Taking crypto out of crypto

Proposals
1

Let’s take crypto out of crypto:

Hi everyone, I’d like to share an idea that could significantly enhance user experience on Concordium and improve the utility of CCD in the long term. The idea revolves around the integration of a stablecoin like EUROe for front-end transactions while maintaining CCD as the underlying token for network fees.

Overview

One of Concordium’s strengths is its stable fee structure, which is denominated in euros, making the cost of transactions predictable for users. But what if we could take this one step further by using EUROe as the default currency for users on the network? Here’s how this could work and why it could be beneficial for both Concordium and CCD holders:

The Concept

Users would interact with the Concordium network using EUROe as their primary currency. Whether they are transacting, interacting with smart contracts, or using dApps, all values and fees would be displayed in EUROe.

Behind the scenes, the network would still rely on CCD to pay validators and delegators. This would be handled automatically via a decentralized exchange (DEX), converting EUROe into CCD for network fee payments.

Concordex could play a critical role in this system by hosting a EUROe-CCD liquidity pool. This pool would automatically convert EUROe into CCD for transaction fees.

  1. The user initiates a transaction in EUROe. All amounts are displayed in euro, providing a user-friendly experience with predictable, stable fees.

  2. A smart contract on the Concordium network calculates the necessary fees in CCD, based on the current EUROe/CCD exchange rate.

Concordex is used to swap the required amount of EUROe for CCD via an automated process that is completely hidden from the user.

  1. The CCD obtained from the EUROe conversion is then used to pay validators and delegators in CCD, as usual.

  2. To make this work seamlessly, a robust liquidity pool of EUROe and CCD would need to be maintained on Concordex.

Liquidity providers could be incentivized with a portion of the trading fees or other mechanisms.

Users only see euro-denominated fees, eliminating concerns about CCD volatility.

Increased CCD Demand:
Even though users don’t directly interact with CCD, every transaction would still require CCD in the backend. This would create constant demand for CCD, driving up its utility and potentially its price.

With the focus on EUROe, Concordium could become more attractive to new users, especially those looking for a stable, fiat-pegged experience on a blockchain without worrying about volatile token prices.

Users would no longer need to deal with cryptocurrency volatility. They can simply transact using EUROe, with the assurance of stable fees.

Since all network fees would still be paid in CCD (via automatic conversions), CCD would remain the core token driving the ecosystem.

Concordex could benefit from more users and more trading activity due to the EUROe-CCD liquidity pool, further increasing liquidity for CCD.

Considerations:

For this system to work, the EUROe-CCD liquidity pool on Concordex would need to be well-maintained. This could involve incentivizing liquidity providers or finding other mechanisms to ensure enough CCD is available.

This would require the development of smart contracts capable of automatic conversions and fee calculations based on real-time EUROe/CCD exchange rates.

EUROe would comply with all necessary regulations, and the process of automatic conversions should also consider regulatory constraints.

I’d love to hear your thoughts and feedback on this idea! Do you think this approach would help streamline user experience while maintaining demand for CCD? Are there any potential challenges or opportunities I’ve missed? Let’s discuss how this could be implemented and optimized for Concordium.

2

Hello, just to clarify the proposal, not sure I fully understand, but you’re not suggesting any changes to the Concordium blockchain itself, correct? From what I understand, everything you’re mentioning is technically feasible as it stands. EUROe smart contracts are already deployed, and users can use EUROe in their wallets. You can deploy smart contracts and dApss that accept EUROe and payout in EUROe also - and use CCD in the process.

3

I confirm that the proposal does not suggest any changes to the Concordium blockchain itself. The aim is to leverage existing capabilities, such as EUROe smart contracts, to facilitate a seamless integration for users and businesses who wish to avoid the hassle of holding CCD but rather interact with EUROe.

If we take the idea one step further and banks came onboard they could act as custodian and cooperations would not even have to deal with the biggest showstopper, the 24 words.

4

Yes, it’s definitely something that could be more automated and user-friendly. We already have a smart contract that allows us to pay out rewards directly in EUROe. The main challenge, however, is obtaining the EUROe in a more automated manner, which brings us to the key issue of liquidity. While we could maintain our own pool of EUROe, it would be better to acquire them by calling a smart contract, like the one from Concordex.

5

Hi @Mav , that is a very interesting proposal, which I have heard a few times already. I will not comment on the commercial aspects, since that is not my field, but focus on a few technical issues which would need to be resolved to get something like that going at large scale.

Let me just recall how transaction fees are calculated on Concordium, as this will be needed to discuss how EUROe could be integrated. Every transaction is mapped to an amount of energy (NRG) that represents the complexity of the transaction, which is some balance between input size, computational complexity, memory requirements in the smart contract, etc. This NRG is then multiplied by a EUR/NRG parameter, which determines the cost of the transactions in EUR. This is a governance parameter, that can be changed by the governance committee to increase or decrease fees. Finally, this is multiplied by a CCD/EUR parameter, which is supplied by an oracle, to get the cost in CCD. The oracle takes values from CoinGecko, CoinMarketCap and Live Coin Watch, and computes some kind of average, which is put on chain and updated every 30 minutes.

This system guarantees that:

  1. fees are fixed in EUR.
  2. the cost in CCD for the user and payment in CCD for the validator depend on this oracle value, which is arguably fair and objective.

If fees are paid in EUR, we want to keep these two properties above. The problem with DEXs/liquidity pools, is that the price of CCD will depend on the supply of the pool alone, and might be quite different from an objective price as seen on CoinGecko/CoinMarketCap/Live Coin Watch. In an ideal situation, arbitrage would even the prices out. But that doesn’t necessarily happen, or might be delayed, and we don’t want to see a significant difference in price for the user, if the transaction is paid in EUROe or CCD.

A solution might be to set up a pool, where CCD can be bought at, say, the price of the oracle + 2%. The reason for adding a fee to get CCD from the pool (2% in my example), is because if the pool dries up, it must be profitable to go and get CCD on open exchanges and resupply the pool. This would also have the effect that a lot of demand for fees paid in EUROe would positively impact the price of CCD on exchanges. And the user paying in EUROe should not mind paying a small fee, because it saves them the hassle of finding CCD themselves and spares them the effects of volatility (as you pointed out).

To put the pieces together, a transaction paid in EUROe would first get CCD from the corresponding pool and transfer the EUROe to the CCD sellers, then pay for the main transaction. The cost for the main transaction would be transaction fee in EUR*(1 + pool fee), and additionally, the user would have to pay for the transaction that does the swap. But they cannot pay for the swap without CCD in the first place, so maybe the swap pool would be a sponsored transaction, which is then deducted from the EUROe paid into the pool for the swap. Maybe someone else has better ideas on how to do this.

The second interesting technical aspect, is to what extend would Concordium need to be involved in setting these kinds of things up. @NHS already mentioned doing some things on their own. And the pool I described above could probably be done without Concordium. But if we really want this to be universal, then wallets should also offer the option of paying in EUROe. And it isn’t clear to me if Concordium would need to set up the exchange pool if their own wallets access it.

Cheers,
Christopher

6

We can tackle the core issue of securing EUROe and CCDs at a fixed pool/price for 2-3 months in advance, allowing participants to fill pools in a timely manner and ensuring price certainty. However, the ideal solution would be for EUROe to have the same properties as CCDs, enabling us to use EUROe as a native token and conduct transactions directly in EUROe. The challenge with this approach is that CCDs would be excluded, potentially redefining the entire setup and market. In my view, we should consider creating a CIS-X standard for handling EUROe CCD sponsored transactions in a standardized manner.

7

Simplifying User Experience on Concordium by Displaying Fees in EUROe

Dear @Mav, @chportma, @NHS and Concordium Community,

Thank you for initiating this important discussion on enhancing user experience by integrating EUROe into Concordium’s ecosystem. The idea of allowing users to interact primarily with EUROe while CCD remains the underlying token for transaction fees is both innovative and user-friendly.

I’d like to propose a simplified approach to achieve this goal without introducing the complexities of liquidity pools and automated swaps.

Proposal: Native Wallet Integration for Euro-Denominated Fees

Overview:

  • Display Fees in EUROe: Modify Concordium wallets to display transaction fees and balances in EUROe, providing users with a clear and predictable understanding of costs.
  • Automatic CCD Deduction: Continue using CCD for transaction fees behind the scenes, with the wallet handling the conversion based on real-time exchange rates from the existing oracle.

Benefits:

  1. Enhanced User Experience:
  • Familiar Currency: Users see transaction fees in euros, reducing confusion and making the platform more accessible, especially for those unfamiliar with cryptocurrencies.
  • Predictable Costs: Stable euro-denominated fees eliminate concerns about CCD price volatility affecting transaction costs.
  1. Simplicity and Efficiency:
  • No Additional Infrastructure: This proposal avoids the need for complex mechanisms like liquidity pools, decentralized exchanges (DEXs), or automated swaps.
  • Leverages Existing Systems: By using the current oracle price feed and wallet functionalities, development efforts are minimized.
  1. Maintains CCD Utility:
  • Core Network Token: CCD remains integral to the network, ensuring validators and delegators continue to receive fees in CCD.
  • Sustained Demand: Preserves the demand and utility of CCD without altering the underlying blockchain mechanics.

Implementation Details:

  1. Real-Time Exchange Rates:
  • Reliable Oracle: Use the existing oracle to provide accurate and up-to-date CCD/EUR exchange rates, ensuring transparency and reliability.
  • Safeguards for Volatility: Implement a mechanism that locks in the CCD/EUR exchange rate at the time the user initiates the transaction, preventing discrepancies caused by price fluctuations during the transaction process. If significant fluctuations occur, users can be alerted to confirm any changes in transaction costs.
  1. Wallet Modifications:
  • User Interface Updates: Adjust the wallet UI to display balances and fees in EUROe, providing clear indicators to users.
  • Backend Calculations: Implement backend processes that convert EUROe amounts to CCD seamlessly during transactions, ensuring users experience no delays or disruptions.
  • User Notifications: Inform users of any minor fluctuations due to exchange rate changes at the time of transaction confirmation, ensuring transparency and building trust.
  1. Transparency and Trust:
  • Clear Communication: Provide explanations within the wallet or through documentation on how fees are calculated, giving users a better understanding of the system.
  • Audit and Verification: Regular audits of the exchange rate mechanism can enhance user trust by ensuring the accuracy of the CCD/EUR conversion and the overall fee structure.

Considerations:

  1. CCD Liquidity and Validator Compensation:
  • Liquidity Monitoring: Monitor CCD liquidity in the market to ensure there is sufficient supply to handle conversions from EUROe to CCD without causing significant price fluctuations. While this proposal removes the need for complex liquidity pools, ensuring stable liquidity is crucial for smooth fee processing.
  • Validator Compensation: Ensure that validators receive predictable compensation by maintaining stable CCD conversion rates. Proper liquidity and exchange rate management will protect validators from sudden price shifts, ensuring they are fairly compensated for their services.
  1. Exchange Rate Volatility:
  • Safeguards: In addition to locking exchange rates during transactions, implement safeguards to handle sudden market changes between transaction initiation and confirmation, reducing risk for users.
  • User Alerts: Notify users if significant exchange rate fluctuations occur that could impact the final transaction costs.
  1. Real-Time Conversion Speed:
  • Efficiency: Ensure that the conversion process from EUROe to CCD happens quickly and seamlessly to prevent transaction delays and enhance the overall user experience.
  1. Security and Compliance:
  • Security Audits: Regularly audit the wallet’s backend, particularly the conversion process, to maintain system reliability and security.
  • Regulatory Compliance: Consult legal experts to ensure that displaying fees in euros and handling euro-denominated transactions complies with relevant financial regulations. Transparency in fee calculation will further enhance regulatory compliance and build user trust.
  1. User Feedback and Experience Improvements:
  • Feedback Mechanism: Introduce a feedback feature within the wallet interface, allowing users to share their experiences with the EUROe fee display and report any issues. This will help refine the user experience and ensure it aligns with user needs and expectations.

Summary

By integrating euro-denominated fee displays directly into Concordium wallets, we can significantly enhance the user experience without adding complexity to the network. This approach keeps CCD at the heart of the Concordium ecosystem while making the platform more approachable for users who prefer transacting in euros.

Additionally, by ensuring stable exchange rates, real-time conversions, and sufficient CCD liquidity, we protect both users and validators from the potential risks of volatility and liquidity shortages. Regular security audits and compliance reviews will further safeguard the network.

I believe this solution aligns with our shared goals of accessibility, efficiency, and maintaining the integrity of the Concordium network. I welcome any feedback or suggestions on this proposal and am eager to collaborate further to refine these ideas.

8

Thank you for the valuable feedback on the proposal. It’s encouraging to know that there’s existing infrastructure, like the EUROe payout smart contract. I agree that automating the acquisition of EUROe—perhaps through smart contracts on Concordex—could streamline the process and address liquidity concerns.

It’s also uplifting to see renewed engagement from the community and builders. While my technical expertise is limited, I’m thrilled that the concept is being considered by the Concordium core team

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