Tezos Upgrade reduces fees for Smart Contracts
By: Lukas Wiesflecker
Tags: Technology, Tezos, Altcoins, Ethereum, Cryptocurrency

More and more cryptocurrencies offer a serious alternative to Ethereum. Until now, the Ethereum blockchain was considered the first choice for creating decentralized applications. The programming language Solidity enabled versatile applications for Smart Contracts. Now Tezos could also arouse the interest of developers again with the latest upgrade.

Especially the high transaction costs of Ethereum are a problem for many applications. These are a decisive factor for the sustainable development of a program. Also, low scalability remains a risk factor, which can strongly affect the speed under certain circumstances. This was shown, for example, when the game CryptoKitties slowed down the network significantly due to a high number of transactions.

Since its foundation, Tezos has been one of the largest projects in terms of market capitalization. However, attention around the company was mostly limited. Similar to other blockchains, a different currency is used in the network to make transactions. However, Tezos differs fundamentally in that it remains dynamic due to its structure and can therefore prevent hard forks.

Tezos as a platform for decentralized finance (DeFi)?

The latest upgrade is designed to appeal specifically to developers who focus on decentralized finance (DeFi). By reducing the fees for Smart Contracts by 75 percent, new projects on the Tezos Blockchain will be promoted.

The upgrade, called Delphi, was first proposed on September 3, 2020, and is now fully integrated. It is a merger of Nomadic Labs, Metastatic, and Gabriel Algour. The goal of the company is to help individuals develop smart contracts for Tezos. According to the developers, this is a critical upgrade to enable specific applications on the Tezos blockchain. These include gaming, distributed finance, and collectibles.

Tezos is a fourth-generation blockchain platform that uses Proof of Stake and enables smart contracts and distributed applications. The Coin XTZ pays fees in the network.

“Tezos is an open source block chain protocol for assets and applications, supported by a global community of validators, researchers and builders. The Tezos protocol is secure, updatable and designed for longevity”. — Tezos Foundation

Unlike other platforms, Tezos is dynamically structured and, therefore, changeable. According to its statements, it is a self-changing blockchain, which uses on-chain mechanisms. This allows protocol upgrades to be proposed, tested, and activated without subjecting the network to a hard fork.

The Delphi upgrade optimizes the calculation of fees. Besides, the necessary costs for managers are reduced from 10,000 to 1,000 gas. Likewise, Tezos blocks can now perform significantly more simple XTZ transactions and multi-asset transfers. The cost of storing Tezos is also reduced from 1 XTZ to 0.25 XTZ per kilobyte.

Further protocol changes based on the Delphi upgrade may follow soon. It is expected that Nomadin Labs could propose these already in early December.

Tezos Staking — generate passive income

Tezos was able to raise over $230 million through an Initial Coin Offering (ICO). This was one of the largest ICOs to date, and the Mainnet was completed approximately one year later in the beta phase.

One of the features of Tezos is staking by so-called bakers. They produce the blocks in the network and receive rewards. The more coins are held, the higher the chance to be selected as a validator. Since bakers can only participate in coins from a specific number, small quantities' staking is done via a pool.

Since Tezos is a very well-known project, many exchanges also offer to stake with the coin. On Binance, customers can expect a return of 7 percent annually. Besides, Binance does not deduct any fees for the service.

Tezos as competition for Ethereum?

So far, several platforms offer smart contracts, including Cardano, Solana, and NEO. However, according to state of the art, Ethereum has the most applications to date. Among them are numerous successful projects, which themselves have become market leaders in their field. This means that Ethereum Blockchain can count on many supporters who want to continue to advance the network. The Ethereum Alliance is also one of the best communities working on blockchain and new technologies.

Ethereum has already announced that it will address previous problems by upgrading to Ethereum 2.0. However, it could take several years before the full implementation, during which time a competitor could emerge as a new favorite. Due to Tezos focus on decentralized finance, new projects could increasingly settle on their blockchain. So far, DeFi has been considered one of the most important topics in 2020 and has seen numerous innovations. If the growth continues over the next few years, Tezos could have good chances through low fees and dynamic development.

“We believe that Tezos will drive social, political and economic innovation on a global scale”. — Tezos Foundation

However, it is unlikely that only one supplier will establish itself for all ecosystems in the end. Since many blockchain companies are still in the early stages, the market offers much room for other participants. Thus, several projects could win the race and advocate for different services. Due to its structure, Tezos could be a good alternative for security token offerings, for example.

Conclusion: Smart Contracts need diversification

Until now, Ethereum was considered the preferred platform for the creation of Smart Contracts. These have helped numerous projects to succeed and form the basis of many other cryptocurrencies. However, it is also essential that alternatives are created, and the possibilities remain diverse. Different projects are developed through various Smart Contracts platforms, which can lead to new technologies and applications.

Tezos was previously considered an inconspicuous project, which was primarily known for staking. The dynamic model also stands out from other applications and offers many advantages. For example, while some developers at Bitcoin have separated and are now working on different projects through the hard fork, changes in Tezos can be tested in many ways.

The Delphi upgrade has made Tezos and the XTZ Coin even more interesting for developers. The network now offers the best conditions to provide efficient Smart Contracts. Especially for decentralized finances, a solid structure and low fees are crucial. Staking is also a lucrative opportunity for investors to generate a passive income even with small amounts.

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