Why Tezos (XTZ) might be one of the most undervalued assets ever
I know most here will disagree with me here, but I will make my case for why I think this.
On-chain governance: Tezos is the blockchain with the most successful on-chain governance in crypto and no other chain really comes close. Cosmos and Decred are probably the ones that come the closest, but none of these have the same amount of engagement, decentralization and big updates like Tezos has had. Hundreds of Tezos validators have been voting for on chain upgrades for 3 years almost. 6 upgrades with the 7th in process now. Also a lot of involvement and discussion from the Tezos community around every upgrade. The on-chain governence process have been changed a little bit and been fine tuned over the years. The on-chain governance consist of 5 periods;
- Proposal: Anyone can inject an proposal for a protocol upgrade. Proposal with the most yays moves on to the next period.
- Exploration: Here bakers vote on wether to move forward with the top voted proposal from the last period.
- Testing: Aproved proposal is tested on the testnet
- Promotion: Final voting stage where the bakers vote on wether to adopt the proposal or not, based on past sentiment and how the testing period went.
- Adoption: Time window for seamless upgrade
Some bakers are planning to create a DAO where their delegators can take part in voting for what the baker should vote for. This entire on-chain upgrade cycle takes a little more than 3 months. This allows Tezos to upgrade itself on a regular basis. TPS increase and gas reduction have already been improved upon in at least 3 upgrades. And the next upgrade called Granada will improve further upon TPS, finality and gas. The thing is that a blockchain without on-chain governance can never be as decentralized as a blockchain with it. This process also legitimizes every upgrade on the network. There is a rule-set for how and when to update. And this rule-set is backed by a decentralized blockchain where every vote is on chain. The community knows when the next upgrade is expected, how many bakers have voted yes, and where in the process we are. This creates predicability, involvement and knowledge about the whole upgrading process. With other blockchains, the community is mostly kept in the dark. They don´t know what, when and where.
Not too long ago, Ubisoft became a validator on Tezos. This means they have to hold XTZ, and they can now vote on proposals. Other companies have done the same. Mainly EDF (exaion), a huge energy company and Wakam, an insurance company, + a few others.
Security: Tezos is getting a reputation with being one of the most secure, trusted and reliable blockchains. This is because it has been running longer for most of its competitors, has a lot of developers and top universities doing research on it. And it has had nearly no major problems (no downtime) for as long as it has been around. It also have a smart contract language and a protocol language that both facilitate formal verification. Ocaml, the language that Tezos is coded in, has a reputation for being used in high security required applications. An example that gives Tezos more validity as a secure blockchain is the fact that BMW and many other large automobile manufacturers have mainly so far at least been doing research and chosen Tezos as the blockchain for virtual proof of validation of automated driving. An application where security is extremely important. The fact that BMW and 40+ other companies have been researching on Tezos for this purpose gives a lot of reassurance that Tezos is seen as one of the most secure blockchains. One of the biggest tech consultant firms in Europe, that gives advice to Microsoft and many others, also are looking into Tezos. So, it surely seems that Tezos is being talked about in these circles of tech experts.
If we can assume that Tezos is one of the most "secure and reliable" blockchains, then that gives it a big headstart on the competition. Applications that require high levels of security might overtime migrate over to Tezos. And with these applications being used by big companies like BMW, potentially. It will lead to big companies buying and holding XTZ. Big companies will want to hold XTZ because they use the Tezos blockchain. And holding XTZ gives them influence over the on-chain governance process, which is likely something they would want.
Tezos is truly revolutionary because it is the first smart contract supported currency where anybody can have a say in what the rules of the currency are. The power of descision making has been moved from a government or a small team of developers, over to the people. Of course the devs will still have lots of influence, but you get the point. Tezos is a blockchain and currency where the a wide set of different people can take part in voting on changes to the blockchain and currency itself. There is no true decentralization possible without on-chain governence. There is also no true long term decentralization without some type of flexible ruleset and monetary design. Tezos is a LPOS blockchain with non dilutive inflation. If you stake your XTZ, you will actually increase your % of the total supply. Inflation is almost 5%, while staking rewards are close to 6%. So, the inflation is non dilutive to your stack if you stake your coins. The next protocol upgrade called Granada incudes liquidiy baking which will massively increase the liquidity of XTZ, perhaps making it one of the most liquid cryptos. Eventually it could become more liquid than even Bitcoin, and this will be possible with inflation, liquidity baking, and a wide set of usecases. Remember that Tezos is being used or will be used for a lot of different things. NFT´s, DEFI, Voting on government projects, DAO for cities, decentralized identity, STO´s, Storing and validating important data for a bunch of different applications from sports contracts to electric vehicle charging. There are almost no other cryptos with a wider set of usecases. The on-chain governance is a major usecase for XTZ in itself, and could make holding XTZ very valuable if the Tezos blockchain succeeds. Remember the kind of companies that is adopting Tezos. These a billion dollar companies and they will likey buy and hold XTZ; because they will have to pay for gas on Tezos, and they will perhaps start their own node to have influence over the network.
Tezos gets it strengths from being secure, being decentralized, having a very good community and being funded extremely well. Tezos has enough money backing it to fund development for decades. Even after the foundation funds are out, devs that inject a proposal on the chain can automatically be funded from the core protocol by injecting a payment invoice together with the proposal. The whole system is really fucking well thought out and great. Way ahead of its time.
To give you some perspective. Tezos is currently in the top 5 of most blockchain usecases.
NFT´s: Top 3
STO´s: Top 3
Decentralized identity: Top 5
Number of devs: Top 5
Amount of funding: Top 4
Decentralized voting and on chain governance: Top 1
DAPPS: Top 10 and climbing the list fast.
DEFI: Top 10 maybe, if not it will definitely be top 10 soon. And top 5 is looking very likely.
Marketcap rank: 40, with a marketcap only twice as big as the amount of funds that the Tezos foundation holds. This is a crazy good ratio that so many people ignore. This kind of ratio is almost unheard of. On top of those funds the TF holds, there are also a few VC funds like DraperGorenHolm investing millions into the Tezos ecosystem. Tezos is 3 years old now, and it has survived the bear markets. It has only become stronger over time, and adoption is now starting to really increase fast. And this trend show no sign of stopping. Companies are taking notice, and feel more comfortable with choosing Tezos over other blockchains since it´s proven to last so far, even with all the resistance it has faced, it´s still standing stronger than ever. In a recent talk, and dev team building on Tezos said they almost couldn´t keep up with all the companies asking them about Tezos. More than 20 companies are planning to use Tezos for real estate STO´s. Billions of dollars worth of real estate are being tokenized. Tezos has some of the most sophisticated token standards and smart contracts on the market. The NYX standard is for example a set of smart contracts that are regulatory ready in many countries and probably the most sophisticated smart contracts of its kind. The Tezos infrastructure is very overlooked. The amount of dev tools, courses, token standards and other infrastructure is way ahead of most other blockchains. Tezos not being EVM compatible is not a big problem, since the Michelson virtual machine has many advantages as presented in the envited ecosystem deep dive presentation on Tezos.
Tezos also has a short and good name. Tezos is the name of the blockchain. Tez is the name of the currency, or XTZ. Few blockchains have more support from leading researchers and universities than what Tezos has. Very few blockchains has more developers than Tezos.
The main point is that Tezos has super strong fundamentals and that it is truly revolutionary because of the on-chain governance. For the first time in history, anybody that runs a node, can now take part in deciding the future of the blockchain and the currency. And if you don´t run a node, you can still have influence over the voting process in some way. Governments and small insider teams have always been making the monetary rules, but Tezos open up participation. Sure, the people holding the most XTZ will have more influence, but as it stands today, Tezos is one of the more decentralized distributed currencies on the market. This is a challenge every crypto face. And through a very wide set of usecases, Tezos has a better chance than anyone else to become decentralized. This is because so many differnt sectors will use and hold XTZ. Tezos success in NFT´s open up using Tez as a currency for thousands of artists around the world. Tezos has now become one of the cryptocurrencies that is actually being used as money, other than just speculation.
Tezos is becoming a currency, and it can also become a good store of value becuase of the many usecases holding up the network.
Some of the entities involved with Tezos: RedBull, Ubisoft, Mclaren, Puma, BMW, emirates group, Societe generale, Groupe casino, wakam, EFD (exaion), city of reno, french and swiss towns, tzero, tokensoft, elevated returns, BTG pactual, BNP paribas, United nations, Red cross. The list goes on, with more to come in the future.
The main strenghts of public blockchains are security and decentralization, and Tezos is a leader in both of these. The amount of usecases, devs and community is increasing. Only time will show if Tezos will continue this uptrend and continue its success, no nothing is set in stone. It is not guraranteed to succeed. But it has a better chance than most cryptos because of the strong fundamentals and focus on decentralization. In the future, we might see a lot more companies choosing to buy and hold XTZ, like Ubisoft is doing now. As more and more companies and regular people buy and hold, this could over time shoot the price up. The latest upgrade to the network will increase liquidity by a lot and will also introduce a burn mechanism, where XTZ fees get burnt, which actually can lower inflation. But we will have to wait to see how it plays out. Its one of the most ambitios upgrades in crypto. Btw, Tezos also has implemented zk-channels in a previous upgrade, so Tezos smart contracts can be coded to have privacy. Something that most competitors lack. Thanks for reading and you are welcome in the Tezos community if you decide to, but make up your own mind. There is always risk involved with investing.
Tezos foundation last biannual report:
Tezos deep dive from the envited ecosystem: