Tezos: The Network for Governance and User-Control
Empires throughout history have collapsed due to ineffective governance — governance that was unable to evolve society in accordance with necessity. Even the empires that were able to replace those that were decaying before them, were inevitably replaced themselves; the cycle repeats throughout human history as the old is replaced by the new.
A system that cannot properly evolve is a system that will always be fundamentally insufficient. All systems eventually become “old” as humanity progresses. It is illogical to chase systems that claim to be the “latest and greatest” if the foundations of such systems are not flexible enough to adapt to the progress made by others.
It is impossible for any human to craft a system that is absolutely perfect as soon as it is first created. In fact, it may very well be impossible to ever achieve perfection even after years and years of improvement. However, a system that can evolve can become closer and closer to perfection as time progresses — even as other systems die out.
And so this brings us to the Tezos blockchain — an old system, relative to many others, yet one that has a strong yet inherently adaptive foundation.
This article will explore what it means for a system to be “designed to evolve.”
Governance and consensus.
Major cryptocurrency teams are now focusing around constructing expansive, global ecosystems built on top of their powerful, “decentralized” networks; the comparison between cryptocurrencies and empires is surprisingly fitting. Gavin Wood, one of the chief architects of the Ethereum blockchain, has said that, “crypto-economic systems act like ‘nation-states’ of the internet.” Like how empires have governed how humans interact throughout historical societies, cryptocurrencies govern how humans interact within digital systems — digital “societies” founded on top of networks.
To build a cryptocurrency without governance is to build a society without a government: anarchy in its worst form, where the strong dominate the weak and disorder slows progress.
We’ve already seen the consequences of ill-conceived systems play out within the Bitcoin and Ethereum ecosystems, as the Bitcoin and Ethereum crypto-elite have claimed that, “off-chain governance” is the best way to handle the evolution of their respective cryptocurrencies.
There has been a lack of community cohesion:
- The Bitcoin ecosystem split between Bitcoin and Bitcoin cash after a dispute over the direction of the cryptocurrency’s evolution.
- The Ethereum ecosystem split between Ethereum and Ethereum Classic after a dispute over the DAO hack.
In both situations, the cryptocurrency communities failed to reach a consensus. Of course, the Bitcoin and Ethereum networks were not created with reasonable “consensus building” in mind. The Bitcoin and Ethereum ecosystems are those where core developers, forum moderators, powerful miners and other influential members dominate discussion and force their wills upon all others. Key discussions and official “votes” are held by popular community organizations, forums, and influential members — but the reliance on central figures, centralized forums/websites, etc. creates a messy, flawed process for upgrades and opens up the community to manipulation and chaos; look at the fight between the Bitcoin (r/Bitcoin) and Bitcoin Cash (r/BTC) supporters for a good historical example of this reality.
However, concerns over centralization aside, there are still issues with the lack of progress being made on the development side of the Ethereum and Bitcoin blockchains. At least the Ethereum community has agreed upon a greater will to evolve, even if the evolution is disorderly and takes years longer than it otherwise should have; meanwhile Bitcoin’s evolution is just rather slow and pathetic, leading to the cryptocurrency being inefficient for use as a “peer-to-peer electronic cash system” — which was the original vision behind Bitcoin, despite everyone’s willingness to slowly convert the narrative to Bitcoin being “digital gold” and a “store of value.”
Even after observing the developmental failures of Bitcoin and Ethereum, newer and flashier cryptocurrencies like Solana are developed solely for power rather than flexibility and sustainability. Eventually, Solana will reach a time where its technology is no longer competitive against a newer and more powerful system — yet it has constructed no pathway for long-term, flexible evolution. Solana users rely on the foundation to make all critical decisions related to the future of the system, and they hope that Solana’s core development team may unlock the secrets to perfection before an infinitely more powerful system comes in and makes all of Solana’s development obsolete.
Tezos was created to achieve consensus and to streamline the process of evolution by centering its design around flexibility rather than pretending that the system would be near-perfect as soon as it was created. Bitcoin, Ethereum, Tezos, and even the “latest and greatest” systems like Solana are all far from perfect; yet, only Tezos seems to have been adequately built to acknowledge that fact. Tezos comes fully equipped with the mechanisms needed to allow for its community to determine the future of the network. Tezos’ history of governance and its very reasonable pace of adaptation have proven that its system works and facilitates evolution. Tezos is even on the verge of adopting an entirely new consensus algorithm, titled Tenderbake, well before Ethereum’s new consensus algorithm — despite the significantly less time that Tezos core developers have had to take to envision and develop one.
Governance and decentralization.
To begin the transition from this article’s focus on governance to its general focus on decentralization, it’s appropriate to note one of Tezos’ greatest pieces of evidence for both, found back at the beginning of the recently implemented Hangzhou upgrade proposal — the story of, amusingly named, protocol proposal PsCUKj6wy.
There is a handful of core developer teams that serves as the main force behind Tezos protocol upgrades; granted, unlike many other cryptocurrency projects, these teams all have different leadership and priorities— but they do still all collaborate and issue joint protocol upgrade proposals. Typically, the core developer teams behind projects will face little to no meaningful resistance from their communities because their communities will lack both the will and the means to oppose the aims of the core developers — however, this was not the case for Tezos’ Hangzhou upgrade.
Kevin Mehrabi, an active Tezos commmunity member, and his team, essentially, proposed an adjustment to Tezos’ Liquidity Baking mechanism so that it would use USDtz rather than tzBTC — which created actual competition with the PtHangzHo upgrade proposal submitted via the collaborative effort of Tezos’ usual core usual developer teams. While the PtHangzHo proposal still came out on top during Tezos’ on-chain governance process, and later went on to be fully adopted, it only won by 55.9% of the vote. No matter one’s feelings on the the proposals themselves, or the teams behind them, it is an overall positive that Tezos was able to demonstrate a healthy and competitive governance process. Tezos’ Hangzhou protocol upgrade was not decided by a powerful foundation or an elite group of core developers — it was decided by its community. Then, in accordance to one of the foundational principles of the Tezos ecosystem, the community accepted the result and came together without the competition of ideas leading to a controversial hard-fork.
The metrics of decentralization and user-control.
Decentralization isn’t just a matter of network security and long-term operational feasibility; decentralization is a matter of user-control and the ability for every user to have a meaningful impact and positive influence over the life of a network. A network without decentralization is a network where users are tied to the interests of a central authority. A network with decentralization is a network where individuals are tied only to their own best interests.
There is a misconception that decentralization can be determined by assessing a single, simple metric like the number of validators on a network. In reality, a cryptocurrency’s level of decentralization needs to be measured after assessing a collection of different variables:
- The governance mechanism
- Initial token distribution
- Number of validators
- Barrier to entry/participation
- The foundation’s level of control
- The power of influential figures
- The community’s general ideology and capability
- Etc. (up to individual interpretation)
Initial token distribution.
The initial token distribution (ITD) of a public blockchain is easily one of the most overlooked metrics of decentralization, despite the fact that it actually carries a high level of importance. To start, Proof of Stake networks need validators to either stake tokens themselves or have tokens staked/delegated to them — meaning that whoever controls the tokens, controls the validators. Beyond that, all the insiders that hold the tokens are the ones profiting heavily from the network’s success. ITD participants can manipulate prices at will and manipulate the network’s financial ecosystem in accordance to their will; everyone else that buys in is merely helping to fund their efforts and their influence out of the hope that some prosperity may trickle down to regular users. If the network ever adopts any sort of on-chain governance mechanism, then these network elites will dominate all governance for the rest of time — unless they sell out of the network and eat up all the free money that lines up for them.
You are invited to compare the initial token distributions for Tezos and Solana in order to determine which one seems more decentralized.
It is important to note that the popular “decentralized” cryptocurrency Algorand was not featured on this list. Rest assured, its public sale sold off a solid 0.25% of its total supply with the rest of the tokens being pre-minted and distributed to the Algorand Foundation and its founders.
(Source on Algorand’s initial token distribution)
Number of validators.
A blockchain’s security and decentralization is definitely strengthened by its number of validators — however, overall validator decentralization/distribution and long-term commitment does need to be considered as well.
In terms of pure numbers, Ethereum 2.0 is on track to easily beat any other Proof of Stake cryptocurrency in terms of validator numbers, with reports indicating over 200,000 validators; however, it is important to note that the overall numbers can change after Ethereum 2.0 fully replaces the current version of Ethereum. Regardless, perhaps the main reason for the high number of validators is due to Ethereum’s ideal target of validators running with 32 ETH each. Vitalik sent 100 transactions of 32 ETH each in order to prepare for Ethereum 2.0’s staking. While a high amount of validators may help with network security, it doesn’t actually guarantee that the network is as decentralized as it may seem, as a collective of people may be managing hundreds or thousands of validators each.
For comparison, Cardano, another Proof of Stake network, has a few thousand validators running its network — although there still is an artificial cap, albeit much higher than Ethereum’s, on how many tokens can be staked per validator and so there are instances of multiple different “stake pools” being run by the same individuals or organizations.
Other proof of stake networks, like Solana and Algorand, claim between 1,000 to 1,500 validators. However, taking what we know about initial token distribution, many of these validators are either insiders making a profit or validators that have been sponsored by their respective foundations — it’s hard to assess how many of these validators are long-term and fully committed to the network while also not constituting part of a “network elite” that has been formed by poor initial token distributions.
Tezos, on the other hand, has a relatively smaller number of validators — coming in with a little less than 400. While Tezos’ validator numbers definitely aren’t the smallest, as Polkadot has less than 300, it still isn’t very impressive. However, Tezos’ structure was not necessarily designed to inflate validator numbers. TzStats reports that 75% of the network is staked and yet less than 400 validators (“bakers”) manages to be enough.
To compare Tezos and Cardano:
- 64 million ADA will make a Cardano stake pool “saturated” requiring the creation of a new validator
- There is about 32 billion ADA in existence according to Coingecko
- The largest Tezos bakery, run by Coinbase, stakes 85 million XTZ.
- There is less than 1 billion XTZ in existence.
The fact that Tezos validators aren’t capped, in the way that other cryptocurrency’s validators are, means that a single individual or organization has no need to create multiple different validators — meaning that the validator numbers will stay relatively low in accordance to individual will. Perhaps, when it is more financially practical or when bakers decide to vote on an XTZ cap for bakeries, then there will be more validators for Tezos.
There are, of course, always concerns in any Proof of Stake system about a “superminority” of validators, the smallest number of validators that control a combined total of 33% of a cryptocurrency supply, that could theoretically shut down the network. The website for Solana was kind enough to point out that Solana’s superminority number was 19 validators. Tezos’ superminority seems to be a bit over 20 validators when you exclude the Tezos Foundation and cryptocurrency exchanges. The important variable to remember here is that Tezos’ token distribution was completely public, meaning that validators are inherently more independent and distributed; it would be harder and more improbable for Tezos validators to collaborate in order to shut down the network. Still, XTZ holders are encouraged to delegate to different, smaller bakeries in order to distribute network stake. As for other networks — well, the validator superminority number itself can be unreliable if multiple nodes are controlled by the same people that could all just collaborate together. If 5 people controlled 10 nodes each, then it would only take 5 people to collaborate, not 50.
Barrier to entry/participation
It’s important to quickly note barriers to entry for those looking to become network validators — such as network hardware requirements. On Tezos, it is possible to run a node with very low hardware requirements, such as running a node on a Raspberry Pi. Low hardware requirements means that practically anyone can become a validator and pay low upkeep costs.
For comparison, here are the hardware recommendations for running a validator on Solana:
CPU
- 12 cores / 24 threads, or more
- 2.8GHz, or faster
- AVX2 instruction support (to use official release binaries, self-compile otherwise)
- Support for AVX512f and/or SHA-NI instructions is helpful
RAM
- 128GB, or more
- Motherboard with 256GB capacity suggested
Disk
- PCIe Gen3 x4 NVME SSD, or better
- Accounts: 500GB, or larger. High TBW (Total Bytes Written)
- Ledger: 1TB or larger. High TBW suggested
- OS: (Optional) 500GB, or larger. SATA OK
GPUs
- Not strictly necessary at this time
- Motherboard and power supply speced to add one or more high-end GPUs in the future suggested
Source. Have fun!
Of course, Tezos does currently require 8,000 XTZ to run a bakery; however, this requirement will be reduced to 6,000 XTZ in the next network upgrade proposal released by Nomadic Labs and the other, usual core developer groups. In addition, people can technically start a bakery with significantly less XTZ so long as they have others to delegate to them.
A small note.
Tezos’ decentralized core is partially formed by a great combination of “decentralized on-chain governance with decentralized off-chain governance” — a topic previously explored in my first ever medium post, “Cryptocurrency Governance and the Tezos Approach” which was deleted and subsequently mixed into this article to help form the next two sections.
The foundation’s level of control.
To achieve a truly decentralized cryptocurrency ecosystem, the ecosystem must be as independent from the cryptocurrency’s foundation as much as possible. If a cryptocurrency ecosystem is too reliant upon its foundation, then it is unsustainable and tied to a certain level of centralization. For a good comparison of different, near-opposite foundation styles, we can assess the differences between the Tezos Foundation and the Algorand Foundation.
The Tezos Foundation takes a somewhat hands-off approach. The goal of the Tezos Foundation seems to be to establish other organizations within the Tezos ecosystem that are able to function independently. This means that power is more evenly distributed. The Tezos Foundation’s overall plan seems to allow it to be able to gradually fade away once all its funds are utilized and the broader ecosystem is more fully established. The foundation does not both participate in core development and grant issuance — it focuses exclusively on grant issuance. It does not control or decide upon any core functionality of the network.
The Algorand Foundation micro-manages the network and then claims decentralization. Algorand’s governance is run through the foundation, with the foundation using its pre-minted ALGO tokens as governance rewards in order to incentivize participation. Algorand’s staking rewards are also run through the foundation, as the foundation holds every ALGO in existence that has not been distributed to the community or Algorand’s founders. Algorand’s relay nodes, a key component of the network’s speed and functionality, are managed by the foundation and the insiders it has selected to sustain the network.
The Tezos Foundation’s style has allowed the Tezos ecosystem to thrive in an independent and relatively decentralized manner. The Algorand Foundation’s style has centered its ecosystem entirely around the foundation, which puts Algorand’s long-term sustainability in question, especially when it, inevitably, will have to try and move away from the Foundation in order to become actually decentralized.
The power of influential figures.
Centralized off-chain governance, where influential foundations and individuals hold executive power, comes with a variety of positive benefits during the beginning stages of a network’s life — but it is unsustainable in the long-term and calling a network reliant on centralized off-chain governance “decentralized” is dishonest.
In centralized off-chain governance, governance that is reliant upon central figures and organizations, there is a significant concentration of power around these key decision-makers and, especially, the visionary at the center of everything. Not only are these decision-makers in charge of designing and implementing the technical developments on the network, but they also control funding, marketing, etc. giving them the ability to choose who gets to innovate and interact with the cryptocurrency platform. Yes, centralized off-chain governance may allow for a more coordinated effort from the beginning because it gives the creators and foundations absolute power: for example, the marketing is generally stronger due to increased coordination and the ability for a community to rally behind one prominent individual or organization that shapes the narrative. However, this system breeds complacency and forms an ecosystem that isn’t actually able to function independently. Cardano would collapse without Charles Hoskinson and his network of organizations— IOHK, EMURGO and the Cardano Foundation — that are still beholden to his will. Algorand would collapse without Silvio Micali and the Algorand Foundation.
Decentralized off-chain governance allows for the actual distribution of power and decision-making abilities — leading to true decentralization and a more sustainable ecosystem. Tezos will not be held back by the imperfections of humanity. For example, if the prominent figure leading some other cryptocurrency project came out with some insane opinion, then it could cause major complications for the whole project. No one cares about the political opinions of (Tezos co-founders) Arthur and Kathleen’s when it comes to assessing whether they’ll participate in the Tezos ecosystem — and no one should care because Arthur and Kathleen aren’t Tezos.
Various organizations and independent development teams are able to innovate on Tezos because the Tezos Foundation only funds them and the Tezos Foundation board doesn’t tell them how they’re supposed to work. Not only does this allow for Tezos to have more organic and sustainable growth, but there is also more room for independent thought and different approaches to development. In fact, independent thought and innovation is actually encouraged due to the lack of hand-holding within the ecosystem.
Humans are inherently flawed; networks are supposed to remove flaws wherever possible. If the Tezos community decided to thrust Arthur and Kathleen into the role of central network leaders, then the community would be forcing them to abandon part of what makes them human. Leaders of grand projects cannot afford to be flawed , after all — especially in this age of the internet where every flaw is highlighted on social media.
People should be allowed to contribute their ideas to the betterment of humanity without needing to sacrifice their own humanity (such as their right to have a controversial opinion or the right to an actual personality) for it. Cryptocurrency is supposed to be about a shared vision for a new technology rather than the lone vision of a single person or small group of individuals.
The community’s general ideology and capability.
A public blockchain, a cryptocurrency, can only be as strong as its community. If the community is complacent, then the network is unsustainable. If the community is incapable, then the network is unsustainable. A reliance on elites leads to complacency and incapability — it leads to a network without any “distributed brain” of sorts.
It’s amusing because cryptocurrency elites, founders and insiders, don’t even really care for the average community member; in fact, they very well may be incapable of caring for the average community member. Yet, communities are so swift to seek their recognition and approval. Do people really think that a founder of a multi-billion dollar cryptocurrency has the time or will to care about the average community member? If these people don’t care about you, then should you care about them? Better yet, why should you participate in a network where they maintain absolute control and are enriched by your efforts?
When you are choosing which network to utilize — do you want one where the elites control everything or do you want a platform where you can actually have a sense of individual agency?
It’s important for people to make decisions based around their fundamental values.
Fortunately, and sometimes unfortunately, for Tezos, the community is notoriously critical. While sometimes the Tezos community can be overly negative, it is, at least, able to maintain a healthy variety of opinions and perspectives. Within the Tezos ecosystem, everyone is human and people are, generally, not idolized.
The Tezos community is also highly capable, being a generally tech-focused community full of people who build meaningful applications and create meaningful work.
So long as the Tezos community is able to remember its responsibility to the development and prosperity of the network, and is able to contribute positively to network growth and evolution, then Tezos will continue to grow and thrive.
Tezos is the network for governance and user-control. Tezos’ system of governance is top-tier and probably the best designed system of governance in the cryptocurrency space. The design of Tezos, from its core network structure to the structure of its ecosystem, has lead to a very decentralized ecosystem and a high level of user-control. Tezos has positioned itself for long-term sustainability as a network that maintains a reasonable pace of evolution while balancing it with a strong, secure, and decentralized foundation.
I hope you enjoyed this article. I was pleasantly surprised by the attention my previous article received. Thank you for your positive comments and feedback.
Again, please share this medium post if you believe it contains points that should be discussed — even if you do not agree completely.
Thank you,
— Mutsuraboshi
