Interview: Arthur Breitman, Tezos

“It took a while but Tezos is catching up”

We originally planned to meet Arthur Breitman in Zug, Switzerland—the home of the Tezos Foundation, which he co-founded. “Everyone thinks I live there,” he told us, sounding equal parts amused and mildly exasperated that such an assumption had taken root. Instead, he invited us to meet him in London, specifically at the Trilitech offices—a Tezos-focused hub he leads that works on both core network development and supporting third-party projects.

The building itself is located on a quiet square in Soho. Inside, large photographs of the early computer age line the walls. One striking image shows the Canadian Imperial Bank of Commerce at the Cottons Centre in 1988—an open office packed with computers running Reuters’ Triarch data system. The retro-futurist vibe feels entirely appropriate for Arthur Breitman, a man deeply immersed in computer science and financial mathematics.

An early Bitcoin enthusiast—despite studying under Nassim Nicholas Taleb at NYU, a prominent skeptic of digital assets (“We still talk now and then, though not really about Bitcoin,” Breitman admits)—Arthur and his wife Kathleen have been part of the crypto world nearly since its inception. The blockchain they envisioned in 2014 and launched in 2017, Tezos, is among the few still standing. Its native token, TEZ, currently ranks near the bottom of the top 100 cryptocurrencies with a $510 million market cap—down from a $7 billion high in 2021.

Still, Breitman remains undeterred. “It’s overcapitalized and undifferentiated. It’s sad,” he says. “There’s a lot of money chasing too few real use cases. Which doesn’t mean they don’t exist,” he clarifies. “I really don’t like the cynics who say there’s no value here. There is real stuff happening—it’s just drowned out by noise.”

He wants to demonstrate Tezos is different: the network has proven its durability, and its brand recognition is strong—just ask Manchester United fans, whose team sports the Tezos logo on their jerseys. The network remains a go-to platform for generative artists around the world, and new developments—like secondary networks designed for high-demand apps—are expanding its capabilities.

All of this fuels Breitman’s conviction. When asked what he sees for Tezos five years from now, his answer is brief but bold: “Triumphant.” 

Let’s find out why he believes that future is within reach.

CoinShares: Do you remember the first time you came up with the idea of Tezos?

Arthur Breitman: It was around 2014, I started thinking about governance: at the time, there was an explosion of ideas around the space of different designs for cryptocurrencies. People were talking about privacy, smart contracts, proof-of-stake. I remember seeing a talk where someone was saying something like: “If you’re not mining Bitcoin, you don’t have a voice in the governance of Bitcoin, blah, blah, blah”. And my first reaction was that, no, mining has nothing to do with it because if there’s enough people that want a change to happen, the miners have to follow it.

I started pulling on thread and I was like, where does that power actually lie?

It seemed important to be able to have changes because so much was being developed. And I realized there’s no such mechanism in Bitcoin. And this is around the time when Zcash was being presented. It fixed a big issue in Bitcoin. But there was just no interest in adopting it. We were shifting from this idea of innovation in altcoins supposed to be folded into Bitcoin to a situation where people no longer wanted them to be implemented. 

Why did you choose Liquid proof-of-stake at the time? 

Proof-of-work was so expensive: it’s not about energy efficiency. In proof-of-work, you constantly have to inflate: the idea that you have a fixed supply [is wrong], you don’t have a fixed supply in Bitcoin. You either have a fixed supply or you have security, but not one and the other, and that’s part of the Tezos position paper. The question was how can we make consensus much, much cheaper without all this waste?

And proof-of-stake was the most natural way to do that. I explored some ideas around social consensus, like using social networks as a way to get consensus and I think that’s an interesting one, and I haven’t really seen it done, but that would be a possibility.

Nowadays, the majority of blockchains are actually using proof-of-stake, so what kind of advantages Tezos has relative to other smart contract platforms?

Well, Tezos was a first mover. There was Bitcoin, that really works. They were other systems based on proof-of-stake, which were quite centralized. I think Tezos was the first real proof-of-stake with slashing [a method to disqualify bad behaviour of stakers]. Tezos was also the first at doing all of other things, which aren’t necessarily as visible or as sexy to people. Very few people have actually done governance for real. Tezos does governance for real. Very few people are doing layer-2 for real: most layer-2, almost every single layer-2 pretty much out there—except for the ones on Tezos—are heavily centralized and have trapdoors. We’re doing Layer 2 for real. We’re doing scaling for real. There’s so many benefits to the Tezos platform that go way beyond proof-of-stake.

What are the demographics of Tezos user base?

It’s a ledger, it’s anonymous, so I don’t necessarily know who’s using what at every point in time in this blockchain. But we do have a big community of artists that is very visible because they’re very active on social media and they’re very active on objkt.com and Teia platforms [two NFT marketplaces]. We have some OGs [early adopters] who have been following the project for a long time. There are people in DeFi, in gaming, it’s a mix.

As you mentioned, Tezos recently launched a new EVM layer-2 [a secondary network compatible with Ethereum chains], Etherlink. Why?

I started thinking about scaling in 2021. A bit late. A lot of people were thinking about scaling earlier. It’s only around 2021 when I came from the point of view that blockchains were going to be mostly stores of value. You need some smart contracts, but not like a ton of applications. I also hadn’t seen any solution that really satisfied me in terms of scaling. The sharding that Ethereum was proposing didn’t make any sense in 2017 and then, I started really getting into optimistic rollups, data availability sharding, and data availability sampling, so we started building that. And, you know, when you build the rollup system, the first thing you want to do is to be able to roll up and it made sense to build an EVM rollup because it was a way to attract applications which already have a code base written for EVM in order to bring people still choosing a chain into our eco-system. It made for a stronger offer than saying: “Hey, you know, I believe that Michelson and all the language that we’ve developed on Tezos are superior, so if you’re really convinced about the value, you should be able to run those.” A lot of people may not be willing to take that risk, that challenge. They kinda want to be doing what everyone else is doing. It was therefore both  a way to build our first L-2 and to bring EVM compatibility to Tezos.

There’s over 50 projects building onto Etherlink. What kind of applications should we expect from this Layer-2 in the coming months?

A lot of the early push is around DeFi. So DEXs [decentralised exchanges], lending. There’s some memecoin applications. We have a few around NFTs, around gaming as well.

Will Etherlink be able to attract liquidity from the several Ethereum existing layers-2 and to gain market share  from this competition?

It’s difficult in particular because there’s currently a playbook that everyone is running which is: you launch a new layer-2 with a company that sits on 95% of the token but you publish a pie chart where it looks like it’s more distributed between market making, team, community and marketing, while you own the vast majority of the supply and you give a giant amount to attract liquidity which works for a while before it dries up. It is very difficult to get sustainable liquidity in this ecosystem : we’re trying with an approach called Apple Farm [a program to bootstrap the DeFi ecosystem on Etherlink] but we want to be strategic about it by focusing on assets that don’t have other chains, by concentrating on a few pairs as opposed to going very wide. Moreover, I also don’t want to play the game of purely looking at a metric just as a metric, such as having the most TVL [total value locked]. Liquidity needs to serve a purpose and the idea is that if one wants to launch a coin on Etherlink, there will be liquidity.

What kind of impact could Etherlink have on the Tezos token itself?

Unlike all the other layers-2 launching on Ethereum, which basically have holders and entities not necessarily in line, because on Ethereum, they are more concerned by the success of their own layer, Etherlink uses tez: it’s a good for gas and for everything. It really is an extension of the Tezos network itself.

It appears that you really are focusing on real world assets, notably with a platform powered by Tezos to trade uranium. What kind of demand does this use case generate? 

The tokenization use cases have been with us for a few years. There were already a few tokenization projects on Tezos in 2019, for instance. I believe that for a tokenization project to be a big success, it needs to match the demand from the people: you want to have a big asset class to attract a lot of liquidity as opposed to a bet where you have 20 different tokenized projects without liquidity. You want something big and uranium is big. Everyone has heard of uranium. You also want to tap into something where it’s not a good established marketplace. Gold is a big asset but it is already tokenized: there’s so many ways you can buy gold. Uranium: there was just no way [before the platform Uranium.io]. You couldn’t buy physical uranium unless you had $4 million dollars. Now, you basically have this one place where you can buy physical uranium and it’s on Tezos’ Etherlink. It’s a big market. It’s an asset that’s interesting. People who buy cryptocurrencies are buying a technologically flavored commodity. Well, uranium is a technology flavored commodity. This is a match in terms of interest for, from the audience and there’s a big future in nuclear energy. The generational attitude around nuclear power has changed a lot. There used to be a lot of pushback against nuclear power for nonproliferation reasons. Now, in the younger generation, the focus on carbon impact is more important and there’s much more acceptance of nuclear power. The demand for power is also supposed to increase so much from the demand of data centers and AI that people are reopening nuclear power plants. So I do see quite a bit of demand coming for uranium, which will make it a very interesting market next few years.

A year ago, Tezos announced Tezos X. What is Tezos X?

Tezos X is a project to build a high throughput rollup. A lot of people associate scaling by rollup with fragmentation. You’re either like Ethereum where you have 50 Layer-2 all misaligned and it’s a horrible mess for users. And they all misalign or you’re like Solana and you scale on your L-1 and it’s easy. Or, you don’t have to do either of that. You can stay decentralized so that you don’t like put giant requirements on your L-1 validators: scale a monolithic rollup. So Tezos X is a monolithic, vertically scaled rollup on top of Tezos, with very high throughput, we’re targeting a million transactions per second [TPS].  The other aspect is it focuses on developer friendliness : it will be EVM compatible. It will make Ethereum and Tezos compatible and we are also bringing languages like JavaScript, Python, Java, or .NET…

Being great technically doesn’t always bring success. Most users would qualify Tezos as great technically but how do you think it will be able to attract users, whether retail or professional into the Tezos ecosystem?

Well, there is a lot of things which are great technically about Tezos but I don’t think it’s always been that great technically. It was probably the most advanced blockchain when it launched in 2018 but it didn’t move fast enough. We developed a lot of really interesting features but at the same time, we were not responding to a lot of other demands around throughput, around latency, that were more important to the market.

So Tezos fell behind in 2019 and 2020 from a technological point of view.There was an enormous catchup work needed to be done starting in 2021 and, you know, we’re catching up but it took a while to turn it around, so I agree with you : it’s not just about the technology. Still, I don’t think the story of Tezos is a story of great technology but lack of adoption. There’s been some really great parts of technology, but it’s been insufficient, in many respects and I think addressing those gaps has been very important.