TEZOS

DIGITAL ASSET REPORT:

XTZ Update
Grade-B-minus

Crypto Briefing Research Department

December 13, 2019

Quick Facts

Current Price$1.78
Market Capitalization$1,177,378,680
Buy Up To Price$3.5
ICO DatesJun 29, 2017 - Jul 12, 2017
ICO Priceearly bird price $0.47
Public Allocation$232,000,000
Private AllocationN/A
Circulating Supply660,373,612 XTZ
Total Supply801,312,599 XTZ
Top 10 Addresses36.18%
ATH Price$10.00 (Dec 17, 2017)
Sharpe Ratio-0.27
30-Day Average Price$1.31
24H Volume$133,559,349
30-Day Average Volume$48,591,524

Contents

Fundamental Factors

Market Opportunity 73;
Ecosystem Development 65;
Token Economics 80;
Token Performance 70;
Core Team 70;
Underlying Technology 70;
Roadmap Progress 65;

Combined Score: 7.0

Introduction

Since the initiation report, Tezos has broken into the top-10 cryptocurrencies by market capitalization. Although this may look like just another “pump,” the move is well-supported by strengthened fundamentals of the project.

Tezos has used Q3-Q4 to improve awareness and adoption of its platform. Almost every large exchange ⁠— including Coinbase and Binance ⁠— has launched support of Tezos staking for its clients. This helped to attract more stakers to the platform, which effectively means higher security. 

Security is especially important for one of the project’s primary use-cases ⁠— tokenization. In fact, the platform

continued to build partnerships in this direction and now has a good pipeline of STO deals for 2020. Given that the STO space continues to evolve, Tezos may become one of the top players in this market. 

Additionally, the project continues to build out its ecosystem, and has gone through a number of system upgrades, partnered with several government entities, and funded a dozen ecosystem projects. 

All of these factors should support the project’s growth into the future, as well as help the network mature its ecosystem.

Catching the Staking Tailwind

Staking has been one of the hottest topics in the blockchain industry in 2019. While the overall space may still lack adoption, staking as a use-case has become an attractive alternative to open market speculation. It has also helped young projects bootstrap the ecosystem and increase community engagement.

On one hand, staking is used to elect block producers and/or vote on governance motions. This makes it an essential utility component of a network’s operation.

On the other hand, staking offers guaranteed revenue streams, even during market downtrends, and is effectively a smart way of HODLing for true believers in cryptocurrencies. 

Tezos has been one of the few projects in the space that uses proof of stake to increase awareness and expand its reach.

While project’s on Tezos have been slow to roll, and adoption remains a work in progress, baking on Tezos has attracted a lot of attention in the media.

The project offers a yield of around 5-6.7%, with token inflation of 5%, which puts it inline with long standing staking protocols like Decred. The number is not too high to facilitate hyper inflation and generate supply-side pressure, but it’s high enough to incentivize staking. As such, it is currently one of the top-ranked projects by percentage of tokens staked, with 74.9% of total supply. 

However, staking is not just a way to collect yield. It also enables token holders to exercise their on-chain voting rights and meaningfully impact the development of the ecosystem. Community driven projects, such as Decred, have shown resilience in the face of market headwinds because they motivate community members to be active participants rather than speculators.

During this year, the project went through three system upgrades, which shows that its self-amending on-chain governance mechanism can effectively rule the network and secure its long-term sustainability.

Staking has helped the project reduce speculation on the open market, and made it less prone to panic moves during rough patches in the market. In fact, since the beginning of November, Tezos has gained ~85% while the

broader altcoin market only gained around 24%.

In fact, the combination of the project’s strong fundamentals, effective governance, and opportunity for passive income that it offers has brought to its ecosystem many partners. Other projects include Coinbase, Binace, and the Switzerland Stock Exchange. They should help further grow the project’s network effects, and help draw in more and more users to the platform.

The Coinbase Effect

Coinbase’s offering of staking services for XTZ on its platform was a major catalyst for Tezos. The custody and trading service giant rolled out the feature to its use clients in November and later made it available to its global client base.

Coinbase has over 30M users, and holds over $7B in assets under custody. As one of the few regulated entities in Western markets, it serves as one of the primary gateways for new users entering the world of crypto. This is especially true for US-based users who are subject to geo-fencing by many crypto exchanges and service providers.

The trend continued, with other platforms announcing the addition of Tezos staking to their platforms. In December, Binance announced that it is going to offer zero fees Tezos staking to its clients. Cold wallet manufacturer Ledger also announced that it was adding support for Tezos and Tezos staking to its software solution Ledger Live (over 1.5M users). Similarly, Kraken has added the support of Tezos staking.

Tezos became one of the few easily accessible altcoin options available to U.S. clients and one of the few altcoins with staking supported on major exchanges. The project now has one of the lowest barriers to entry for retail investors in the entire industry.

Fundamentals That Hint at Potential Adoption

Despite being a general purpose dApp platform, Tezos has started to carve out a niche for itself in the STO market. Security is especially critical for these types of use cases, since the platform will have to deal with large sums of money. 

Tezos uses Michelson smart contract language, which features readability, security checks, code amendments and maintenance. Tezos smart contracts are supported with formal verification. This gives the project a good level of security and, with the upgradability features, makes Tezos a good platform for asset tokenization (STO).

The STO market has not yet become as popular as ICO’s in 2017, but its prospects are still positive, and it is likely the future of raising money. The market has the potential to reach at least 5T by 2022, which can potentially open up a great deal of prospects for STO platforms. 

For Tezos itself, this is a great opportunity. Already, the project is quietly becoming the number one option for asset tokenization and, as the market progresses, it may become a leader in this sector.

In fact, most of the hype around STOs is somehow connected with Tezos. The project has been partnering with large financial corporations throughout the year to use Tezos for the sale of digital securities:

- Brazil’s fifth-largest bank, BTG Pactual, plans to utilize the Tezos blockchain for security token offerings that potentially could be worth $1B.

- Elevated Returns sets to tokenize Thai real estate with a target of $100M this year.

- Bonda Vinci signed a joint venture agreement with Tezos Korea to start tokenizing art and real estate.

- tZERO partnered with Alliance Investments to tokenize River Plaza, a luxury real estate development in Manchester, UK. The project plans to tokenize approximately $640M and will use the Tezos blockchain. 

- Fundamental group partnered with Tezos to introduce a technology-based legal solution for tokenizing regulated financial products.

Given that we are still in the early stages of the industry’s development, the initiatives that Tezos has taken make it a strong contender in this space. Also, as most of the STO partnerships should unveil their potential in 2020, the upcoming year looks bright for the platform. 

Tezos has been exploring other directions to expand its ecosystem as well. The project has partnered with the French Armies:

As of September 2019, the Gendarmerie’s cybercrime division (C3N) has been validating judicial expenses incurred during investigations and recording them on the Tezos blockchain.

In November, the project partnered with the Singapore

government to jointly launch a training program for developers on the Tezos blockchain. Tight connections with governments may help the project realize macro level use-cases and therefore reach a large number of users.

Tezos has also been issuing grants to other projects that are building on its platform. In September, 14 new grants have been issued. Projects that receive grants are improving the platform and attracting more community members to the system, which should reflect positively on the project going forward.

Overall, Tezos has shown a good effort, grown its ecosystem, and started implementation of use-cases on its platform.

Things to Think About

Tezos has shown significant growth over the past month. However, as it usually happens in crypto, the large uptrend movement can be followed by a correction. Speculators and stakers may decide to take profits to balance out losses in their portfolios, as XTZ has been one of the few assets to show consistent positive returns over the past month. Buyers should be wary of potential spikes in volatility ahead.

More fundamentally, the project uses a new functional programming language, Michelson. As such, it could be difficult for the ecosystem to attract new developers. Cardano is planning to launch its mainnet in the near future, and as it is also targeting functional programming language developers, could become a serious competitor for engineering talent.

To mitigate the potential hurdles with developer onboarding, Tezos also has introduced SmartPy. It is a high-level smart contracts library, which uses widely popular Python. It should lower the barriers to entry and help onboard developers that did not have experience with functional programming languages before.  

Another concern is that Tezos long-running litigation concerning its status as a security is still in progress. The project is being sued by private parties who are seeking a refund and damages for their investment. The next hearing is scheduled for early next year, and there is always a chance that XTZ will be considered a security.

Conclusion

Since the initiation report, Tezos has made good progress towards possible adoption. While many of the competing general-purpose blockchains have struggled to find use-cases for its network, Tezos has carved a niche for itself in the STO market. 

The project has significantly improved awareness with its staking program, and now a large number of top crypto exchanges have enabled staking on their platforms.

Due to this, the project receives an upgrade to B-.

How to buy XTZ

Step 0. Choose your preferred exchange.

XTZ can be purchased from several cryptocurrency exchanges, the full list of available exchanges can be seen ​here​. 

Step 1. Head over to your preferred exchange.

If you want to purchase XTZ, it is a good idea to use Coinbase Pro. It has a good liquidity and is among the most reputable on the market.

Step 2. Create an account on the exchange of your choice if you don’t already have one.

Step 3. Top-up your exchange balance with some of your USD or BTC.

On Coinbase Pro, XTZ can be purchased with USD or BTC, so make sure to first verify your ID and set up your debit card or bank account.

Step 4. Purchase XTZ with a market or a limit order.

If you want to buy just a small amount instantly, it is easiest to use a Market Order.

Input the amount of XTZ you want to purchase and press Buy.

If you need to purchase a large amount of XTZ, it is best to use a Limit Order to get the best possible price.

Input the amount of XTZ you would like to purchase, and the price at which the order should be filled at and press Buy. (It might take some time for the whole order to be filled if you are purchasing a large amount).

Step 6. Store your XTZ on one of the supported wallets for increased security.

To store XTZ, you can use Ledger or Trust Wallet​ for improved security.