Tezos (XTZ) is an open-source blockchain platform with a novel governance design that allows XTZ stakeholders to vote on possible changes to the protocol and then implement these changes with an on-chain upgrade mechanism. Through this governance design, Tezos aims to reduce the chances that its blockchain would fork, which is when two separate cryptocurrencies are created from a single project when there is a large enough disagreement between blockchain participants. With its novel design, Tezos brought to light the contrast between off-chain and on-chain governance strategies, an important conversation which continues to play out in the crypto space.
The Tezos blockchain was first created by husband and wife Arthur and Kathleen Breitman in 2014, and the team held an initial coin offering (ICO) in 2017. This was the largest ever ICO at the time, raising the equivalent of $232 million. The Tezos Foundation, based out of Switzerland, was created to launch the Tezos protocol following the ICO.
Since Tezos operates with a Proof-of-Stake consensus mechanism, users holding XTZ tokens can earn staking rewards in exchange for using their holdings to secure the blockchain. Staking, also known as "baking" in the Tezos ecosystem, is the process of locking up your XTZ tokens to secure the Tezos network, validate transactions and distribute newly minted XTZ. Through the process of staking, the Tezos network ties its security to the honesty of the majority who are incentivized as token holders to maintain the integrity and value of the network.
Tezos staking (aka "baking") works in two ways:
There are two general approaches to delegating your XTZ:
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