While Tezos (XYZ) may sound like the name of a rare gem or a hotel in Santa Fe, it’s yet another crypto that investors can add to their wallets. Below, we’ll cover the basics of Tezos and what you’ll need to know if you’re considering adding it to your crypto portfolio.
What is Tezos (XTZ)?
Like some other common types of cryptos (Ethereum, for instance) Tezos is not only a currency, but also a platform. Technically speaking, Tezos is a decentralized, open-source blockchain network. More specifically, it’s a network that allows for peer-to-peer transactions, and on which users can deploy assets, applications, and smart contracts. The “tez”, or XTZ, is the native cryptocurrency for the Tezos blockchain.
Like other, similar networks, Tezos utilizes blockchain to produce a decentralized computing platform. As such, users verify the code and data on the blockchain, and through that process, receive XTZ tokens. This process, “baking,” is similar to Bitcoin mining. Tezos coin uses a proof-of-stake consensus mechanism, which means there is no need for miners to produce new tokens.
History of Tezos (XTZ) Crypto
Like most other cryptocurrencies, XTZ Tezos has a relatively short history.
Husband and wife team Arthur and Kathleen Breitman first proposed Tezos XTC in a 2014 whitepaper . In 2017, they raised more than $230 million during an initial coin offering (ICO) , the biggest-ever initial public coin offering at the time. The currency launched the following year.
The Tezos ICO, however, faced controversy from the start. The Breitmans got into a spat with the head of the Tezos Foundation (a non-profit organization created to promote Tezos), which led to a court battle, which took three years to settle.
It’s a pretty long, intricate story, and one that’s worth reading if you plan on investing in Tezos cryptocurrency. But for traders and investors, the important takeaway is that Tezos is now on the market, and has been for a few years.
How Does Tezos Work?
Tezos doesn’t exist on a single central server or computer somewhere—instead, it exists on the blockchain, on users’ computers all around the world.
The Breitmans envisioned the platform itself as a self-amending blockchain network, which means that anyone who owns XTZ crypto could vote on changes to its rules. So, participants actively have control over the network, which sets it apart from many other networks where control remains with the developers. Its ongoing evolution gives it a flexibility that some other crypto currencies might not have.
XTZ holders can stake, or “bake,” their coins to earn more. That also allows those with a large balance to take a role in actively managing the network.
XTZ Coin Price
XTZ’s coin price has had an up-and-down ride over its short existence. When it debuted back in late 2017, XTZ’s value topped out at more than $12. It hasn’t seen such lofty heights since, unfortunately. In the following months, XTZ prices fell, and bottomed-out at below $0.40.
After more volatility over the next several years, XTZ rose in value through most of 2020, reaching $8.42 on May 6 before falling back down to $3.13 in early August.
Like any commodity, digital or otherwise, Tezos’ value reflects supply and demand. And like other cryptos, XTZ doesn’t have much on-the-ground application.
Instead, it derives value from its utility on the Tezos blockchain network. Other than that, users can trade it as a commodity or hold it as an investment, much like Bitcoin or other cryptos.
Is XTZ A Good Investment?
While cryptocurrency can add another dimension to your portfolio, it also has significant risks. As noted by looking at XTZ’s price history, it’s a volatile asset, and could lose significant value in the future.
That said, it could also gain value, too. Proponents of the cryptocurrency believe that its strict governance rules could lead to market-leading technology solutions, which could make it more valuable.
But there’s always the chance that the government could change crypto rules and regulations. All told, there are a lot of things to consider before taking the leap. Do your due diligence, or talk to a professional if you feel like you’re in over your head.
Recommended: Cryptocurrency Guide for Beginners
How to Buy and Sell XTZ Cryptocurrency
If you’re an experienced crypto investor, you know the drill. Buying XTZ requires following a few basic steps. If you have any experience buying cryptocurrency online, this should amount to a review:
Step 1: Choose an exchange, and fund your account.
Much like choosing a stock broker, you’ll need to choose a crypto exchange and fund your account before you can buy, sell, or otherwise trade crypto like XTZ. If need be, do a little homework to learn about how crypto exchanges work.
Step 2: Have a place to store your assets.
If you don’t already have one, look up what options are available for crypto wallets. There are many different types, each with their own pros and cons. Your digital wallet is what you’ll use for crypto storage going forward.
Step 3: Trade!
Once you’ve selected and funded the exchange, you can start trading. The details might vary, but it typically involves looking up XTZ in a search bar, and then exchanging your U.S. dollars or other cryptocurrency for XTZ. Once you’ve executed the trade, you can transfer your holdings to your wallet, unless your exchange provides you with one.
Recommended: Crypto Taxes (2021): How to Pay Taxes on Cryptocurrency
The Takeaway
Tezos has quickly become a fixture on the markets. And though it has a fairly interesting past, throngs of users across the world use its network for various assets.
If you feel that XTZ would make a good fit for your portfolio, you can take the next steps by purchasing cryptocurrency with the SoFi Invest® brokerage platform. You can use it to build a portfolio that includes more than 20 different types of crypto, as well as stocks and exchange-traded funds.
Photo credit: iStock/PeopleImages
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SOIN0521212
Source: sofi.com