Tezos - $XTZ, Asset Review
General Information-What is Tezos
Tezos Background
Tezos Funding/Collaboration
Token Information-Tokenomics
Staking
Additional Information-
Governance
Technical Analysis
Conclusion
General Information-
What is Tezos
Tezos is an open-source blockchain that acts as a layer-one protocol with its proof-of-stake algorithm. Similar to other protocols, Tezos has the capabilities to handle DeFi, dApps, and NFTs on the chain. OCaml and C are the programming languages that Tezos was built upon. Tezos chose Ocaml since it's the fastest for updating in the event of a mishap. Tezos network may also handle smart contracts with a TPS over 1000, transaction fees under $0.20, and is energy efficient. Tezos aims to be a security-based, upgradable and robust layer one blockchain with the ability to evolve.
2. Tezos Background
Tezos is a project based out of Luxembourg, Luxembourg, and founded by a husband(Arthur Breitman) and wife(Kathleen Breitman). Both founders have strong backgrounds in the public sector. They have worked in firms such as Goldman Sachs, R3, Morgan Stanley, Google X, Accenture, and more. Their background in technology led to the creation of Tezos. The first iteration of Tezos was from a company founded by Kathleen called Dynamic Ledger Solutions. Additionally, Arthur designed an on-chain governance paper in 2014 around the Tezos protocol. This is what led to the creation in 2017 of the Tezos blockchain.
3. Tezos Funding/Collaboration
Tezos had an initial coin offering in July 2017. They raised a total of $232 million in Bitcoin and Ethereum becoming the largest ICO after Filecoin($FIL) months later. Tezos has prominent investors like Draper Associates, CMT Digital, Blocktree Capital, Paradigm, Polychain Capital, Winklevoss Capital Management, and more. Tezos has also collaborated with many companies to bring forth the adoption of its ecosystem. According to Tezos’s website, they have partnered with Mclaren, Manchester United, Ubisoft, Red Bull Racing, Team Vitality, and Misfits Gaming. Tezos has strategically chosen to partner with gaming entities, e-sport teams, and race cars brands to establish its brand for being fast and scalable. Tezos is not just choosing any partners, but once that will continue to push the brand image forward.
Figure A
Token Information-
Tokenomics
As of July 2022, there are 895,248,846 million $XTZ tokens in circulation, with an uncapped total supply according to Coingecko. A total of ~760 million $XTZ was sold during the ICO and was allocated and distributed per the bottom image. 80% of the supply was sold to the ICO participants. Half a percent was sold to early backers and contractors. 10% was allocated to the Tezos foundation. The remaining 10% was allocated to Dynamic Ledger Solutions. It is important to note that $XTZ is an inflationary asset with a rate of about 5.51% annually to the total supply.
Figure B
2. Staking
$XTZ token holders may contribute to the network by staking. Staking rewards are 2.7% and have no minimum requirements of tokens. “Bakers”(Validators) may earn 3.02% rewards and have 8,000 required tokens to participate. Both options for staking are moderately complex to set up. Currently, 74.76% of all circulating supply is staked and 188,954 unique addresses are staking their $XTZ tokens. It’s interesting to note that 75% of the token holders are staking, showing that the buyers are confident about what to come for the Tezos ecosystem.
Figure C
Additional Information-
1. Governance
Tezos relies on a Liquid Proof-of-stake consensus mechanism. The consensus mechanism is designed for multiple use cases like smart contracts, governance, and verification. Tezos relies on an on-chain governance mechanism. “Bakers”(Validators) are the only ones who can vote on any proposals and an 80% ratio is required to move forward with an amendment. Those who are delegating and don’t have the 8,000 $XTZ to be a “baker” may delegate their votes to a baker of choice. It’s important to note that the Tezos foundation runs about 30% of the voting power which gives them influence over any amendments according to Messari.
2. Technical Analysis
Figure D
$XTZ has had an amazing run from $.31 to $9.09 yielding ~28x + returns. Ever since $XTZ hit all-time-highs, we have seen the price fall towards a high time frame demand zone (red box) which should act as a support region. Price is likely to consolidate in the red box before making a new move. The way the correction subdivides will give hints on how the next move plays out. Bottom structures typically take a long time to form and reverse when the bears are exhausted, so it's best to stay patient for a clear pattern. All in all, the price action of this chart is neutral bullish over the long term, and holding the support will be crucial.
Conclusion
Tezos is a great layer-one solution for any ecosystem that is looking for a fast, scalable, and cheap solution. Tezos has been partnering strategically around gaming, sport and car sectors which seems like will be their niche. I do believe each blockchain will have its advantages and will dominate different sectors. It looks like Tezos has found its niches to tackle aiming to bring in more adoption to their blockchain. Today, Tezos is worth ~$1.45 billion and it will be interesting to watch how they will keep the momentum going. Tezos does have all the right elements for an ecosystem to thrive, but will they be able to keep adoption at an increasing rate? This is the main question on my mind and we will have to watch closely what Tezos will bring next. Lastly, it is important to note that I believe Tezos value may grow but it isn’t correlated with the value of the $XTZ token.