Only three weeks ago “Florence”, the latest Tezos protocol upgrade went live. And yesterday, the next packed upgrade “Granada” was injected for voting. And it’s awesome.
Tldr; Faster transactions: block time will be reduced to 30 seconds (now ~60 seconds). Liquidity baking will be introduced. Gas improvements will enable even more complex smartcontracts (3 to 6 times decrease of gas costs for certain smartcontracts).
A blockchain is a database that updates itself by consecutive blocks that form a chain of blocks. Hence blockchain. A transaction is only final once it has been included in a new block.
This means that the time that a block can be produced, limits the speed at which transactions can be made. The speed in which blocks are produced is called the block-time. Currently, the block-time for Tezos is 60 seconds.
Granada includes a Tezos consensus algorithm upgrade “Emmy*” that will half the block-time of Tezos.
This will make Tezos transactions twice as fast. Additionally, with the same amount of transactions per block, the amount of transactions per second (tps) will double with Emmy*.
This is the third tps improvement of Tezos, the fastest evolving decentralized blockchain in the world.
The blogpost on Tezos Agora that announces Granada, also hints at fast finality in the next upgrade. This could hint at Tenderbake to be included in the next protocol upgrade.
Liquidity baking is best explained in the tow part article that covers all the ins and outs that we published a while back. You can read part one here and part two here.
In short: Liquidity Baking will be a single-pair, semi-protocol-level, decentralized exchange. So one trading pair, not part of any of the DEXes on Tezos. A unique concept.
There will be a lot of eagerness to provide liquidity for Liquidity Baking (LB). LB provides a Subsidy for liquidity providers which will be paid in XTZ, that makes it very much worthwhile to add liquidity to the XTZ – tzBTC pair. The XTZ that is needed for the subsidy is created by the protocol which is why it needs to be part of a protocol upgrade.
Especially when liquidity is low, the subsidy rewards will be a lot higher than the staking rewards people can earn baking, or delegating.
By design, the incentive to add liquidity to the Liquidity Baking pool is extremely high when liquidity is low (Over 2,000% yearly ROI when the amount of XTZ is around 0.1 million), and moves toward ~6% (similar to staking rewards minus inflation) once it reaches ~43.8 million XTZ.
Transactions cost gas which results in paying for a transaction with XTZ, the native token of the Tezos blockchain. Large and complex smart contracts need more gas for a transaction than a basic transfer of tokens.
Decreasing gas consumption:
…enables developers to deploy richer, more complicated, and more interesting applications on Tezos at reasonable real-world cost. We have generally observed a decrease of a factor of three to six in the gas consumed in the execution of already deployed contracts.