3 Seed protocol Much like blockchains start from a genesis hash, Tezos starts with a seed pro- tocol. This protocol can be amended to reflect virtually any blockchain based algorithm. 3.1 Economy 3.1.1 Coins There are initially 10000000000 (ten billion) coins, divisible up to two decimal places. We suggest that a single coin be referred to as a “tez” and that the smallest unit simply as a cent. We also suggest to use the symbol ꜩ (\ua729, “Latin small letter tz”) to represent a tez. Therefore 1 cent = ꜩ0.01 = one hundreth of a tez. 3.1.2 Mining and signing rewards Principle We conjecture that the security of any decentralised currency re- quires to incentivize the participants with a pecuniary reward. As explained in the position paper, relying on transaction costs alone suffers from a tragedy of the commons. In Tezos, we rely on the combination of a bond and a reward. Bonds are one year security deposits purchased by miners. In the event of a double signing, these bonds are forfeited. After a year, the miners receive a reward along with their bond to compen- sate for their opportunity cost. The security is primarily being provided by the value of the bond and the reward need only be a small percentage of that value. The purpose of the bonds is to diminish the amount of reward needed, and perhaps to use the loss aversion effect to the network’s advantage. Specifics In the seed protocol, mining a block offers a reward of ꜩ512 and requires a bond of ꜩ1536. Signing a block offers a reward of 32∆T−1 tez where ∆T is the time interval in minutes between the block being signed and its predecessor. There are up to 16 signatures per block and signing requires no bond. Thus, assuming a mining rate of one block per minute, about 8% of the initial money mass should be held in the form of safety bonds after the first year. Therewardschedule implies at most a 5.4% nominal inflation rate. Nominal 2 inflation is neutral, it neither enrishes nor impoverishes anyone . Note that the period of a year is determined from the block’s timestamps, not from the number of blocks. This is to remove uncertainty as to the length of the commitment made by miners. 2 In contrast, Bitcoin’s mining inflation impoverishes Bitcoin holders as a whole, and central banking enrishes the financial sector at the expense of savers 8