governance - 21.04.2020

Tezos Governance

Tezos is a self-amending blockchain network which uses an on-chain process to propose, select, test, and activate protocol upgrades without the need to hard fork

Tezos is a self-amending blockchain network which uses an on-chain process to propose, select, test, and activate protocol upgrades without the need to hard fork

This enables Tezos to improve itself over time via a structured, yet decentralized process while preserving a high level of consensus. Tezos also allows stakeholders to upgrade the amendment process itself.

Similar to miners in Proof-of-Work blockchains or Block producers in Delegated Proof-of-Stake network (EOS, Telos) in Tezos there are Bakers.

Voters — Bakers

Baking is how blocks are produced and validated on a Tezos blockchain using Liquid Proof-of-Stake. Bakers (also known as “delegates”) obtain the right to create (bake) a block when a roll of tokens (1 roll = 8,000 ꜩ) they own (or that is delegated to them) is randomly selected to produce or validate a block.

As the maintainers of a Tezos network, bakers are also the voters in a Tezos formal upgrade process, with their votes proportional to the size of their stake (including delegations).

In order to become Tezos baker you need to have 8,000 ꜩ and setup computing infrastructure to bake.

Delegators — All Tezos holders who delegate their XTZ to Bakers

Every Tezos holder can delegate their stake to bakers and receive rewards.

The baker does not own or control the delegated tokens, they cannot spend them. Tokens remain in the wallets of delegators. However, if and when one of these tokens is randomly selected to bake a block, that right will belong to the baker. Bakers share the additional revenue generated from the delegated tokens with the coin holder.

The average bakers fee is around 5–10% and delegators can expect 5–7% APR

Bakers compete for the stake to be delegated to them by providing better technical infrastructure and by contributing to the general Tezos community.

Delegation as the process is very easy and can be done from multiple Tezos wallets, therefore even the new blockchain adopters can take their part in governance.

Votes — Rolls

To speed up computations for deciding which delegates are selected to bake, the Tezos ledger tracks tokens for staking and governance purposes as “rolls”. Rolls are aggregated at the delegate level, which means a baker’s baking power is proportional to the amount of tokens delegated to them, rounded down to the nearest roll. A roll is currently set to 8,000 ꜩ.

The Four Stages of Tezos Governance

The amendment process can be broken into four discrete periods:

1. Proposal Period
2. Exploration Period
3. Testing Period
4. Promotion Period

Each of these four periods lasts eight baking cycles, comprising almost exactly three months from proposal to activation.

We’ll cover these periods in detail in the next article.

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