Canton Network: the largest blockchain you’ve never heard of
Canton Network’s whitepaper proposes a “network of networks” designed to tackle privacy, governance, and scalability issues that hinder traditional finance institutions’ potential for adopting smart contract platforms like Ethereum.
In Canton Network, apps can operate with independent privacy, permissions, governance systems, and scaling mechanisms, while maintaining a general decentralized public permissioned network.
What Makes Canton Interesting
Canton is decentralized yet permissioned, which can enable institutions to adopt blockchains without the scalability and privacy issues of traditional blockchains.
It supports application-specific scaling where each app operates independently, avoiding congestion due to single apps.
Hybrid consensus mechanism with two layers where transactions are validated locally but sequenced globally via ‘sync domains’ to a global synchronizer.
Token minting mechanism tied to actual network usage, coupled with a minting and burning mechanism that contributes to Canton’s scarcity.
Proprietary programming language for smart contracts with advanced hierarchical role management, ideal for designing multi-party interactions.
Problem
Traditional blockchain architectures face significant limitations that limit their adoption for regulated financial applications and enterprise use cases. One of the primary challenges is the lack of privacy and governance flexibility, since public blockchains enforce full transparency, which makes them unsuitable for handling sensitive financial data and regulated assets. Additionally, governance is typically inherited from the base layer, restricting institutions from defining custom rules and compliance frameworks tailored to their needs.
Scalability is another major bottleneck. Applications must compete for global network resources, often resulting in network congestion and unpredictable fees. In their whitepaper, Canton mentioned a well-known example, CryptoKitties in 2017, which consumed over 12% of Ethereum’s transaction capacity, driving up gas costs for all users. While Layer 2 solutions and cross-chain bridges attempt to address these issues, they introduce security vulnerabilities, operational complexity, and fragmented liquidity, making them unreliable for mission-critical financial applications.
Enter Canton Network: a powerhouse for institutional blockchain-based solutions in the making, and of which you’ve probably never heard of.
Main features
Canton has been designed from the ground up for more complex applications that require the benefits of blockchain technology, but must remain compliant while private. For this reason Canton has re-thinked some of the most basic components seen on any blockchain, including smart contract logic, programming language, ledger model, and even its consensus mechanism in order to ensure privacy, scalability, and efficiency. Here’s a quick first-look at Canton’s core features:
DamlA proprietary smart contract language called Daml, which has programmable privacy built into it entirely, from data and assets. Daml allows each app to scale independently, increasing the availability and keeping fees low
Privacy-enabled smart contractsUnlike traditional blockchains where all transactions are visible, Canton’s smart contracts operate with selective transparency, meaning that only relevant parties involved in a transaction can access details for it, making it attractive for institutions and enterprises.
Ledger modelCanton does not use a single, fully replicated ledger like traditional blockchains (for example, Bitcoin and Ethereum operate by replicating the entire ledger across all nodes on the network). Instead, it employs a distributed ledger model where each participant only stores and validates the subset of transactions they are involved in. This prevents unnecessary data exposure while ensuring data integrity and consistency across the network
Proof-of-Stakeholder Consensus Mechanism
Unlike traditional PoW or PoS, Canton introduces the Proof-of-Stakeholder model, where only relevant stakeholders validate transactions, reducing unnecessary replication of data
Transactions follow a two-phase commit model to ensure validity and prevent double-spending. Canton’s architecture consists of two distinct layers to manage transaction execution and synchronization efficiently:
Layer One | Execution and validation
Smart contracts are executed within subnets, where validators process and validate transactions locally
Transactions are verified by relevant stakeholders only, avoiding network-wide replication
Each participant node maintains a local ledger view, ensuring privacy and efficiency. Local ledger view means it only has access to the subset of the ledger that is relevant to its own transactions and contracts
2. Layer Two | Global Synchronization and Finality
The Global Synchronizer, operated by Super Validators, ensures network-wide consistency.
Transactions that involve multiple subnets or require cross-domain execution are finalized at this layer.
Ensures atomic settlement across applications and prevents inconsistencies between subnets
Introduction to Canton’s Architecture
Before understanding Canton, it is essential to understand different components that come along with each other within the network. Including different stakeholders, a hierarchical operation processing, and a proprietary programming language, Canton has been built from the ground up with a bottom-up approach, meaning that most of its components are different from what most blockchains are accustomed to.
StakeholdersCanton operates through an ecosystem made up of different stakeholders, each of which plays a different role in maintaining the network’s usability, security, and sustainability.
Hierarchical Transactions
It’s one of the core components of Canton Network. By using the Daml model, the network structures transactions hierarchically to enable privacy, composability, and a structured execution of smart contracts.
Actions as building blocks
Transactions are composed of actions which define how contracts are created, exercised, or fetched. A transaction can consist of one or more actions bundled together, but they’re structured hierarchically and follow a specific execution order. The different types of actions are:
As aforementioned, all transactions are composed of actions, and they also follow a flow, meaning that they are executed in order, and their completion can trigger following actions or nested sub-actions.
A ledger is a sequence of commits, and commits are transactions requested by parties. Each commit makes reference to past transactions, effectively building a connected transaction graph.
Programming Language: DamlDaml (Digital Asset Modeling Language) is an open-source smart contract language and infrastructure framework designed for building multi-party applications with native privacy, security, and interoperability. Unlike other blockchains like Ethereum, which require transactions to be public and executed by the whole network, Daml opens up the possibility of enforcing privacy at the contract level, meaning that only authorized parties can view or modify data.
Canton deems itself as a “Daml ledger interoperability protocol” rather than a blockchain. This is because multiple Daml-based ledgers can connect into a unified virtual global ledger using the Canton Network. In the end, Canton Network functions as a decentralized yet permissioned network, which is the reason why Canton could potentially be attractive for institutional entities and enterprises.
You may be asking: Why Daml?
At a high level, both Daml and other popular programming languages (like Solidity) are capable of supporting the creation and execution of smart contracts. However, they’re very different in terms of architecture, execution model, privacy, and scalability. While some aspects of Canton’s architecture could probably be implemented with Solidity, it would introduce challenges and inefficiencies, which is why Canton developed Daml: a purpose-built programming language for Canton Network.
There are a set of core requirements that Canton needs to function, including:
- Native privacy with selective privacy
- Independent scalability per subnet
- Interoperability without external bridges
- Instant finality without waiting for multiple block confirmations
- Flexible governance per application
While Solidity can only achieve the requirements above through rollups and privacy techniques (like ZK proofs), this requires significant additional infrastructure.
This is why Canton decided to use Daml.
- It enables built-in granular privacy settings, where smart contracts explicitly define who can see or modify properties
- Daml enables multiple subnets to operate independently, and they don’t compete for network space
Multiple Daml ledgers can ‘sync’ natively through Canton, avoiding the complexity of Layer 2 rollups or cross-chain bridges
- Daml uses the Global Synchronizer, which ensures that transactions are finalized instantly without having to wait for multiple block confirmations
- Each app or subnet in Canton can define its own governance model without affecting the broader network
That’s the theory behind Daml, but now we need to understand how it comes along in Canton. Daml plays a foundational role in Canton’s architecture. It dictates how everything works, from applications to users and infrastructure, Daml also commands how all stakeholders interact with each other, empowering the following features:
#1 Participant Nodes run Daml
Each participant node executes smart contracts written in Daml and they maintain local views of the ledger, rather than replicating a global state.
#2 Apps connect to the network as “Parties”
Apps in Canton don’t run on-chain like Ethereum dApps. Instead, they connect to participant nodes as “parties” using a ledger API. This allows business logic to execute on a secure, private ledger without needing full blockchain replication until needed.
#3 Data Sharing is Ensured by the Synchronization Layer
Canton features a dedicated synchronization layer that ensures that only relevant actors receive transaction updates, which allows transactions across multiple applications to execute atomically while maintaining privacy.
#4 Infinite scalability
Unlike traditional blockchains that require a global consensus mechanism, Daml enables infinite scaling by allowing new parties, ledgers, and applications to join without requiring validation from a central managing entity
Canton’s Architecture: A Network of Subnets
After understanding the key independent components within Canton, we can now examine how these elements come together to form Canton. Moreover, examining how Canton operates as a network of networks. This allows it to host scalable, private, and interoperable smart contracts, with a specific focus on traditional finance institutions and enterprises.
How is Canton able to act as a network of networks? It does so by introducing subnets, which are independent but interconnected environments with fully customizable privacy, governance and scaling capabilities. Let’s dive into how they work.
Subnets
A subnet in Canton is a self-contained environment where a set of participant nodes interact via synchronizers, also known as Sync Domains. Subnets are permissioned and can define their own rules for privacy, access, and execution, making them ideal for financial and enterprise use cases
Thus, subnets operate independently but can operate with other subnets via sync domains, ensuring cross-network transactions without sacrificing privacy or efficiency. Sync Domains are basically decentralized communication hubs that enable subnets to exchange transactions while maintaining privacy.
Subnets consist of participant nodes that interact with each other to process transactions. After processing transactions, subnets use sync domains to connect with other subnets, but only when interoperability is needed. On top of subnets, Super Validators oversee global synchronization to ensure consistency across subnets.
Since many subnets can operate independently on Canton, a higher level mechanism is required to ensure consistency across the entire Canton Network. This is where the Global Synchronizer comes in.
Global Synchronizer
The Global Synchronizer is Canton Network’s core component that ensures transaction finality and state consistency across all Canton subnets. Super Validators are the entities responsible for operating it by validating transactions and governing the network
The Global Synchronizer has three key functions:
1. It ensures finality for cross-subnet transactions, preventing double spending or conflicting updates between subnets.
2. It provides a global order of events, ordering subnet transactions with consistency, ensuring reliable data, timestamps, and sequences.
3. It’s responsible for governance and overall security and decentralization. Governance rules require that ⅔ majority of Super Validators approve protocol changes.
Now, we can understand a global overview of how the transaction flow happens in Canton:
1. A user submits a transaction through an application within a subnet.
2. The transaction is first validated only locally by subnet Validators
3. If the transaction is within the same subnet, it is processed locally without needing the Global Synchronizer
4. If the transaction requires to be processed across multiple subnets, it is sent to the Global Synchronizer for finalization
5.The Super Validators verify, sequence, and finalize the transaction.
6. The transaction is confirmed, ensuring consistency across all involved subnets.
Canton Coin
Native utility token used for:
- Utility
- Provide value
- Incentives
- Governance
In contrast to traditional minting mechanisms, the Canton Coin is minted only in exchange for tangible utility and value,
Canton introduces a “Burn-Mint Equilibrium Mechanism that aims to allow the total supply to adjust to real network demand. For this, Canton utilizes this mechanism to adjust the conversion rate in real time based on network demand:
Minting is capped at 2.5 billion Canton Coins per year, meaning that even in high-demand scenarios, minting cannot exceed this threshold.
How the burn and mint mechanism works:
Canton users pay fees with Canton Coins as they use apps and infrastructure services
Instead of paying the fees directly to infrastructure providers in the network, the Canton Coins are completely burned, thus decreasing the supply over time. In this part, the system records the app or service for which users are burning fees.
In exchange for providing apps and services, providers are empowered to mint new Canton Coins
The usage fees from users to providers are fully independent of the mint mechanism
There is a minting curve which establishes the total number of coins that can be minted over time. The minting curve is explained below.
The total number of coins minted must stay in equilibrium with the amount burned to maintain a stable supply-demand balance.
The Burn-Mint mechanism uses a conversion rate that adjusts in real time, ensuring that the system does not over-inflate or under-supply tokens.
Canton Coin Minting
There are three entities who are able to mint new Canton Coins:
Applications
As mentioned before, applications are empowered to mint new Canton Coins in exchange for providing and hosting valuable services within the Canton Ecosystem. The total amount of coins that can be minted is defined by a minting curve, but the total minting amount is split among all application providers relative to the value that each application provides to the network.
To calculate the value of Canton Coins that each app can mint, the system takes in consideration the amount of burned coins that an app contributes through users burned by users. This is possible due to the system recording which application users burn their fees for, as mentioned before.
Validators
Validators mint new tokens in two ways:
- Based on the value of transfers initiated by users of a specific validator. However, the number of coins that can be minted by validators is capped to avoid manipulation and arbitraging.
- Based on “Liveness”, only when unused minting capacity remains, the coins will be distributed among active Validators to ensure network reliability. Over time, this shifts towards active Validators.
Super Validators
Super Validators also mint new Canton Coins for running nodes in the Global Synchronizer. The total amount of coins to be minted by them is defined by the minting curve and is split among Super Validators based on their contributions to network growth and requires a 23 majority vote from all Super Validators.
Minting Curve
Over the first ten years, 100 billion Canton Coins can be minted in total, split evenly between application providers and infrastructure providers (Validators and Super Validators). After that, 2.5 billion coins are minted each year, with 75% going to applications and 25% going to infrastructure.
Early on, the Super Validators receive a larger share to offset their initial infrastructure costs. However, after about five years, the Validators collectively receive a greater portion of the infrastructure allocation. By the ten-year mark, application providers dominate the minting allocation, reflecting how Canton designed the minting curve for a long-term shift toward rewarding applications that drive ecosystem growth.
Featured Applications and Minting Caps
Canton enforces minting caps to ensure that applications and users can’t game the system by creating artificial transaction volume without delivering real value. All new applications start as unfeatured, which means they have a lower cap on how many coins they can mint compared to the fees they generate. Unfeatured apps can mint at most 80% of the fees they generate, preventing them from inflating transaction volume artificially.
An app becomes “featured” if Super Validators, by a ⅔ vote, determine it provides real utility to the network. Featured apps can mint up to 100x the fees they burn, significantly increasing their potential rewards. In short, featured status is both a mark of trust (decided by Super Validators) and an incentive to encourage the creation of high-value applications on Canton.
Fee Structure
One of the main challenges for blockchain adoption on behalf of institutions are unpredictable high fees seen in many blockchains. For this reason, Canton’s native fee model has been designed to satisfy the needs of big players, who typically perform high-value transactions.
Canton’s fee structure is designed to produce fair, predictable, and optimized fees for institutional use cases. Unlike in most blockchains where fees vary depending on network usage and bidding or tipping models, Canton employs a regressive fee model, meaning that larger transactions will pay lower percentage fees compared to small transactions.
As aforementioned, fees in Canton Network are not paid directly to an entity and are directly burned by users to support the Global Synchronizer’s burn and mint model. Canton does not explicitly use a dynamic fee adjustment mechanism, but the burn-mint aims to indirectly adjust fees by ensuring network demand and supply balancing.
There are two types of costs that are unified into a single fee:
Percentage Transfer Fees: based on the amount of the transaction, following the regressive model mentioned above, where bigger transactions pay lower fees.
Resource Usage Fees: used to cover infrastructure costs, regardless of value transferred. Based on infrastructure load, storage, and network bandwidth
Technical Aspects (Developers)
Canton is easy to set up and build atop. It is written in Scala and runs as a JavaScript process against a database (H2 and Postgres). All this ensures that Canton provides a familiar and developer-friendly environment, not for Web3 developers only, but for any developer given they use some of the most popular coding languages and databases:
JavaScript the most widely used programming language
While Scala’s popularity as a programming language has been decreasing, it is still used by Java developers.
H2 is a very popular relational database management system written in Java
Postgres is a also a renowned database management system (DBMS)
Implications for Institutions
In the end, Canton may be one of the largest blockchains that you probably haven’t even heard of. Thanks to their strong focus on institutional players rather than the retail crypto community, they have sneaked into the industry by targeting large corporations directly with a product tailored to their needs.
All of Canton’s features align institutional entities’ interests and needs like compliance and efficient economic models with blockchain’s privacy and security. The first example is their fee model, which is certainly attractive for institutions, as the fee percentage decreases as the transaction size increases, which ensures cost efficiency for high-value financial operations, typical of institutional entities.
The network’s infrastructure and hierarchical model also poses opportunities for powering traditional finance applications, for example, a central bank running a CBDC (Central Bank Digital Currency) can create its own private sync domain, ensuring that only authorized financial institutions can process transactions. However, if cross-border transfers are needed, the CBDC system can interact with other financial networks via a public sync domain without exposing all transaction details.
Canton has already gained significant traction among renowned financial institutions, investment firms, and more such as BNY Mellon, Bank of America, Bank of China, Nasdaq, Moody’s, Deloitte, EY, and KPMG, as well as crypto-native firms like Circle, QCP Trading, Hashnote, Copper, Dfns, and more.
With 76 validator nodes and 20 Super Validators currently securing the network, Canton is positioned to be a strong player for institutional adoption with its ability to scale while maintaining privacy and regulatory compliance, making it a blockchain ecosystem designed for enterprises.
Proof of their ability to stick to legal frameworks, and gain the attention of financial institutions is highlighted by the fact that Canton currently accounts for 57.5% of all digital bonds issued in the last five years, totaling over $4.6 billion. In 2024 alone, five issuances across three platforms amounted to $1.1 billion. These issuances include major milestones such as the first digital GBP bond, the first digital multi-currency green bond, and the first bond settled with a CBDC.
With their technology and achievements, Canton’s infrastructure, proven track record in digital bond issuances, and the backing of major financial institutions highlight their commitment to regulatory compliance and efficiency. And while retail crypto may be overlooking the network, institutions are taking note, positioning Canton as a strong runner up for really bringing traditional finance on-chain.