Tezos Deep Dive: The Only Viable Ethereum Competitor In The Smart Contract War

Tezos Deep Dive: The Only Viable Ethereum Competitor In The Smart Contract War

 

“It is not the strongest of the species that survives, not the most intelligent that survives. It is the one that is the most adaptable to change.” – Charles Darwin

 

Executive Summary

 

We believe the crypto-space is on the verge of a smart contract platform war, known plainly as the battle between public blockchains. While Ethereum has clear dominance today, Tezos is a sophisticated entrant tackling fundamental problems with current platforms. This war will focus on the advantages each platform has; namely on-chain governance (Tezos) vs off-chain (Ethereum), speed of evolution, scaling technologies and other areas with the reward being developer mindshare and global adoption.

Further, this battle will last several years, and will likely not center on any one event.

 

In a world of complacency, we believe many in the space neglect the point that public blockchains are competing head-to-head.

We begin with why Tezos was created, we dive into the platform and conclude with our answers to the above questions. Despite Ethereum being the dominant public smart contract platform, we believe Tezos’ should be included in active portfolios and index funds as it’s the most realistic competitor.

Tezos History: Inspired By Bitcoin’s Shortfalls

 

Tezos was created to address the limitations of Bitcoin. Tezos was born to address the problem of hard forks by using on-chain governance for better coordination (token holders vote) and Proof-of-stake to solve the centralized and costly proof-of-work (mining) algorithm. More importantly, Tezos offers formal verification to test the correctness of code used to prevent bugs, which is a marked improvement over Bitcoin.

One differentiating feature of Tezos is that it can host smart contracts, in comparison to Bitcoin, which does not have this capability. Below we share the original problems Bitcoin faced and how Tezos is addressing each one.

The future viability of blockchain projects will be dependent upon their systems of enacting change. This is characterized as blockchain governance which falls into two buckets: on-chain vs off-chain. The biggest long term differentiator of Tezos includes its system of on-chain governance, namely one token, one vote.

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Recognition: Thank you to Itamar Rogel, Winford Lin, and Nisha Pandit for their input on this report)

 

Disclosures: Tom Shaughnessy owns tokens in Ethereum (ETH) and does not own tokens in Tezos (XTZ). This research is strictly informational and is not investment advice. Do not buy or sell any securities based upon this research. This research strictly reflects our views and opinions which can be wrong. 51percent did not receive compensation to create this report, outside of our subscription paying members.

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51percent Crypto Research provides institutional crypto research spanning extensive reports on specific projects to unbiased thought pieces on the industry for analysts, hedge funds, family offices asset managers and investors. The firm offers detailed valuation models, actionable picks and an industry leading podcast featuring the top leaders in crypto. Learn more at 51pct.io. 51percent also offers an industry-leading crypto research podcast (iTunes, Spotify and Podbean).

 

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