coin was "flushed" by all those who were disappointed in the project and were waiting for the moment when it would be possible to get rid of it. But, despite the significant decrease in the cost of XTZ, Tezos ICO participants remained in profit, as they bought XTZ at the token sale for less than $0.5 per unit.
The Future Lies through Agreement
Time is playing against Tezos. A year ago, it could compete with Ethereum at the expense of financing and a beautiful idea, but now it has to work in a highly competitive environment and "catch up" with the leaders, whose list has significantly increased. Yes, Ethereum is preparing an update of Casper to solve the current technical problems and take revenge.
At the same time, the cryptocurrency market is going through hard times. Easy money is gone, pressure from regulators is growing, and decentralized applications with at least a few hundred users can be counted on the digits. It is in a crisis situation, however, that the "money pillow" of the fund can come to the aid of Tezos.
Anyway, Tezos has taken the first steps. So far, the reins of government have not been transferred to the community, but the Tezos team under the leadership of the Breitmans needs to reach the same consensus with the community on the further development of the project.