Tezos may be one of the most controversial cryptocurrencies out there, and not because of the disruptive power of the coin, but because of how it has been run as a company.

High Aspirations

Tezos was originally developed with the goal of creating a “self-amending” cryptocurrency that wouldn’t end up becoming fragmented by hard forks and the like. The founder, Arthur Breitman, saw this as one of the fundamental weaknesses within the industry, and predicted that if he could create a cryptocurrency that solved that problem, it would become “the last cryptocurrency”.

The network would use a distributed, peer-to-peer, permissionless network, and would depend upon a system that used smart contract (similar to those of Ethereum). Basically, developers on the Tezos network would have the privilege of proposing upgrades to the protocol, and potentially be rewarded for their contribution to the network’s strength.

There are two major things to note about the structure here. First, Tezos would use a proof-of-stake system, which would reward users for their investment in the network rather than their use of computing power. Second, this was meant to make the network similar to a democracy in that you had a vote proportional to your holdings, and would accept the democratic outcome in the case that one’s suggestions are not passed.

Aggressive Fundraising

Tezos set a record at the time of its ICO with $232 million being raised during its offering. The only ICO to beat this since was Filecoin (ICO of $257 million).

Around then is when things started to get a little more scandalous. It started when the SEC started to investigate the ICO with the claim that the Tezos tokens (XTZ) would be considered securities. Then conflict arose between the founders and the board president who controlled the funds that had just been raised.

On the communications front, it didn’t help that Tezos began to refer to the funds as a “non-refundable donation” rather than a speculative investment. They would additionally go on to warn the investors that they might never issue the token.

One thing is for sure: it doesn’t help the public perception of a company to have an intellectual property rights dispute in the works at the same time as the company is failing to honor its agreements with token-holders. Tokens wouldn’t be issued for nearly a year as the different board members fought with each other and the SEC over the correct management of the company.

Recent Performance

With almost a year delay before the release of its beta network on June 30th, 2018, Tezos has had a very rough start. Users waited all this time, and many seem to have lost their patience, because there was a large sell-off almost immediately.

Prices fell approximately 75% in the first week of trading, and this sell-off was almost entirely attributed to users finally being able to access liquidity for their tokens. It is hard to tell if this is pure “profit-taking” or if it is a sign of more negative things to come for the cryptocurrency that can’t seem to get enough bad news.

In the middle of lawsuits and disputes, it is difficult to predict where Tezos is going to go. With all the recent uproar about the implementation of KYC checks for contributors, it seems like Tezos has a long way to go before it wins back the faith of its initial backers. For many, this is a clear example of the downsides of the wild west of ICO investing.

Featured image courtesy of Shutterstock.

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