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 validators, delegators, users and Concordium foundation. Other key ingredients in the tokenomics system include CCD transfers, rewards, validation, new CCD minting, block creation, 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.
To become a validator, a user has to stake at least 500,000 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. If they decide to shut down their validator, the stake is unlocked after a cool-down period.
Validators can decide to open a pool. The stake in a pool consists of the stake of the validator and any stake added by delegators. The validator 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). Furthermore, the validator can choose the commission that their delegators pay to them. These parameters can be changed by the validator at any time.
The probability of a validator winning the lottery to create the next block is proportional to their relative pool size. The rewards earned for creating the block are distributed to all users with a stake in the pool as described in the rewards section below.
The sizes of pools are limited in the following ways. Firstly, the stake in a pool is capped at 5% of all staked CCD. The purpose of this bound is to foster decentralization and avoid a too large fraction of the stake going offline if a machine fails or the software is updated.
If this limit is exceeded, then only 5% counts towards the lottery power and rewards. If a user wishes to stake more than this amount, they can run a second validator with a different pool.
Users who do not wish to run validators have the option of delegating CCD to validators and profiting from some of the rewards. A delegator has two options: delegating to a specific validator’s pool or choosing passive delegation.
Delegating to a pool has been mentioned in the section above: a delegator adds their stake to the pool of a validator, increasing this validator’s probability of adding new blocks to the chain and earning rewards. These rewards are then shared with all pool members. Each staker in the pool gets a share proportional to their stake, minus the delegation commission that is given to the validator.
Passive delegation is an innovation of Concordium. It provides rewards to the delegator equivalent to what one would get if one were to split one’s stake amongst all pools proportionally to the pools’ stake, but with a fixed commission of 25% that is shared amongst all pools.
By choosing passive delegation, the return will be the average rewards over all pools (minus the fixed passive commission), which mitigates the risk of picking a validator that performs poorly or goes offline. This security comes at an increased cost: a delegator to a pool can choose one with a commission below 25%. More details are provided in the rewards section.
The reward distribution explained in this section is illustrated in the figure at the top of page 2. Rewards are computed and distributed once a day. This currently takes place around 9:00 UTC. The period between two payouts is called a payday.
Please download Concordium's Tokenomics one-pager for more detailed information.