Group

B: Utkarsh, Vishal, Neha, Kripa, Manswin, Veerashekhar Rao, Maneesh S, Apoorv Khanna

Tezos Foundation

While all Blockchains offer financial incentives for maintaining consensus on their ledgers, no
Blockchain has a robust on-chain mechanism that seamlessly amends the rules governing its
protocol and rewards protocol development. Tezos takes a fundamentally different approach
by creating governance rules for stakeholders to approve of protocol upgrades that are then
automatically deployed on the network. Though the underlying philosophy of the Tezos business
model is around creating Governance rules, ironically its own governance practices have glaring
loopholes.

Following are some of the existing and potential governance issues in Tezos business Model:

Investor Control Issues: Mr. & Mrs. Breitman are the principal investors, Dynamic Ledger
Solutions (DLS), and also part of core management team. Though they have all the operational
decision making rights the financial control rests with Tezos foundation (Switzerland). This was
the fundamental governance conflict creating confusion and lack of clear authority between
investors and management team. Further, post the completion of fund raiser the Foundation was
reluctant to spend money over Tezos’s operational activities.

Unclear philosophy of Tezos foundation: Though Tezos Foundation was created with a motive
of non-profit, with an independent board, the company Tezos controlled by it is a for profit
organization. In addition, Tezos also have external investors with for profit motive. Hence, Tezos
Foundation as an organization is not clear with its purpose of existence, thereby misleading the
investors.

Public Investor rights are not protected: In July 2017, public investors invested USD 220 Million
for approximately 79% of Tezos cryptocurrency token. The investors had invested basis the
technological potential of Tezos product, however they do not have any rights in decision making
process

Improper dispute redressal mechanism: Tezos foundation do not provide any guarantee in case
the product fails. The Initial Coin Offering (ICO) was conducted in US whereas the laws applicable
in case of dispute would be Swiss law. Any dispute arising shall be settled by the ordinary courts
of Zug, Switzerland. In such a scenario the US citizens, who were the major investors in the ICO
would find it difficult to pursue any legal action against the company.

Unethical practices by Board members: In early September, it came to fore that the president of
Tezos Foundation, Johann Grevers misrepresented the council about the bonus he attempted to
grant himself. It was also alleged that he attempted to pressurize other council members to
award him a contract that would grant a bonus worth USD 1.5 Million.