After the intense dispute Zug-based crypto project Tezos is ready to bring the blockchain technology to a new level. Tezos pays taxes in Zug, creates jobs here and plans to open a co-working space in the city centre. But the spirit of Tezos is decentralized. For the first time president Ryan Jesperson gives his view on the state of the network.
Ryan Jesperson, how are people feeling at Tezos?
Really good. The enthusiasm is palpable. Over 30'000 people participated in the Tezos fundraiser and the community is growing worldwide. The network had a successful start in the summer and the technology is working well. But naturally there are also things that we can improve. We are now fully focused on the technology and it will continue to be developed.
What is going well and what is not going so well?
The Tezos network is based on an idea, namely that many decentralised participants will help to secure and further the network. This has quickly established itself and is being lived out. Worldwide, there are now more than 450 validators who help secure the network, hold a stake in Tezos, and actively participate in the network, constantly validating and confirming it. What still needs to be worked on are the basic software tools that help developers to integrate and interact with the network. Various applications can then be built on this «base layer». More than the Internet protocol, which is rather «thin» and no longer seeing major ongoing development, we want a layer for the base network that is as «thick» as possible and can also be continuously improved.
When will we see the first specific applications on the Tezos network?
We are currently still focused on this base layer where various tools can be run and applications integrated. This does not mean that there are no such projects for specific applications. Various projects are being worked on. One example is MoneyTrack. This start-up is using the Tezos network to develop an application that will harmonise discount and loyalty systems at various merchants and eliminate transaction costs incurred today. Another example is a project that is working on a microinsurance solutions. It is exciting to see how these projects take shape on the Tezos network.
What makes the Tezos network so special? What can you do with it that was not possible before?
Tezos has eliminated some problems that blockchain systems have had up to this point. Let me delve into the details a little: I see Bitcoin as «blockchain 1.0», that is, the first version of the blockchain. This almost unbelievable invention allows you to transfer value worldwide securely and relatively cheaply – without intermediaries. Then came «blockchain 2.0», that was Ethereum. On this network, not only could value be transferred without intermediaries, but so-called smart contracts could also be used. This means that code with certain conditions can be embedded in transactions. This code may specify, for example, that a transaction will be triggered as soon as such a condition is fulfilled. Both solutions have the following problems: They are both decentralised networks by nature. Who decides on the future in such a construct? How do you manage something that is decentralised? There are always disputes and also spin-offs such as Bitcoin Cash.
And this is different with Tezos?
The method of control and decision making at Tezos is different as follows: Everyone who has a stake in Tezos, i.e. who owns tokens, receives a voting right – proportionate to their stake – and can co-determine the future. So when it comes to updating the system, the Tezos co-owners can vote, with the majority principle, specifically a three-quarters majority with a little leeway, applying to decisions. The updates are then automatically installed on computers or servers around the world according to the result of the vote. In contrast to Bitcoin or Ethereum, the network constantly adapts to the wishes of the token holders and – that is important: This form of democratic administration also makes the network more secure. It means that we can call Tezos «the third generation of blockchain», or a blockchain that changes and improves itself.
You spoke of several problems. What other problems can Tezos solve?
The tragedy of the commons. When many people share a resource, none of the people or parties have an incentive to update or develop that resource. On the other hand, there is a high incentive to use the resource heavily. One example is the sea and the fishermen who fish in it. This problem also exists with the Internet, for example. To put it simply, the Internet is based on a protocol on which large corporations such as Google or Facebook have built their applications and make a lot of money. That is where the added value is: There is innovation in the applications, but the basic protocol is neglected and hardly developed any further. And this is exactly the problem we have with Bitcoin or Ethereum because it is much more lucrative to launch a cryptocurrency on Ethereum, for example, than it is to continue developing and improving the basic network itself.
And how is this dilemma to be solved?
With the democratic management or on-chain governance mentioned before. Now that the Tezos network is up and running, developers around the globe are able to submit code for improvements to the base protocol. The owners of Tezos tokens will then vote on whether or not to accept a proposal. If they do, then the developer will get Tezos tokens for their work. The developer sets the price in advance, so his suggestion for improvement to the Tezos protocol comes with an invoice. This mechanism creates the incentive to improve the base layer protocol and not just individual applications.
And how secure is the network?
Security was one of the points to convince me early on that Tezos would work well. Blockchains such as Bitcoin or Ethereum work according to the so-called «proof-of-work» principle. This means that security is based on the use of energy and is guaranteed by a gigantic computing effort. It is well known that this use of energy has become a problem. This method is therefore not sustainable. And it gives the most influence to those with the most computing power, the miners. Tezos, by contrast, works according to the «proof-of-stake» principle. The token owners validate and guarantee the security of the network. They are rewarded with tokens for this, and the results of the validations are public, so anyone can see them. If someone behaves contrary to the rules or acts maliciously, the protocol is designed to have their tokens or at least a part of them, a predefined deposit, taken. This ensures that all participants act properly. The idea of proof of stake is therefore to decouple the voting power of a miner from its computing power and to weight it on the basis of the number of tokens in its possession. Finally, security also includes the off-chain governance of the network. We are pleased that we were able to appoint PricewaterhouseCoopers (PwC) Switzerland as our independent external auditor. This is the first time one of the «Big Four» has fulfilled this function for a large-scale blockchain project such as Tezos.
Do you have any contact with the founders, the Breitman couple?
Of course. But we attach importance to the idea of decentralisation, not only in the software, but also in the organisation. The Tezos Foundation is only one part of the global Tezos community, and there are also several Tezos Foundations with their own boards, for example in Singapore or South Korea. Everyone in the community communicates a lot with each other and meets as often as possible. There are development teams all over the world, for example one is in Paris. Arthur and Kathleen Breitman are also important community members.
Let’s talk about the money. How much of the original 232 million Dollars is still available?
More than after the fundraising in 2017. We recently published the figures and will do so again in the future. We have enough money for the future. We are also diversifying risk, i.e. converting assets out of cryptocurrencies.
How much has already been exchanged into conventional currencies?
We have plenty in conventional currencies.
Does the Tezos Foundation pay taxes in Zug?
Yes, we pay taxes here. And I live here, too.
Does Tezos have any intention of leaving Zug in the foreseeable future?
The foundation is here in Zug and will also remain here. That’s why I came here from the United States. And we will also be opening a big co-working space in Crypto Valley next spring. We are currently evaluating a suitable location. The foundation will occupy a small part of these Tezos Labs, but most of the free workspaces will be for other people from the Tezos community, that is, developers. And we also want to offer space for other start-ups or events.
How many people work for the Tezos Foundation?
Here, too: We don’t want a central, bloated bureaucracy. We want to provide funds to developers and researchers around the globe. At the moment, less than ten people are permanently on the foundation’s payroll. It’s important for us to stay agile.
You moved to Zug with your family at the beginning of the year. How do you like it here? Have you settled in?
We really like it here and it feels like home. We like to be outside, it’s great to have nature within a few minutes of the city center. And the people are very friendly; you always greet each other on the street. What I particularly like is that so much time and effort is invested in protecting the environment and recycling.