When critics bemoan the lack of meaningful adoption of blockchain by enterprises, they often point to a lack of return on investment, or killer use case, or inflated expectations. The founders of Concordium believe that there’s a far more fundamental reason why businesses are hesitant to incorporate blockchain – compliance. Many public blockchains, including the mighty Ethereum, prize privacy over an enterprise’s legal obligations to identify the parties with whom it is doing business.
The value of this compromise shouldn’t be underestimated. The average cost of compliance for any organization, in any sector across the world, is $5.47 million. It seems excessive until you consider that the average cost of non-compliance is close to $15 million.
Recognizing the critical role that compliance plays, the creators of Concordium have developed a public blockchain infrastructure that allows enterprises to achieve a much-needed equilibrium. It allows for the legal identification of users but offers transaction privacy in all circumstances except those where they need to be legally identified.
Vision and Team
Concordium was founded by Lars Seier Christensen, who founded Saxo, a Danish investment bank, back in 1992. Under his leadership, the company expanded significantly and is still in operation today.
The financial sector has a heavier compliance burden than many others. It’s this depth of understanding that led Seier Christensen to recognize that many public blockchains are simply not fit for enterprise purposes. He explains his vision for Concordium in a video, outlining the value that blockchain can bring to various sectors if it was designed to help companies fulfill their legal obligations.
Concordium is now developed under the direction of the Concordium Foundation, which Seier Christensen chairs. He is joined by Professor Ueli Maurer, a distinguished name in the field of cryptography who also serves as Professor of Computer Science and Head of the Information Security and Cryptography Research Group at the Swiss Federal Institute of Technology Zurich (ETH Zurich.)
Lone Fønss Schrøder is the CEO of Concordium, heading up the commercial and operations team. She joined the company having spent 22 years at AP Moller-Maersk, serving as Senior Vice-President among other roles. She brings extensive executive experience from a range of sectors, including aviation, biotech, retail, automotive, banking, and capital markets.
The project has also recruited a stellar team of advisers to help bring it to life. This team includes Anders Fogh Rasmussen, who served three terms as Prime Minister of Denmark between 2001 and 2009 and went on to become Secretary-General of NATO until 2014. Hans-Ole Jochumsen, a former Vice-chair of NASDAQ, is also on the advisory team.
Perhaps one of the best-known names in the entire blockchain space, Professor Ivan Damgård, heads up the Science team at Concordium. The Merkle-Damgård construction that he co-invented is the cryptographic hash used in all blockchains.ֵ
Features and Technology
The identity and privacy elements are the unique features designed to make Concordium stand apart from all other public blockchains. However, the technology stack is designed to offer a combination of speed, scalability, low transaction fees, and high security.
Concordium is constructed as a stack comprising various layers. The underlying layers are the fundamental blockchain architecture. They run the proof-of-stake consensus and handle the sharding mechanism that enables the platform’s high transaction throughput.
Most blockchain platforms require a certain number of block confirmations to pass for a transaction to be considered as final. From an enterprise perspective, this isn’t necessarily desirable as it introduces a window where transactions could be disputed after the organization considers them completed.
Therefore, Concordium has developed the first provably secure and fast finality layer to run on top of the consensus layer, which can also serve other Nakamoto-style consensus blockchains with fast finality under the heading of “Finality-as-a-Service.” The finality layer ensures that transactions are confirmed and immutable in the shortest possible time. Block validators can become finalizing nodes once they have staked a sufficient number of tokens under the proof-of-stake consensus.
Users can enjoy transaction privacy thanks to Concordium’s use of zero-knowledge proofs, which protect encrypted transfers so that only the sender and the receiver ever know the exact amount of the transaction. Furthermore, zero-knowledge proofs allow a user to make encrypted transfers between their own accounts without anyone being able to identify that those accounts belong to the same user.
Provable Digital Identity
Within the overall technology stack, the identity layer is the element that ensures organizations can remain compliant with their local legal requirements. The identity layer comprises three parties:
- Users – individuals or entities who have to provide a valid form of ID to use the network
- Identity providers – individuals or entities who take a copy of the user’s ID and verify it off-chain, creating an identity object that exists on-chain
- Anonymity revokers – individuals or entities who can decrypt the identity object upon receiving a valid order from a legal authority
It’s important to note the “arm’s length” distance between the user’s on-chain activity, and the identity providers and anonymity revokers. Once the user’s identity is verified, they can create an account and transact on-chain with privacy. The anonymity revoker only gets involved, and the ID is only retrieved, if the strict requirements for a compliance-based legal case are met.
The General Transaction Unit (GTU) token is the native token of the Concordium network. Validating and finalizing nodes (called “bakers”) must stake GTU to become part of the network, and similarly, they are rewarded in GTU transaction fees paid by users.
Users can also delegate their tokens to any particular validators, in a similar way to the delegated proof-of-stake consensus used by EOS and Tezos. However, there is no limit to the number of parties that can participate as validators.
Currently, and for a time after the mainnet launches, the plan is for the Concordium Foundation to take a leading role in governance and development decision-making. The Foundation’s role will gradually decrease as the network becomes more populated and decentralized.
Ultimately, the intention is for Concordium to become open-source and fully autonomous.
Concordium is currently in development and will launch in the first quarter of 2021. In the meantime, the platform is operating on successive versions of the testnet, which are scheduled for release in each quarter of 2020.
Many of the features listed here are currently underway on testnet, including anonymity revocation, identity management, and the proof-of-stake consensus. However, features such as the user interface, the finality mechanism, and wallet integrations, are still due to launch.
Compliance in blockchain is a serious challenge and one to which the community has paid precious little attention. However, this could have been one of the biggest oversights in blockchain development to date. If so, then Concordium may end up being the first public blockchain to provide genuine appeal to enterprises. If this is the case, we could start seeing some of the long-discussed use cases across various sectors finally come to fruition