Decentralized Governance Framework

tl;dr In June 2024, Concordium will hold its first election to add two members of the community to its Governance Committee (GC). This document outlines the roles of the GC and the Concordium Foundation, the tasks assigned to the GC, and the rules for its internal working. A call for candidates to the GC will be published on the 2nd of April 2024, when applications open for 3 weeks. Interested parties are encouraged to read the current document to learn what would be expected of them as members of the GC.

A more detailed overview of the GC’s work can be found in the governance section of the Concordium homepage. Questions may be directly sent to Christopher Portmann, one of the current Concordium GC members, by email cp@concordium.com or Telegram @chportma.

Introduction

The Concordium Foundation is a non-profit organization established in Switzerland. Its purpose is stipulated in its Public Deed. The Foundation Board is responsible for ensuring that the Concordium blockchain develops in accordance with its deed. It therefore has a supervisory role. To facilitate this, it has established guidelines for the development of the Concordium blockchain.

The Governance Committee (GC) is an advisory committee to the Concordium Foundation Board. It is composed of technical experts, entrepreneurs or community members. The Foundation Board assigns certain tasks and responsibilities to the GC.

The current document defines the roles of the GC and Foundation during the first phase of governance decentralization, and describes the GC tasks and internal rules.

Structure of this Document

After the current Introduction, this document has four sections. The first section, ‘Road to Decentralization’, describes the steps in decentralizing the Concordium governance and the roles of the different stakeholders in this decentralization. The second section, ‘Tasks of the Governance Committee’, defines in more detail the tasks of the GC during the first phase of decentralization. In the third section, ‘Concordium Development Guidelines’, one can find the guidelines for the GC established by the Concordium Foundation. And finally, the last section of this document, ‘Functioning of the Governance Committee’, describes the internal rules for how the GC works.

Road to Decentralization

After the preparatory phase which ends with the elections of two new GC members from the community in June 2024, the decentralization of the Concordium governance is divided in two phases. In the first phase, the Concordium Foundation Board has the responsibility and is liable for ensuring that the Concordium blockchain develops in accordance with the founding deed. During this phase, certain tasks are assigned to the GC, which is an advisory committee composed of people with relevant skills and experiences, including technical expertise on blockchain and Web3, entrepreneurs building on the Concordium chain and representatives of the community of CCD holders. This first phase of decentralization will see a mix of direct and representative democracy be introduced to the Concordium blockchain. CCD holders will elect members of the GC, first adding new members and then (re)electing members in the seats that were initially filled by the Foundation. As part of the decentralization development, CCD holders will also obtain certain rights to vote on GC decisions and make proposals of their own.

In this first phase of decentralization, the Concordium Foundation Board has a supervisory role. It is responsible, in particular for ensuring that the GC is functional and develops the Concordium blockchain according to guidelines that are inline with the Foundation deed.

When all members of the GC are elected by CCD holders — which will be June 2027 according to the current decentralization roadmap (see the subsection ‘Election of the Governance Committee’) — the Concordium blockchain will start the second phase of decentralization, which will see an enhanced role in the decision making process for the GC and CCD holders. The details of this second phase are to be developed by the GC during the first phase.

Tasks of the Governance Committee

The GC is responsible for recommending changes to the following areas of the Concordium blockchain:

• Parameter updates
• Protocol updates
• Tokenomics
• Managing CCD holder proposals and votes
• Preparation of the next phase of decentralization

In particular, the GC is consulted on technical changes, and it is expected to drive tokenomics changes and governance decentralization. In doing so, the GC will consider the following goals and priorities:

• Stability of the protocol
• Widespread adoption of the blockchain
• Value creation on the blockchain
• Prevent dominance by single parties
• Ensure a decentralized network of validators
• Inclusion of CCD holders in decision-making

Each of the areas in the first set of bullet points above is discussed in more detail in the following subsections.

Parameter and Protocol Updates

Many variable parameters controlling the functioning of the blockchain are on-chain and can be changed with a governance transaction. These include, for example, the block size, timeout times, minimum time between blocks, or the amount of staked CCDs needed to become a validator. The governance committee is the body that recommends changing these parameters as needed.

Protocol updates consist in updating the code that is run by the validators. Such updates may change any other parts of the protocol that are not controlled by the variable parameters mentioned above. This includes, for example, changes to the network and consensus layers and adding smart contract features. The governance committee recommends such protocol updates.

Tokenomics

The tokenomics cover the criteria for becoming a validator or delegator, the CCD growth rate, transaction fees, and how these are distributed to the validators and delegators in the form of rewards. The tokenomics can be changed through parameter and protocol updates, as described above. The GC is responsible for driving tokenomics changes.

CCD Holder Votes

The decentralization process will lead to CCD holders being able to nominate and elect GC members, vote on some GC decisions and propose their own changes. A suggested timeline is present in the Concordium White Paper. The process of decentralization is also to be driven by the GC. In particular, the GC is tasked with organizing elections, allowing the CCD holders to vote on GC decisions, and providing a framework for CCD holders to make proposals. It also has to provide appropriate forums in which CCD holders can debate about the proposed changes and discuss the different candidates for elections.

All proposals from CCD holders that are to be implemented on the blockchain must follow the same guidelines as the GC (see the section ‘Concordium Development Guidelines’). It is up to the GC to decide if a proposal satisfies these guidelines. If not, they can amend it, put alternatives to vote, or reject it.

Changes to the election rules, the process for nominating candidates, and the election schedule may also be proposed by the GC, but are subject to the Foundation Board’s approval.

Concordium Development Guidelines

This section describes the general direction in which the Concordium blockchain should be developed. Some of these have already been achieved, others partially achieved and some are still on the roadmap. For simplicity, this section ignores the current status of the blockchain, and describes the goals in the present tense.

ID Centric Blockchain

The Concordium blockchain is designed with a built-in ID layer and requires users to register with an official ID to create accounts capable of holding tokens. A set of anonymity revokers are entrusted with secret keys, and, in response to a valid request from a government authority via established legal channels, these anonymity revokers can combine their keys and cooperate with the identity provider to reveal the real-world identity of an account holder.

Security & Privacy

The security of the essential cryptographic protocols underlying the blockchain is trustless and relies on decentralization, i.e., no single entity has the power to affect the safety and liveness of the chain. Instead, security relies on a given fraction of a decentralized community running the protocols correctly. While certain services may be provided in a more centralized manner (e.g., mobile access, bridges), they must either be non-essential or be temporary and replaced by decentralized solutions when possible.

The Concordium blockchain also provides privacy for its users. In particular, on-chain identities are self-sovereign: the user has ownership and control over the identity data provided during registration. This data cannot be obtained by Concordium or any private company or person from the general public without being revealed by the user. Only law enforcement agencies can access this information through a well-established process involving the approval of multiple anonymity revokers and the cooperation of the identity providers.

Science-based Blockchain

The Concordium blockchain is science-based. The security of the chain is rigorously proven. The tokenomics are based on well studied economic principles. Changes to the blockchain and tokenomics are to be researched by appointed scientists or academic partners before being implemented.

Public & Permissionless

The Concordium blockchain is a public blockchain with permissionless access. Any person who satisfies the requirements for obtaining a verified ID can create an identity object, create accounts and transact on-chain.

The governance of the chain is transparent. The identities of the governance committee members are public and their final decisions are to be published. The tokenomics model is public. The source code of the Concordium software is open-source.

Decentralization

The Concordium blockchain is on a path to decentralization. Not only security relies on a decentralized network, but governance is conducted by a committee elected by CCD holders. The CCD holders can vote on crucial governance decisions, and may also propose their own changes to the blockchain and tokenomics within the framework specified in this document. Activities that increase decentralization of the network will be encouraged.

Realistic Projects

All proposals from the GC must be realistically achievable given the resources available within the Concordium ecosystem, development environment and with due regard to the expected benefit.

Compliance

In its advisory role, the GC shall consider any regulatory concerns and potential compliance issues in relation to new proposals and changes to the regulatory landscape in relevant countries.

Functioning of the Governance Committee

Election of the Governance Committee

The first five members of the GC are appointed by the Foundation Board. After that, new members are elected by CCD holders and added to the GC, until it has nine members. The first election will be held in June 2024, where two new elected members will join the GC. In June 2025, another two members will be added, bringing the total to its maximum of nine members.

From this point on, three seats are up for reelection every year in June. First, the seats filled by the Foundation are up for election, then those already elected by CCD holders.

Elected GC members are thus all appointed for a three year term, except one of the two elected in June 2024, whose seat will be up for reelection after four years.

A member of the GC may be excluded by the Foundation Board if they substantially violate their obligations or if they are incapable of properly fulfilling their duties.

If an elected GC member leaves or is excluded before the end of their term, and if the remaining term is at least 6 months, a new election will be organized to replace them. The new member is elected to finish the term of the departing member. If less than 6 months remain in their term, then the seat will be up for election at the end of the term, and the GC will function for the remaining months with fewer members.

Decision-Making

The GC has a quorum when the majority of its members are present. Unless organizational rules of procedure stipulate otherwise, decisions require a simple majority of those present. In the event of a tie, all tied options will be recommended to the Foundation Board, which will take the final decision.

Governance Committee decisions are to be made public, and a GC member may publicly talk about their own vote and opinions. But the details of other member votes and the internal discussions and considerations of the GC should remain private.

Compensation

Elected GC members will receive a compensation in CCD equivalent to USD 5,000 (five thousand) for every year in the GC. The exchange rate will be determined at the beginning of their year — on the 1st of July for members elected during the month of June — and paid out at the end of the year on completion of the full year, namely on the 30th of June.

If a GC member leaves in the middle of a year, they do not receive a compensation for the partial year they served.

If a GC member is elected in the middle of a year to replace a departing member, their compensation for the first partial year is proportional to its length. The exchange rate is fixed on the first day they join, and the compensation is paid out on the 30th of June.