Tezos is a cryptocurrency token that supports smart contracts. It’s largest competitor in the crypto industry is Ethereum. Both Tezos and Ethereum have a similar value proposition: to decentralize financial services through the use of smart contracts.
Smart contracts can be used across almost any industry, giving Tezos massive growth potential. Real estate, insurance, supply chains and retail lending are beginning to use smart contracts to improve their bottom line. Learn how you can be part of the movement with our step-by-step guide on how to buy Tezos (XTZ)
What is Tezos?
Tezos is a self-governed and amendable blockchain that supports smart contracts. Tezos raised $232 million from its initial coin offering (ICO) in 2017 and now has a market cap of $2.3 billion. Tezos growth is attributed to its competitive advantages over Ethereum.
Both Tezos and Ethereum decentralize financial services through smart contracts. Smart contracts are sets of code used to replace terms of a real contract. Since these contracts are capable of holding value (cryptocurrencies), they are able to execute contracts based on the terms (code) uploaded to the blockchain.
For example, you can get a loan through a smart contract by providing collateral to the smart contract. Once you pay your loan back, the smart contract will return your collateral. If you default, the contract seizes the collateral and sends it to the lender.
While the 2 cryptocurrencies have a common goal, there are also stark differences. Here are some ways that Tezos and Ethereum differ:
- Proof of work and proof of stake. Proof of work (PoW) and proof of stake (PoS) are the 2 most common ways to power a blockchain. Ethereum, similarly to Bitcoin, operates on a PoW model, which is costly and creates a barrier to entry PoS doesn’t have. Tezos uses PoS to solve these issues.
- Network size. Ethereum has many more users and a more robust network than Tezos. The amount of users affect both a cryptocurrencies utility and security.
- Self-amendment. Blockchains that use proof of work need to fork when there are disputes over network upgrades. When Bitcoin users disagreed on how many transactions should be processed on each block, Bitcoin forked into Bitcoin and Bitcoin Cash. Cryptocurrency forks often divide the users of the cryptocurrency, decreasing the network size.
Brief History of Tezos
Tezos was founded in 2017 by Aurther and Kathleen Brietman. They released Tezos through an initial coin offering, selling each token for $0.47 (Tezos is currently trading for just under $3). This means that the Tezos protocol had an initial token sale to fund development. New tokens are minted at an inflation rate of 5.5% annually, a relatively high inflation rate for a cryptocurrency token.
Tezos’ main advantage over Ethereum is its proof of stake model. A proof of stake model limits the overhead for miners and makes transaction times faster. Instead of using electricity-intensive cryptocurrency miners to validate transactions, users can stake their Tezos tokens to validate transactions on the blockchain.
You need at least 8,000 Tezos (just under $24,000) to become a validator on the Tezos blockchain. However, you can delegate your Tezos to a validator to earn interest on your Tezos while having a say in the protocol’s governance.
Using a PoS instead of PoW model also allows for cheaper transactions and less sell pressure on Tezos. In a PoW system, miners earn cryptocurrency based on the amount of computational power they provide to the network. Miners often sell their earnings daily to minimize the risk of price fluctuations of the token they are mining and create a constant sell pressure on the cryptocurrency.
Step 1: Open an online account.
You need to make an account with a cryptocurrency brokerage to buy Tezos. Coinbase is the No. 1 trading platform for cryptocurrency investors in the United States. It’s well-regulated and insured, so it’s a great option for any level of investor.
You must provide your legal name, address, email, phone number, photo ID and Social Security number in order to make a Coinbase account.
Review our picks for the top cryptocurrency brokerages now.
Step 2: Buy a wallet.
Storing your Tezos tokens securely is important to keep your investment safe. If you’re looking to actively trade your Tezos, then you should keep your funds on an accredited crypto exchange.
If you’re buying Tezos to hold, choose a crypto wallet to keep your funds secure. Software wallets are a good choice because they’re free and easily accessible. However, look into a hardware wallet if you want to be as secure as possible.
You can store your cryptocurrency offline with a hardware wallet. This is the equivalent to holding gold in a safe. Hardware wallets are physical devices that grant you access to your crypto when you connect the wallet to your computer via USB.
Best Hardware Wallet: Ledger Nano S
If you’re looking for industry-leading security without breaking the bank, get a Ledger Nano S to secure your crypto. The Ledger Nano S supports hundreds of tokens, including Bitcoin, Ethereum, erc-20 tokens and Tezos. This hardware wallet comes in at an affordable price –– you can purchase one on Amazon for just over $50.
Ledger also offers a mobile and PC user interface to manage your cryptocurrency that is simple and easy-to-navigate. And the Ledger Nano S is secured by an offline, encrypted chip as well as an 8-digit passcode to keep your investments secure.
Best Software Wallet: Coinbase Wallet
Unlike hardware wallets, software wallets store your cryptocurrency on your computer or smartphone. Software wallets are typically less secure than hardware wallets, so it’s important to use a reputable company if you want to store your crypto using a software wallet.
Coinbase is best known for its exchange, but the platform also offers its reputable Coinbase Wallet application to securely store your investments.
Coinbase Wallet offers great security. It lets you manage your own private keys and has industry-leading security standards like 2-factor authentication. You can easily transfer cryptocurrencies from Coinbase Wallet to a Coinbase exchange, so if you already use Coinbase, its wallet is a natural choice.
Step 3: Make your purchase.
After deciding where to make a cryptocurrency brokerage account and choosing a crypto wallet, you can purchase your cryptocurrency. Tezos can be purchased like stocks: through limit and market orders.
If you place a market order, you buy Tezos at the market price. If you set a limit order, your buy is executed if the market price hits the price of your limit order.
With Ethereum upgrading to a proof of stake model later this year, you can expect the price of Tezos to fluctuate. Ethereum upgrading its blockchain to be more similar to Tezos may lessen Tezos’ competitive advantage over Ethereum.
Trade or Sell Your Cryptocurrency
If you decide to actively trade your Tezos, keep your crypto on an exchange. Large exchanges are generally secure but not impenetrable to hackers. Be sure to use a credible exchange to trade on to limit your security risks.
If you hold your Tezos in a hardware or software wallet, you can’t sell your Tezos until you send your tokens back to a crypto exchange. To do this, send your tokens to your cryptocurrency address on your exchange account. Once the transaction is sent, you can sell your Tezos for Bitcoin, Ethereum or USD.
Current Crypto Prices
Keeping an eye on cryptocurrency prices will give you an idea of how the markets have been moving. You don’t need to watch every cryptocurrency to get an idea of the market as a whole, as Bitcoin and Ethereum are generally good indicators of the health of the crypto markets.
However, you should also be watching the prices of the cryptos you want to buy, as some cryptocurrencies deviate from the general market.
Here’s a list of some of the top cryptocurrencies and their prices.
The Future of Tezos
Tezos offers a promising solution to traditional financial services spanning diverse industries. While the growth potential of Tezos is incredibly high, it’s a still risky investment.
With Ethereum transitioning to a proof of stake system, it’s hard to tell whether Tezos will have enough advantages over Ethereum to grow its market share.