3 lessons from Tezos’ record breaking blockchain fundraiser

Last week, blockchain startup Tezos racked up a record-breaking Initial Coin Offering (ICO) of around $ 232 million in a hectic 13-day fundraiser.

What got investors excited about Tezos was the fact that it is a whole new blockchain (currently in alpha testing) that has 1) built-in self-management methods and 2) a potentially better approach to smart contracts than the incumbent Ethereum -Blockchain has.

The startup has also managed to partner with renowned Silicon Valley VC Tim Draper, who has done a lot to give credibility to the Tezos project at a time when many blockchain startups are launching ICOs with no viable product for itself is present.

The Tezos fundraiser has more to offer than just hefty ICO loot, however. The fact that this particular startup has generated so much interest currently tells us some interesting things about the blockchain world:

1. There is a call for chain stability

By definition, blockchains are decentralized units. There is no central responsible body and that can mean that there are problems steering the ship when different voices in the community disagree. The two most established blockchains, Bitcoin and Ethereum, got into trouble as a result. The Ethereum chain came into being with no built-in governance rules, and when two factions of the community couldn’t agree on a plan to change the platform last year, the chain split. Two Ethereum blockchains are now operational.

The Bitcoin blockchain is facing a possible split right now, with factions arguing for and against a proposed change to the Bitcoin code that could increase the chain’s capacity. The lock-in period for the commitment to change actually started yesterday. And while the prospect of avoiding a split looks good as of last night, Bitcoin prices have seen significant volatility over the past month due to uncertainty.

But at Tezos, “there is an attempt to put a governance structure in code so that you can change the underlying system if necessary,” Emin Gun Sirer, Tezos advisor and IC3 director, told Venturebeat. Anyone who owns a coin can vote and the code adheres to the winning decision – a clear rule that is supposed to make a split impossible.

That’s not to say that Tezos solved the problem. It is a very young platform and will inevitably run into problems of its own. And as Gun Sirer explained, this is only the first of many experiments with built-in governance structures. Tezos is regulated by “coin voting”; competing chains could arise with other mechanisms.

The real insight here is that a $ 232 million increase shows that integrated governance is something that the blockchain world sees as very important.

“[Tezos’ solution] is very theoretical at this point. We have to see how that works out in practice. But it’s a good experiment to do. We can learn a lot from it even if it fails, ”Sid Kalla of cryptocurrency research group Smith + Crown told VentureBeat.

2. And a pursuit of better – and more – chain options

Another key feature of Tezos’ platform is the strength of its smart contracts, explained Gun Sirer. “The way Ethereum writes smart contracts, it’s hard to find out what a piece of code is doing. It’s easier to say in Tezos. The system is therefore accessible for analysis. For example, another section of code might check to see [if a smart contract is operating as intended]. “

Smart contracts, when you’re new, are an extremely important part of the “decentralization promise” of blockchain technology. Ethereum defines it as “applications that run exactly as programmed, with no downtime, censorship, fraud or third-party interference”. (Incidentally, unlike Ethereum and Tezos, the Bitcoin blockchain does not have integrated smart contract functions, although a startup called RSK is working on enabling smart contracts for Bitcoin.)

The size of the Tezos fundraiser tells us that “we are at the beginning of the wars over the smart contract platform,” said Charlie Morris of cryptocurrency asset management firm NextBlock. “Ethereum is the biggest now, but we’re seeing it with Tezos and IOTA [a blockchain specifically for the Internet of Things] and Qtum in China that there are alternatives. We can even see regional disparities in blockchains. “

Morris sees three potential future perspectives for smart contract platforms: 1) A single “all-powerful” platform that everyone uses, 2) a multi-platform world with platforms that serve different use cases such as IOTA for the Internet of Things, and 3) one World in which the community of blockchain applications, called dApps (for “decentralized apps”), “turns up their own version of a blockchain and connects to others via a parachain”. (Parachains that would enable inter-blockchain transactions don’t yet exist, Morris said, but are in the works by groups like Cosmos and Polkadot.)

So the Tezos increase tells us that there is still no clear winner among the existing blockchain platforms – that we can expect increased competition and development. “There is a very good chance that the leading smart contract platform will not exist in 10 years,” said Morris.

3. The experiment has priority

Given the current popularity of ICOs, some of the investors in Tezos were likely speculators. But much of the funding likely came from crypto millionaires – early investors in Bitcoin and Ethereum, as well as those who got rich from the recent ICOs, Morris and Gun Sirer said. There seems to be an ethic in the blockchain community to channel profits back into the ecosystem by supporting new projects. It’s about keeping the experiment of decentralization going.

The Tezos team consists of 11 developers. Raising $ 232 million in fundraising for a team of this size with just one product in alpha seems incredible. What’s even more incredible is that this team (along with a small group of PhD students and academics, according to the company) is building a blockchain to compete with the well-established and hugely popular Ethereum platform.

But in contrast to the “traditional” startup community, experimenting in the blockchain startup community seems to be more important than a dollar return. Tezos’ promised improvements over Ethereum may or may not pay off, and the cryptocurrency millionaires who supported the fledgling company seem to understand that. “It is a risk to give so much money to such a small team. On the flip side, this is a team that competes against the well-funded Ethereum, so they need a lot of money to compete, ”explained NextBlock’s Morris. “This is not a backlash against Ethereum saying ‘we need to have governance’; It’s an experiment. “

Even if Tezos fails to outperform Ethereum, many of its investors may still see this as a worthwhile return as long as it gets the chance to test its ideals in real life.


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