Concordium is being developed by a team of researchers and engineers from various institutions, including the Technical University of Denmark and the Swiss Federal Institute of Technology.
It is based on a proof-of-stake consensus algorithm and uses a unique two-layer consensus design that ensures the platform remains available and secure even under adverse conditions.
In today's world which is increasingly regulated and interconnected, the need for a public, permissionless blockchain that can meet regulatory compliance requirements has never been greater. Blockchain technology not only streamlines processes, making them transparent and cost-effective, but it is also proving equally effective in building compliant products.
“Blockchain isn’t just a more efficient way to settle securities. It will fundamentally change market structures, and maybe even the architecture of the Internet itself”, Abigail Johnson, Founder of Fidelity Investments.
Concordium is a next-generation blockchain platform that offers a unique combination of compliance and privacy features. It combines the benefits of a public, permissionless blockchain with the ability to meet regulatory compliance requirements.
What does this mean? Concordium’s unique protocol-level identity primitives allow for a balance between privacy and accountability, enabling users to remain anonymous on the blockchain while still being able to provide their real-world identity to authorities when necessary.
According to Lars Seier Christensen, Founder and CEO of Concordium:
“If you have a high volume of transactions, obviously you not only need low fees but also know that it’s not going to rise in the next twelve months’ time. If you look at Ethereum three years ago, there were use cases being built. They worked fine under the then conditions, but are now crossed by $30o or $500 transaction fees, which in itself is an absurdity if you want to be a piece of infrastructure. Hence, the need arose to move again to Layer-2 solutions, where you don’t have that problem”,
In addition, Concordium is also designed to be fast and efficient, with a high transaction throughput that can meet the needs of business applications on a global scale. This ensures that transactions are confirmed and immutable within a short period of time, and the platform is designed for reliable uptime even under adverse conditions.
Being interoperable with other blockchains, Concordium allows an efficient and secured data transfer between these platforms, thereby facilitating a wider adoption of blockchain technology.
The basic concepts of Concordium
The Concordium blockchain is a compliance-ready blockchain that is backed by science and enables private and public transactions. It offers high throughput, fast transactions, and predictable fees, allowing businesses, developers, and traders to harness blockchain’s true power and potential.
Let us dive deeper and find out how Concordium utilises these features and builds a layer of trust for its users.
Identities: Identities facilitate compliance with relevant regulations while also protecting users' privacy. Transactions in the Concordium network are processed without exposing the identity of the sender or receiver. Every account on the chain must be derived from an identity that has been verified and signed by an approved identity provider, and it is publicly visible which identity provider issued the identity for an account.
Account owners can choose to publicly reveal other values, called attributes, such as nationality or country of residence. These attributes are publicly accessible and enable anyone to assess the risk of interacting with an account before doing so. It is generally recommended not to reveal attributes unless there is a good reason to do so.
On the Concordium platform, the identity of a user can only be revealed to a qualified authority, such as a governmental body with the authority to act in a relevant jurisdiction, as part of a valid legal process. This means that the identity of a user cannot be easily revealed and can only be disclosed in exceptional circumstances, such as if authorities detect suspicious activity on the user's account and obtain an official order, such as a warrant or court order.
The process of revealing a user's identity involves decrypting a specific user identifier that is encrypted on each account and requires the cooperation of multiple parties. The number of parties required and the specific parties involved are determined when the user's identity is issued.
Accounts: Accounts and identities on Concordium are strongly linked. A user must have a verified identity and a user identity certificate issued by an authorised identity provider in order to create accounts.
An account on the Concordium blockchain consists of an on-chain part, which is publicly visible and maintained by bakers, and an off-chain part. The on-chain part of an account includes the credentials of the account, the public and shielded balance, the account sequence number, and the public keys of each credential to verify transaction signatures. The off-chain part of an account contains the private keys of the credential holders, the identity the account is created from, and the decryption keys used for shielded transfers. Users can interact with their on-chain accounts in various ways and use the same account from multiple devices at the same time.
An account on the chain is identified by an address, which is a 32-byte sequence. The user can create an initial account when they receive their identity, or they can create a regular account with additional privacy protection by obtaining a user identity certificate and going through the anonymity revocation process with the identity provider and anonymity revokers.
Backup: It is essential to create a backup every time you create a new account on the Concordium platform, whether it is an initial account or a regular account. This is because a backup is the only way to restore access to your account keys if you lose your phone or need to re-install your wallet.
For the Concordium Legacy Wallet, it is necessary to create a new backup file each time a new account is made, or the keys for that account cannot be recovered. The Concordium Desktop Wallet uses a Ledger device to sign transactions, so you can recover your wallet and accounts with a combination of your backup file and your Ledger device if anything happens to your Desktop Wallet or you cannot access it. It is important to keep your Concordium wallet updated to the latest version and to carefully follow the instructions in the backup and restore guide to create a backup.
Transactions: A transaction is an operation that makes a change to the chain and is recorded on it permanently. On the Concordium blockchain, there are several types of transactions, including CCD transfers, shielded CCD, shielded transfers, and baker management.
To make a transaction, users can use the Desktop Wallet, Concordium Wallet for Android, Concordium Legacy Wallet, Concordium Wallet for Web, or Concordium Client. Each transaction has a defined fee, which is paid to the Concordium network in NRG units and deducted from the sender's account. It is important to have enough CCDs in the sender's account to cover the fee. Transactions are verified by bakers and either successful, ignored, or rejected. Successful transactions are permanent when the block they are included in is finalised.
Baker: A baker is a node on the Concordium blockchain that is responsible for creating new blocks and adding them to the chain. Bakers are selected through a lottery process, and the chance of a baker being selected is proportional to the amount of CCD that the baker has staked on their baker account. When a baker successfully bakes a block, they receive a reward in the form of CCD, which is paid out of transaction fees and newly-minted CCDs.
Bakers play a critical role in maintaining the integrity and security of the Concordium blockchain by validating and ordering the transactions that are included in the blocks they bake. To become a baker, a node must be configured with a set of baker keys, which are used to sign blocks and verify whether the baker has won the lottery to bake a block. Bakers stake a portion of their CCD balance on their baker account, and the greater the stake, the greater the chance of winning the lottery and baking a block.
The Concordium blockchain divides time into epochs and slots, with payday occurring every 24 hours at a specific time. During payday, new CCDs are minted and rewards are distributed to bakers and their delegators. There is also a cool-down period during which certain actions, such as decreasing stake or removing delegation, cannot be taken.
Bakers and delegators can earn rewards by participating in the baking process and helping to maintain the integrity of the blockchain.
Delegation: This feature allows individuals to earn rewards on their CCD (the native cryptocurrency of Concordium) without having to run their own "baker" (a node responsible for creating blocks on the blockchain). Instead, they can "delegate" their CCD to a baker, who uses the delegated CCD to increase their probability of creating a new block and receiving a reward. The reward is then shared between the baker and the delegators, with the baker taking a commission.
This process allows individuals with fewer resources to participate in the proof-of-stake protocol and earn rewards on their CCD without having to run their own baker. Concordium has caps in place to limit the size of pools (groups of delegators and bakers) in order to maintain decentralisation and prevent any one party from having too much control. Pool statistics are available to help delegators choose the best pool for their CCD.
Bakers are selected based on their stake in the pool and their reliability, and they must follow the protocol to avoid being "jailed" and losing rewards. Delegation is a non-custodial solution, meaning that delegated CCD remains under the control of the delegator and is not transferred to the baker.
Concordium’s utility in the financial industry
Concordium's unique protocol-level identity primitives and focus on compliance, makes it well-suited for use in the financial services industry. For example, a financial institution could use Concordium’s platform to build a secure and transparent platform for trading financial instruments, such as stocks or bonds. The platform could use Concordium's identity primitives to ensure that only authorised parties have access to certain data, while still maintaining the anonymity of those parties on the blockchain. This could help the institution meet regulatory compliance requirements while also taking advantage of the benefits of a public, permissionless blockchain.
In addition to its compliance features, Concordium's high performance and efficiency make it an appealing choice for financial institutions looking to streamline their processes and increase transparency. Its support for private blockchains and interoperability with other blockchains further enhance its appeal, making it a powerful and flexible platform for use in the financial services industry.
In conclusion, Concordium is a powerful and innovative blockchain platform that addresses a critical need in today's increasingly regulated and interconnected world. Its unique protocol-level identity primitives allow for a balance between privacy and accountability, enabling organisations and individuals to build compliant products that take advantage of the benefits of a public, permissionless blockchain. Its focus on compliance, performance and security makes it well-suited to meet the needs of business applications on a global scale, and its support for private blockchains and interoperability with other blockchains further enhance its appeal. With more innovations happening within the platform, Concordium promises to advance and evolve, helping to make blockchain technology safe and accessible for all.