Tezos’ On-Chain Upgrades Are A Major Deal

by | Oct 7, 2021 | Latest, Opinion

In this opinion piece, Anders Langberg explores how on-chain upgrades help to give Tezos the edge over other blockchains and why decentralized governance is such a big deal for long-term viability, sticking to the core ideals of the blockchain revolution.

Image courtesy of the Tezos.com illustration library.

Why Tezos On-Chain Upgrades Are Such As Big Deal

As we’ve seen many times in the past, technology-based systems must be able to upgrade themselves and answer to evolving use cases and environments in order to stay relevant. Otherwise, they’ll go the way of Lotus Notes.

When I started out in the IT industry, it was in the middle of the proliferation of web 2.0 and mobile apps. I had many hard arguments with colleagues who favored the mobile apps for their ability to provide “the utility I want, when I need it”, versus the web apps ability to provide the latest version of data, the underlying system as well user interface with a single refresh of the page.

The benefits of the web app model eventually led mobile apps to embrace many of the principles of web apps in order to stay relevant, most notably the ability to automatically update the app and the use of REST-based services to exchange data.

The speed in development enabled by this paradigm meant that any organization that didn’t employ continuous delivery was quickly left behind. One key component to get this to work is a strong development process, so that code doesn’t get into a production environment before the feature is agreed upon and before it’s tested and validated.

In a decentralized system, this problem is immensely more difficult. Bitcoin has chosen to, by design, make changes difficult. This has resulted in an almost non-existent development pace, and the few changes that have been proposed have multiple times resulted in actual chain splits.

In fact, any meaningful upgrade is a so-called hard fork where the chain is stopped and a new chain is created with the old one as a starting point. The creation of Bitcoin Cash and Bitcoin SV as a result of the block size debate in 2017 and 2018 are the two most well known examples.

This is what happens without a formalized development or governance process. A way to mitigate this and have a higher upgrade pace is with a strong core development team. Solana, Avalanche, Binance Smart Chain, and others are examples of this.

These chains evolve relatively fast, but at the cost of decentralization. Even if the block creation is more or less decentralized, it’s still the core team that’s calling the shots.

Ethereum is somewhere in the middle, with a strong core development team but such a decentralized user base that meaningful changes are incredibly slow to develop and adopt.

There’s also a historic precedent for chain splits and other outfalls after controversial actions taken by the core team, for example, the creation of Ethereum Classic after the on-chain fix and hard fork to stop and reverse The DAO hack in 2016.

The founding of Polkadot and Cardano by Ethereum co-founders could perhaps also be seen as a result of the slow development pace of the Ethereum chain.

Is it possible for a blockchain to facilitate a development process that guides new upgrades through an approval and validation process, in order to get improvements, new features, and even changes to the very base layer functionality into production?

Yes, it is. In Tezos it’s called on-chain governance and is a continuous process where anyone can insert a proposal which the network stakeholders can vote on. If it goes through the voting and ratification process the proposal is automatically enforced and the blockchain is upgraded.

The proposal itself contains actual code, so once the governance process has kicked off there’s no single human hand that can stop or adjust what’s happening.

This process allows the blockchain to continuously upgrade itself without any hard forks, based on the direction from the network stakeholders.

By the publication date, Tezos has undergone seven self-amending upgrades, with an eighth underway. Some have been minor, others have been quite significant and controversial.

In the Edo upgrade (fifth), an implementation of the Sapling zK-proof circuit was implemented, making Tezos smart contracts able to use the same privacy enabling technology that underpins Zcash.

Other upgrades have contained both changes to the consensus mechanism (Emmy* in Granada, the seventh) as well as the governance process itself in the form of an additional stage in the governance process (Edo).

The last upgrade (Granada) also saw the introduction of Liquidity Baking, a mechanism to draw Bitcoin liquidity to Tezos by giving protocol-level incentives to contribute to an XTZ/tzBTC liquidity pool.

This feature was widely debated and somewhat controversial, but the governance process really showed its ability to let the network stakeholders decide on whether to adopt it or not.

There are multiple teams working on the upgrade proposals, with different versions injected both by the developers as well as other contributors with slight tweaks to some features.

As someone who watches the development from the sidelines, I find it exciting to see that we both get features with immediate value, like lower gas consumption and faster blocks, but also functionality that paves the way for future, big upgrades.

The active upgrade proposal, Hangzhou, has multiple features that help prepare the network for an even bigger update later this winter, Tenderbake, which brings a version of the incredibly fast consensus protocol underpinning the Cosmos ecosystem of chains.

In addition, it provides a feature to countermeasure Block Producer Extractable Value (BPEV, a big issue on Ethereum) and Views, which gives smart contracts the ability to read the storage of other smart contracts, for more design freedom when writing smart contracts.

I find the BPEV countermeasure a perfect example of the active core developers’ ability to learn from the issues other blockchains experience and provide a solution before it’s even a problem on Tezos.

The same with Tenderbake, even with the exponential usage increase since the beginning of the year, there’s no shortage of block space.

Regardless, the direction has been set to bring orders of magnitude more capacity for the users.

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