How to participate in Concordium or how to become a baker

Last update: June 2nd, 2021

Concordium is a novel Proof-of-Stake Layer 1 Blockchain built to answer the Enterprise call and to offer the first and the sole open and permissionless ecosystem to the business world.

As an open and permissionless project, Concordium invites the community to run nodes and participate in securing the network. By doing so, the community will be able to earn rewards.

The purpose of the following lines is to explain the concepts and the critical features that lay in the core of the Concordium Network and to describe the mechanisms and reward schemes attached to it.

PoS

Concordium is a Proof-of-Stake Layer 1 Blockchain using a 2-layer Consensus approach that turns the finalization part of the process into a stand-alone service.

We’ve designed our protocol this way to assure the necessary security and achieve the right velocity when it comes to finalizing blocks.

Participants are requested then to validate blocks and to finalize them.

For this effort, participants are entitled to receive rewards in Concordium Native Token, called the GTU.

To sum up, there are three defined roles in the network:

• Bakers
• Finalizers
• Delegators — Not available at Mainnet

Bakers are responsible for maintaining the network by authoring blocks and running consensus.

Finalizers are responsible for finalizing blocks and securing the network.

Delegators are backing bakers by delegating their GTUs as described later.

Participants and roles

To participate, node runners will have to stake 1 GTU to be potential bakers, and as explained below, they will be finalizers if they hold 0.1% of all GTU.

The following entities are part of the tokenomics system at the time of mainnet launch:

• Users own accounts (B) and execute transactions on the blockchain for which they pay a transaction fee.
• Concordium Foundation has overall control and responsibility for the tokenomics system. On its account (A), the Foundation receives Development Charges amounting to 10% of the new minting (3) and 10% of transaction fees (1).
• Bakers create new blocks. The right to create the next block in a given slot is assigned to an individual baker through a lottery. The number of GTU staked (i.e., locked up for per period of time) by each baker on the baker’s Validator Account (G) determines the winning probability.
• Bakers who hold a certain minimum amount of GTU on their account (G) (initially set to 0.1% of all GTUs) will automatically also become Finalizers, who are responsible for the finalization of blocks.

Reward mechanism

The reward mechanism is generated from two sources:

● Transaction fees (1) and (2) by Users (B)

● Newly minted GTU (3), (4), and (5) from the minting process ©

Rewards are paid from the reward and GAS accounts (D, E & F) to bakers within an hour.

Baking Rewards from Transaction Fees

Concordium Users pay a transaction fee (also referred to as GAS) for each transaction they make. The complexity of the transaction determines the fee. The fee is paid in GTU.

Transactions’ costs are designed to be stable in EUR terms, thereby enabling businesses and other users to predict and plan the costs of blockchain transactions.

Concordium’s goal is to have low transaction fees, from EUR 0,010, depending on transaction volumes, making it cost-competitive for businesses to use the platform.

90% of GAS (2) is paid into the GAS Account (F), which holds all GAS until it is paid out as rewards to bakers (8). The remaining 10% of GAS is paid (1) to the Foundation (A) as part of the Development Charge, enabling the Foundation to finance its operations and promote and further develop the blockchain.

Baking & Finalization Rewards from Minting

For each new validated block, an amount of new GTU is minted. The new-minted GTU are distributed as follows:

● 10% is paid (3) to Concordium Foundation (A)

● 85% is paid (4) to the Validating Reward Account (D)

● 5% is paid (5) to the Finalization Reward Account (E)

The GTU paid into the two reward accounts (D and E) will be accumulated until they are paid out as Validating Rewards (6) or Finalization Rewards (7) to Bakers (G).

The Baking Rewards are allocated between bakers based on the number of blocks each baker has created since the last payout of rewards. The Finalization rewards are distributed to all bakers who are also finalizers. The finalization rewards are distributed based on the number of GTU staked by each and once the finalization proof is added to a block.

The baker can choose between having its rewards added automatically to the staked amount or not adding the rewards to the staked amount, meaning that rewards can be transferred freely from the account.

If the baker is active, the staked GTU amount is locked in the account and cannot be moved.

Delegating

An ambitious delegation program will be launched once the Concordium network is mature and secured. This program will enable GTU Holders to delegate their GTU to a global pool which will be distributed among all bakers and will not influence their probability of winning a block .

Off-chain and Layer-2-delegation tooling is allowed from Mainnet.

Slashing

The following describes ‘Slashing’ on the Concordium chain. In this context, slashing is a set of measures to disincentive bakers or finalizers from undesirable actions.

Concordium will see the following actions as undesirable and they will be punished:

• Double Signing: A baker winning the block lottery in a slot publishes more than one block for that same slot. Note that the baker must sign a published block.
• Invalid transactions: A baker publishes a block containing invalid transactions.
• Inconsistent Finalization Messages. In the Afgjort finalization protocol, a finalizer is supposed to multicast all their messages, i.e., they must send the same message to all parties. A finalizer is misbehaving if they send different messages instead.
• Sign two finalized blocks. This is a particular case of Inconsistent Finalization Messages.

How will Concordium detect these actions?

● Any node can detect double signing. If a node detects an instance of double signing, that node can submit a special transaction with that accusation, pointing to two blocks in the same slot. The signature on the block identifies the misbehaving baker.

● The block containing an invalid transaction acts as a witness. Any node detecting such a block can report it on-chain. The signature on the block identifies the misbehaving baker.

● When a finalizer observes inconsistent finalization messages, that finalizer (similar to bakers above) can submit a special transaction containing both messages. Since these messages are signed by the misbehaving finalizer, this can be verified publicly.

How to respond to undesirable actions?

Different responses are possible. To avoid punishing honest users due to software bugs etc., a mild form of punishment is applied: If a baker/finalizer is caught performing one of the undesirable actions, that party is banned from baking and finalizing for a period between 24 hours and 168 hours depending on the severity.

Parties do not get rewards for detecting undesirable actions. This prevents dishonest parties from intentionally performing such actions and accusing themselves (or colluding parties) to collect rewards. A Concordium node can perform reporting.

Number of tokens and parameters

At the time of launch, the Genesis block will be established with 10,000,000,000 GTUs.

The total number of GTUs in existence will increase over time because of the minting of new GTUs.

The minting of GTUs is set to decrease as the number of transactions increases.

The growth rate will be 10% initially, then decrease to 6% when the number of transactions consistently exceeds 1.7 TPS, and further to 5% at 4.2 TPS, to 4% at 10.4 TPS, to 3% at 16.7 TPS, and 2% at 33.3 TPS.

In order to become a baker, a node runner will have to wait at most 2 epochs to get in.

And in order to stop baking, a node runner will have to wait 7 days to get his/her stake unlocked.

How to get your first stake to become a Concordium Baker?

Until Concordium Launch, set for Q2 2021, the only way to “acquire” GTU and be able to participate in Mainnet, is to participate in Concordium Incentivized Testnets.

Tesnet 3 that was launched in October 2020 had up to 10 million GTU to distribute to node runners and testers. With more than 2000 submissions, Concordium’s Community has massively participated in Testnet 3.

Concordium will launch its 4th and last Testnet on January the 20th 2021 with a total of 15 million GTU to distribute to testers that will complete the missions.

We will publish the official announcement very soon with all the participating details.

The Concordium Foundation is currently promoting the Concordium platform and GTU to potential early adopters in order to have sufficient key players such bakers, available at Mainnet.

To learn more, please contact gtu@concordium.com.

Join our community:

Twitter: https://twitter.com/ConcordiumNet

Discord: https://discord.gg/MZyHgfw

Telegram: https://t.me/concordium_official

Reddit: https://www.reddit.com/r/Concordium_Official

Developers Hub: https://developers.concordium.com/testnet

Learn more: https://concordium.com

Concordium Blockchain Research Center Aarhus (COBRA):https://cs.au.dk/research/centers/concordium/