Early generations of blockchains recognized the need to reward network participants for writing blocks, but that was as far as they went. The initial focus remained on facilitating cryptocurrency transactions and not on the creation of entire blockchain network ecosystems.
The Concordium Network is designed for a much broader approach. Our aim is to grow the network to become a global backbone for transaction logging and we have designed our token structure, as well as other activities, with that in mind.
Each and every participant on the network will be consistently rewarded for activity. Whether a user, a network client or a developer, everything is geared towards supporting pervasive growth and, therefore, Concordium’s ubiquitous presence and availability.
GTU tokens: Consistent Win/Win Design
The Concordium Network is fuelled by the GTU token (Global Transaction Unit). Our basic tokenomics design is simple. Logging transactions requires a gas fee in GTU while every supporting network role—running network nodes, providing identities, creating smart contracts, delivering consensus (baking) and so on—can and will be rewarded with GTU tokens.
Block bakers earn rewards
The Concordium Network will use a sophisticated proof-of-stake algorithm for consensus on block-writing. Network nodes that participate will be rewarded with GTU tokens for baking blocks.
Baking participation can be delegated
If you run a network client but are not interested in setting up a baking node, you can delegate your baking participation rights, allowing you to share GTU token baking rewards with bakers.
Smart contract developers can earn GTU tokens
The Concordium smart contract framework will enable developers to share network transaction fees. This incentivizes developers to create contracts for a wide range of uses based on a pay-per-use structure. This is a first for blockchains although the same practice is quite standard in other areas of software development, such as most app-store apps.
GTU tokens traded on cryptocurrency exchanges
Subject to applicable securities laws, the Concordium Foundation intends to arrange for GTU tokens to be bought and sold on key cryptocurrency exchanges such as Binance, Coinbase and Kraken. On these exchanges GTU can be traded outside the Concordium network based on simple supply/demand pricing. Which specific exchanges will carry GTU tokens has yet to be determined, and of course there is no guarantee that exchanges will agree to carry GTU, or that GTU holders will recognize any return from exchange trading.
Block creation reward
The baker of each block will receive a reward for creating the block. The amount is dynamic and a network protocol will adjust this amount based on block creation speed—so if not enough bakers are writing blocks, the reward will grow. The reward is dynamically updated on each finalization block, and should always cover the actual computation costs for a baker to bake a block.
If a user is part of the Concordium finalization protocol mechanism, the user can then participate in the reward offered for finalizing blocks. Each successful finalization stamp will generate a set reward to the participants.
Identity Issuer transaction reward
Each account on the Concordium blockchain will be required to have valid credentials generated from an identity object that was issued by a Trusted Identity Issuer. If an account does not have such credentials, it is not a valid account (meaning that transactions from/to that account will be impossible). A percentage of transaction fees will be given to the Identity Issuers that provided the credentials for transacting accounts.
The initial version of the Concordium Network protocol does not define a cap on token supply. The token supply is expected to grow between 2% and 6% each year, and it is envisioned that adoption of the technology will grow at a higher rate than the ongoing issuance of tokens. We are researching principles for creating a sort of algorithmic “central bank” function that enables token issuance to become higher to keep the coin stable when demand is growing too fast, or lower if demand slows.