When Ethereum went live with the experimental “Frontier” release on July 30, 2015, it was met with fanfare touting the many advancements this second-generation blockchain would have over Bitcoin. If you stroll back just over three years ago, the blockchain universe was much smaller, and fewer users appreciated smart contracts, let alone recognized the potential of running code on a decentralized blockchain. In fact, on the day Ethereum launched, the price of Bitcoin closed at $287, a far cry from the $6,500 level we’re accustomed to today.
Tezos was originally scheduled to launch by December of 2017, which would have pegged it right at the height of the last cryptocurrency bull run. This could have been good or bad, depending on how you look at it since it may have caused an immediate price spike, though the value would be short-lived, and might have left Tezos as one of many heavy bags being held by cryptocurrency newcomers at that time looking to cash in.
As it stands, Tezos was delayed until a beta period launch, akin to the Ethereum Frontier launch, in late June of 2018. The “beta” label was lifted in September and the network proved successful enough to have the beta disclaimer removed and take a seat at the table of production-ready Ethereum competitors.
ICO Stats: Ethereum vs. Tezos
During a presale which took place during July and August of 2014, Ethereum raised around $15 million in funding with 48 million Ether sold during the open period. At the time, to be raising money into the millions was breaking new ground for cryptocurrency and piqued the interest of investors and tech enthusiasts from outside the space.
When Tezos held a fundraiser in July of 2017, the environment for cryptocurrency ICOs was reaching a fever pitch. By the end of the period, which lasted just over two weeks, Tezos managed to raise $232 million in Bitcoin, Ethereum, and fiat contributions. By the time the crypto bull run of 2017 hit in October, the pot ballooned to $1 billion at one point as crypto values skyrocketed. The sale generated 31,000 individual contributions totaling over 600 million Tezos coins sold.
When Arthur Breitman set out to create Tezos, he took cues from some areas where Ethereum was lacking. For example, a selling point of Tezos is that it can support formal verification, which is a method for mathematically validating the correctness of algorithms to guarantee they will perform as expected. In this case, the goal is to formally verify the code which governs a smart contract to the point that it can be trusted with millions, or perhaps billions of dollars.
Ethereum has suffered several vulnerabilities with smart contracts being hacked, and millions of dollars worth of Ether being lost. Fixing these costly vulnerabilities has proven cumbersome, with the most famous case being the DAO attack which split the Ethereum community over whether or not stolen or lost funds should be somehow restored.
No More Forks?
Tezos aims to avoid this kind of situation in two ways. The first way being a code base written in OCaml, an industrial strength programming language, built with safety and security as a primary goal, which will help facilitate formal verification.
The second major difference between Ethereum and Tezos, when it comes to the question of hard forks, is that Tezos includes the revolutionary idea of on-chain governance and voting. Unlike first and second generation chains, Tezos can be updated, expanded, or patched, and those changes can automatically propagate to nodes. The tagline used by Tezos is the “self-amending cryptographic ledger” which not only reaches consensus on transactions but also reaches consensus on protocol upgrades and changes.
As Breitman has described, the goal of on chain governance is to avoid the need for hard forks, but, he concedes, “there will almost certainly be hard-forks in the life of Tezos.”
“The Tezos code base strives to root as many bugs as possible,” according to Breitman.
Still, he admits, bugs and hard forks cannot be eliminated 100% of the time, but the risks can be mitigated by taking prophylactic steps.
Baking vs. Mining
Mining Ethereum is similar to mining Bitcoin in that nodes on the network compete against one another to complete a mathematical equation to validate transactions on the chain. Rewards are then handed out to the node which writes the next block, and so on. As with Bitcoin, this process in Ethereum requires powerful computing hardware dedicated to the practice of mining. The up-front investment can be steep, and considerations such as the cost of electricity can ultimately determine how profitable Ethereum mining can be in any given part of the world.
Tezos, which produces a new block on the chain every 60 seconds, uses the process of baking to validate transactions and produce blocks. Unlike mining, which is based on a Proof of Work algorithm Tezos is a Proof of Stake network. The major difference is that Tezos does not require any specialized hardware to validate transactions and secure the network.
Most Tezos coin holders will participate in baking by delegating their coins to a baking service. Upwards of 80% of all Tezos coins that have been activated from the fundraiser period are now engaged in baking by delegation.
For example, this Tweet from Twitter user @tzbakeoven demonstrates some of the differences in investment and profitability when it comes to mining Ethereum versus earning rewards with Tezos via delegation:
Ethereum is still the king when it comes to smart contracts, sub-tokens, and market cap, by far. Tezos has a long journey ahead before it can seriously start chipping away at Ethereum’s stronghold.
Breitman saw the future of the Tezos versus Ethereum competition over a year ago when he foretold why, in his opinion, business would be inclined to drift toward Tezos. “Businesses will switch if they value certified programming for smart contracts, and this move will be further promoted when and if more DAO style hacks happen.”
In July of 2017, during the Tezos fundraiser, Ethereum creator Vitalik Buterin stated his opposition to the direction of Tezos, saying, “Tezos has an official goal of eliminating the need for extra-protocol governance; I personally disagree with this direction.”
It’s likely the two chains will co-exist for quite some time together and continue to feed off one another for motivation and innovation.