Concordium’s tokenomics is the set of rules and technology that defines the creation of CCDs and the flow of CCDs between actors engaged with Concordium and the CCD.
The key participants are the bakers, finalizers, delegators, users and Concordium Foundation. Other key ingredients in the tokenomics system include CCD transfers, rewards, baking, new CCD minting, block creation, finalization, delegation.
CCD is the native token on the Concordium Platform. CCD is a payment token that can be used for a variety of purposes, including payment for the execution of smart contracts, payments between users, and payments for commercial transactions. 10 billion CCD have been created in the genesis block. After this, the only mechanism to create more CCD is the minting process.
To submit a transaction to the blockchain, a fee must be paid in CCD. The price of transactions is fixed in EUR, not in CCD. This means that they are not subject to the fluctuations of CCD. Businesses can thus plan the cost of their operations.
In order to become a validator, a user has to stake some CCD, which is then locked in their wallet. They can then run the required software and have a probability of creating blocks and receiving rewards which is proportional to their relative stake.
On Concordium validators are called bakers and we say that they bake blocks. The subset of the bakers consisting of all bakers with a stake of at least 0.1% of all CCD minted are called finalizers, and have an extra role: they run a finalization protocol on top of the consensus algorithm, which regularly marks blocks as finalized, and these can never be rolled back.
When a user sets up a baker, they can decide to open a pool. The stake in a pool consists of the stake of the baker and any stake added by delegators. The baker can choose whether the pool is open to all delegators, closed to new delegators (but the existing ones can stay), or closed to all delegators (existing delegators are removed). This can be changed by the baker at any time.
Users who do not wish to run bakers have the option of delegating CCD to bakers and profiting from some of the rewards. A delegator has two options: delegating to a specific baker’s pool or choosing passive delegation.
A delegator adds their stake to the pool of a baker, increasing this baker’s probability of baking blocks and earning rewards. These rewards are then shared with all pool members.
Concordium introduces the concept of passive delegation. By choosing passive delegation, the return will be the average reward for all bakers, which mitigates the risk of picking a baker that performs poorly or goes offline. This security comes at an increased cost: a passive delegator only gets 88% of the rewards a baker would get with the same stake, whereas a delegator to a specific baker’s pool gets 90%.