Reviewing Top Benefits of Tezos for Institutional Finance


Tezos Financial Applications (source: Tezos UK)

As has been previously written here and in many other publications, proponents of Tezos are arguing it can to become the top smart contract platform for institutional financial applications. Below are reviews of some of the main arguments.

On-chain Governance & upgradeability
Upgradeability is an important security vector that any financial application needs to consider. Many blockchains like Ethereum had major issues with hard forks pushed by developers and forced on the network which caused skepticism as to their decentralized nature. Institutions don't want a small group of developers to wield the ability to revert or censor financial transactions with billions of value. Tezos has a proposal voting system where Tezos stakeholders can vote on proposed upgrades. So the power to make changes on the blockchain rests with the largest investors in Tezos, as opposed to developers. During the presale in 2018, a large amount of the supply was purchased by a small number of 'whales', large investors, like Tim Draper. If institutions trust the current array of whale investors from the presale, those investors will metaphorically act like a board of directors on the Tezos platform. If institutions do not trust the investors with the chain governance, or if the largest whales from the presale who held most of the Tezos supply decide to dump at a certain price and the supply gets more distributed, a consortium of financial institutions may decide they should either buy up large amounts of Tezos, significant percentages of the market cap, in order to have collective control over the network.

KYC verified token sale
Although the post-presale forced KYC upset many privacy oriented community members, it may prove ultimately beneficial as Tezos can be seem as a more legitimately regulated coin and information on stakeholders is available.

Staking model/POS
In addition to the ROI from staking, this model brings us back to the discussion about control over the blockchain. POS takes away power from miners and replaces it with consensus from stakeholders. This removes the threat of a 51% by shady miners from China that concerns many in the communities of POW blockchains. Now you can start to see why institutions may view Tezos as a more secure blockchain (depending on who controls the supply).

Formal Verification
Tezos's smart contract language Michelson has yet to be proven in the real world as being conducive for smart contract development. Because of its complexities, most developers will use other languages on top of Michelson. This could be a positive only if a financial institution is willing to spend more time and money on development, with less interoperability.

Tezos Foundation war chest & business development
Tezos foundation is actively marketing at events like Fintech London and others globally. Several announcements of partnerships or cooperation with large financial institutions have already been announced.

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In summary, if Tezos is successful in becoming the institutional financial blockchain, there is a possibility that financial institutions from around the world will drive up the price buying a large percentage of the supply to secure the network.