TZ APAC undertakes a comparison of the Tezos blockchain against other blockchains.

Comparing Tezos with other blockchains

October 22, 2021
Tezos is a third-generation blockchain protocol capable of writing smart contracts, minting NFTs, underpinning dApps, and uses tez (xtz) as its native cryptocurrency. Here we take a high-level overview of how Tezos compares to other blockchains including Ripple, Polkadot, and Ethereum.

Tezos and Polkadot – a high-level comparison.

Both Tezos and Polkadot are decentralized peer-to-peer networks, however there are fundamental differences that set each of these third-generation blockchain protocols apart.

On the one hand, Tezos is particularly known for its inexpensive transaction fees, formally verified smart contracts, and the minting of NFTs. These qualities are what makes Tezos the default platform for NFT creators.

Polkadot, on the other hand, is more concerned with blockchain interoperability, allowing different blockchain networks to communicate and share data with each other. Additionally, Polkadot requires these protocols to stake or bid on slots to be included in the network.

Tezos comes out ahead in terms of experience running on-chain governance, having successfully upgraded seven times over the last two years, with the eighth upgrade on its way. It is able to avoid contentious hard forks and the Tezos protocol can be seamlessly upgraded so long as a majority of stakeholders agree on the new direction, via its Liquid Proof of Stake (LPoS) consensus mechanism.

To qualify to vote, stakeholders need only hold a certain number of tez (currently 8000 tez, otherwise known as one “roll”). Those who have less than one roll, can delegate their vote to a baker.

The ‘liquid’ characteristic of this Proof of Stake mechanism means there is little friction for token holders on Tezos to change which baker they delegate their voting power to, which can in turn, incentivise greater community coordination.

It is worth noting that Polkadot is also forkless, but it relies on a Nominated Proof of Stake (NPoS) protocol where only selected (or ‘nominated’) validators are allowed to participate in the consensus protocol. Unlike Tezos, this forkless development is relatively new, having only been implemented in June 2020.

With DPoS, Polkadot token holders participate in securing the network by staking their tokens in one of two ways – they can either run a node as a validator or nominate/stake to an already existing validator. On the Tezos system, voters do not need to be nominated. As mentioned, they simply need to hold a minimum of one roll to earn direct voting rights.

Tezos compared to Ripple

An individual company privately holds Ripple, and while it can execute smart contracts and mint NFTs (though it does not boast any sizable NFT market) just as Tezos does, its primary role is as a funds transfer mechanism.

This financial transfer mechanism works similarly to the familiar SWIFT system used by traditional banks and financial institutions. Where it's superior to SWIFT is that transactions are instantaneous, and can be conducted in any currency, be it crypto or fiat currency.

Many large financial institutions back Ripple, and as a global payment protocol, unlike other blockchains, Ripple is not designed to replace banks but to augment their existing operations.  

Like Tezos, Ripple is technically also decentralized but uses a distributed consensus method to validate transactions. Transactions are validated by participating nodes that verify the authenticity of a transaction by conducting a poll in real-time, allowing virtually instantaneous transaction confirmations, without the need for a central authority.

Under Tezos’ LPoS system, validators are held accountable. For example, delegate misbehaviour, such as not paying out rewards or charging high fees, can quickly be detected. If this happens, the community is quick to call them out for their misbehavior and bring it to an end.

However, the most important aspect of Ripple to note is that it is centrally controlled, and its token release mechanism is solely at the discretion of the Ripple shareholders. Ripple nodes are also far more centralized than Tezos nodes, meaning that it’s much harder to run one than it is a Tezos node.

On top of that, it is very hard to become a Ripple validator. Put simply, not just anyone can join the Ripple network and participate in the consensus mechanism in any meaningful way.

Tezos compared to Cardano

Tezos and Cardano use similar consensus methods in that they both rely, as most next-generation blockchains do, on proof of stake rather than proof of work (such as is used by older, easily forked protocols like Bitcoin).

Tezos uses a PoS consensus mechanism called Emmy*, which adds blocks to the chain through validators, known as bakers. As mentioned before, anyone with 8000 tez (or one “roll”) can become a baker, and the more tez possessed by a stakeholder, the higher their chance of being selected for baking.

8000 tez is known as a 'roll.' The network selects 256 random rolls to vote on the block's authenticity before it is accepted. Network participants are incentivized with additional rewards for their work as validators. These rewards are shared by both the baker and its delegators.

Like Tezos, Cardano uses a PoS algorithm, but in its case, uses a mechanism called Ouroboros. The algorithm divides the blockchain into what are known as 'epochs,' which are further divided into 'slots' lasting one second.

Cardano's protocol chooses a random slot leader for every block from staked pools, with the slot leader verifying the transaction and adding to the blockchain. However, settlement delays are introduced, as the slot leader must consider the last few blocks of the chain as transient. Like Tezos, participants are rewarded for approving transactions and building the blockchain.

Both Tezos and Cardano have smart contract and NFT capabilities, but...

While Cardano has NFT capabilities, Tezos prevails as the preferred place for creators to mint their NFTs because of its energy efficiency and affordability (including Mumu, creator of the Tezos Taco Bunny meme).

Moreover, Cardano only recently added smart contracts to its blockchain after a successful Alonzo hard fork, launched in September 2021. To date, Cardano has around 30 contracts where Tezos can lay claim to hundreds.

Thus, Cardano is still in the very early stages of developing these technical capabilities and has some way to go before it catches up to Tezos.

Tezos and Cardano also take different design approaches.

Tezos exhibits a single layer for the settlement and computation of transactions, whereas Cardano divides this into two different layers. The rationale behind Cardano's design is to split the settlement part of a transaction from its computation part.

Cardano Settlement Layer is designed to register the end value or result of the transaction. The Cardano Computation Layer is where transactions are processed, including smart contract execution, contract calls, and other operations. This approach provides Cardano flexibility in comparison to other blockchain networks.

When it comes to smart contracts, Tezos is far ahead of Cardano. On Tezos, there are exponentially more smart contracts and smart contract iterations than its competitor.

Tezos has a single layer for both computations as well as settlements. It is built with a modular design to provide the same level of flexibility without distributing operations into two layers.

Tezos compared to Ethereum

Where Tezos has an advantage over Ethereum is that Tezos is self-amending. Upgrades to the protocol can happen without a hard fork, making Tezos extremely agile.  With a traditional blockchain like Ethereum, making a significant change to the protocol leads to a split, as happened with Ethereum and Ethereum Classic. Ultimately, this means Ethereum is far less capable of rapid evolution than Tezos.

This self-amending feature was cited as one of the reasons that a large consortium of automakers decided to build on Tezos. BMW, Audi, Porsche, and a few other large automotive manufacturers, have decided to use Tezos to verify the authenticity of the firmware installed in their cars, for example.

Besides favoring the self-amending feature, the automakers also praised the fact that Tezos can clear significantly more transactions per second than Ethereum. Although Tezos is technically more centralized, the advantage of that is its speed. This appeals to large manufacturers and other corporations, who find transaction speed more important than building on the most decentralized protocol. Having said this, Tezos is still markedly more decentralized than the likes of other blockchains like Ripple (as explained above).

Tezos also commands cheaper gas fees to conduct transactions than Ethereum, where  network congestion can make even the simplest of transactions significantly more expensive. As of October 2021, the average gas fee on Ethereum was approximately USD $105.

The recent Tezos Granada update is the seventh major update to the protocol and was completed in August of 2021. The upgrade replaced the previous Emmy+ consensus algorithm with Emmy* – cutting block times in half from approximately one minute to thirty seconds. Along with this reduction, Granada has made smart contracts on the network more efficient, reducing gas consumption by three to six times (with some contracts seeing a decline of a factor of eight), compared to the previous fees.

Another major area where Tezos has an advantage over Ethereum is in its environmental friendliness. Using Proof of Stake requires around two million times less energy than Proof of Work blockchains like Ethereum to conduct an equivalent transaction.

Some estimates of Ethereum's annual energy consumption place it at around 26TWh with a draw of 3 gigawatts, which is comparable to the annual energy consumption of Ecuador, a country of 17 million people.

Compare that to Tezos' energy consumption, which is around 60MWh, with a continuous draw of 7 kilowatts. To put it differently, if the carbon footprint of an Ethereum transaction is roughly the size of a polar bear, the equivalent transaction on Tezos would be the size of a snowflake on that polar bear’s snout.

This lower energy consumption also leads to gas improvements and reductions in consumption. This decline in gas consumption lets developers deploy richer, more interesting and increasingly complicated applications on Tezos at a reasonable cost.

So, what should I use the Tezos blockchain for?

There is an almost infinite number of use cases for the Tezos blockchain. The infrastructure layer provides tools that let developers create interactive end-user applications – these could be games, financial applications, virtual real estate, and smart contracts.

With its energy efficiency, Tezos is also an effective store of real-world value via its native token, tez, while creators can mint NFTs knowing that they are using an environmentally friendly blockchain.

Tezos is a proven blockchain with a market capitalization of around USD $7 billion at the time of writing. With over 10 million contract calls, and low gas fees for people minting NFTs, Tezos has become a place for creators, both artistic and those of value. Tezos has arrived, but in many ways is only just getting started.

Fill this form to download pdf
Thanks for your submission
download pdf
Oops! Something went wrong while submitting the form.