An in-depth look at the Canton Network: What exactly do institutions need?

Author: Ryan Yoon, Source: Tiger Research

Key Points

• Solving the Mismatch Between Blockchain and Institutions: The full transparency and decentralization of traditional blockchains conflict with financial institutions' requirements for privacy, regulatory compliance, and control, limiting their application to pilot stages.

• Implementing a Selectively Transparent Architecture: The "open permission" model combined with DAML smart contracts allows for transaction-level privacy controls, meets Basel regulatory standards, and supports institutional-level workflows through a rights and obligations framework. Achieving Real Institutional Scale: With over 400 institutions, over $6 trillion in tokenized assets, and 3 million transactions processed daily, the blockchain has seen major participants, including Bank of America, conducting 24/7 Treasury bond trading since its launch in 2024. 1. Between Blockchain Ideals and Reality From its inception, blockchain technology has been built around two core principles: 1) complete transparency, with all transactions publicly visible; and 2) decentralization, with the system operating without central control. While these ideals shaped blockchain's early development, reality has diverged significantly. In the early stages, early adopters developed services centered around transparency and decentralization. However, adoption was limited to niche communities. As broader participation became necessary, completely replacing existing systems with blockchain infrastructure proved impractical. For financial institutions, the challenges were even more severe. Full transparency meant that trading strategies and corporate financial data could be exposed. Decentralization conflicted with the need for control and management. Consequently, blockchain's fundamental ideals clashed with institutional demands for privacy, oversight, regulatory compliance, and scalability. Institutions recognize clear benefits—such as real-time settlement and capital efficiencies—but most remain in the pilot phase.

  However, continued growth cannot rely on a small group of idealistic supporters. Institutional adoption and broader market expansion require an approach that prioritizes practical needs over philosophical purity. 2. Canton Network: A Pragmatic Approach Canton Network was created to address the tension between blockchain ideals and institutional realities. Unlike earlier blockchains that relied on absolute models, it introduces flexibility, allowing institutions to choose how information and control are managed. This approach reflects the real-world needs of financial institutions. Some information must be fully transparent to regulators but shielded from competitors. Customer privacy must be protected while still enabling internal audits. Traditional blockchains, with their binary model of full disclosure or complete opacity, fail to meet these nuanced requirements. The Canton Network differentiates itself through the Canton Protocol, which enables institutions to meet regulatory requirements and manage risk while retaining the real-time settlement and capital efficiency benefits of blockchain. This makes it the infrastructure to support the transition from pilot projects to large-scale institutional adoption. At its core, the Canton Protocol supports independent control of applications and transactions, achieves configurable privacy through a unique "proof of stake" consensus model, and enables interoperability between independently operated systems. This is achieved through DAML, a functional programming language specifically designed for securely and efficiently automating multi-party financial workflows. By leveraging DAML, Canton Network offers an alternative to existing smart contract frameworks such as Ethereum's Solidity, providing an architecture tailored for institutional use cases.

  

  Daml structures contracts around rights and obligations, directly aligning with the nature of financial transactions. Every financial agreement can be decomposed into a transfer of rights and a set of obligations.

  For example, in a lease contract, the tenant has the right to occupy the apartment but is obligated to pay maintenance fees, while the landlord has the right to collect a deposit but is obligated to provide the right to use the property. Daml precisely encodes these relationships in an executable form. Daml and Canton work together, connecting disparate systems into a single, automated workflow through atomic composability at the smart contract level. In this model, all interdependent steps either succeed or fail together, ensuring the integrity of the transaction. A real estate transaction illustrates this: once the buyer deposits funds, loan review automatically begins; upon approval, the title transfer proceeds. Each stage is governed by clearly defined rights and obligations, and the entire process is treated as a single, undivided transaction. If any step fails, the system reverts to its original state. Equally important is the system's flexibility and controllability. Contracts can be modified by mutual consent to accommodate unexpected changes, such as regulatory changes or court rulings. By leveraging Daml, the Canton Network provides the operating conditions institutions need: clearly defined rights and obligations, practical workflows, and built-in adaptability and governance mechanisms. This allows institutions to meet compliance and privacy requirements without sacrificing efficiency. 2.2. Regulation and Privacy The primary barrier to blockchain adoption by financial institutions is regulation, which is closely related to data privacy and operational controls. One of the most significant obstacles is the Basel Accords, international standards developed by the Basel Committee on Banking Supervision, an arm of the Bank for International Settlements. While not legally binding, these standards are often implemented through national legislation, giving them practical force. Under Basel rules, unsecured assets issued on public blockchains fall into "Group 2," carrying a risk weight of up to 1250%. This means holding 100 million won worth of blockchain assets would require 1.25 billion won in regulatory capital, making large-scale use uneconomical. The Canton Network addresses this issue through an "open permission" architecture. Much like the internet is open but restricts access to sensitive platforms like bank websites, Canton combines openness with granular access controls. This is achieved through the aforementioned sub-transaction-level privacy feature. Only parties directly involved in a transaction can view and record specific data related to them, while other participants see only the information they need to know. For example, in a delivery-versus-payment transaction, banks can only view the cash transfer portion, while securities depositories can only view the securities transfer portion. Daml smart contracts allow fine-grained control over data access and operations, ensuring that tokenized traditional assets qualify as "Group 1" exposures, thereby avoiding punitive capital charges. The same mechanism also supports selective disclosure to auditors, enabling oversight without compromising confidentiality. Thus, Canton resolves a key trade-off that has constrained early blockchains. The full transparency of public chains compromises confidentiality, while the full opacity of private chains hinders interoperability. By providing selective transparency, Canton enables institutions to simultaneously comply with regulations and protect privacy. 2.3. Performance at Financial System Scale For blockchain to be viable in capital markets, its operational scale must match that of existing financial infrastructure. Daily trading volume in foreign exchange alone exceeds $7.5 trillion, and combined trading volume for stocks, bonds, and derivatives reaches tens of trillions of dollars. Therefore, institutions require blockchain systems that can match existing performance benchmarks, maintain stability during peak periods, and support continuous 24/7 operation. The Canton Network addresses this need through a "network of networks" architecture. Unlike traditional blockchains that operate as a single, monolithic system, Canton's structure is similar to a transportation network, with multiple interconnected subnetworks to balance load and ensure resiliency.
  

  • Participant Nodes: Nodes representing institutions that validate only their own transactions and can securely host multiple parties.

  • CSPs: Regional infrastructure providers that connect participant nodes and provide services compliant with local regulatory requirements.

  • vCSP: A global synchronization layer that provides a common backbone for cross-application and cross-regional settlements. The first production instance is currently operated by over 30 major institutions.

  This layered design functions similarly to a city's transportation system. Participant nodes are analogous to buildings, CSPs act as regional road networks, and vCSPs act as the highways connecting regions. Nodes can connect to multiple CSPs. If one path is congested, transactions can be rerouted, and capacity can be expanded by adding new CSPs. A cross-border transaction between Samsung and Apple illustrates this process. Samsung's node connects to a South Korean CSP holding digital won, while Apple's node connects to a US CSP holding digital dollars. Both are also connected to a global vCSP. When Apple places an order, a smart contract deposits $100,000 in US dollars into an escrow account. Once Samsung confirms shipment, the funds in the escrow account are automatically released to Samsung. The entire process is completed in minutes, while traditional international wire transfers typically take two to three days. Here, the South Korean CSP verifies Samsung's won activity, the US CSP verifies Apple's dollar activity, and the vCSP ensures atomic settlement between the two networks. Simultaneously, other CSPs can process unrelated transactions (for example, LG-Sony or Google-Microsoft transactions), multiplying the system's throughput. Because CSPs operate independently, overall capacity scales with the number of providers. This parallelization approach supports concurrent execution across synchronization domains. Currently, Canton processes over 4 transactions per second and has recorded over 3.5 million Canton Coin-related events in a single day. Digital Asset and its institutional partners have successfully executed on-chain US Treasury bond and repo transactions, demonstrating continuous settlement capabilities even on weekends. 3. Building the Canton Ecosystem The Canton Network solves the classic "chicken and egg" problem in blockchain adoption: services won't exist without users, and users won't join without services. It achieves this through a unique incentive and distribution model. At its core is the Canton Coin, the network's native digital currency. Unlike many blockchain projects, where tokens are pre-mined and distributed disproportionately to founders or venture capitalists, Canton Coins' distribution is based entirely on contributions to the network. There is no pre-allocation to venture capital or foundations. Participants earn tokens only by providing tangible value—whether operating infrastructure, developing applications, or conducting transactions. Effectively, the distribution is akin to paying wages for work performed. A second key feature is the burning and minting balance mechanism. Transaction fees paid by users are burned, permanently reducing the supply, while new tokens are minted as rewards to contributors. This creates a balance between scarcity driven by usage and issuance driven by contribution.
  

  Reward distribution also evolves over time. In the early stages, higher rewards are allocated to super validators responsible for building the network infrastructure. As the system stabilizes, the reward share shifts to developers building applications and services. This is similar to the development of a new city, with initial investment focused on roads and utilities, followed by the growth of retail and service providers.

  4. Canton Network's Path Forward

  Since its official launch in July 2024, Canton Network has demonstrated strong growth momentum by proving its real value to financial institutions, not just technical milestones. This progress is reflected in fundraising. In June 2025, Canton raised $135 million, led by DRW Trading and Tradeweb, with broad participation from major traditional financial firms. These institutions are not only investors but also active contributors to service and operational development. The value of the assets handled is even more staggering. Tokenized assets on Canton exceed $6 trillion, a value greater than the GDP of most countries. The network also processes over $280 billion in U.S. Treasury repo transactions daily. Concrete use cases are emerging. On August 12, 2025, Bank of America, Circle, Citadel Securities, DTCC, Societe Generale, and Tradeweb executed the first weekend on-chain financing transaction involving U.S. Treasuries and USDC, marking the emergence of 24/7 capital markets. Stablecoin settlement is another attractive area. Circle's integration of USDC with Canton emphasizes privacy controls, with Paxos joining as a validator. Institutions value the ability to maintain confidentiality in intercompany payments while meeting regulatory requirements. Looking ahead, broader adoption is expected, particularly in the tokenization of RWAs. Real estate, commodities, and art are likely to follow, boosting liquidity far beyond the $6 trillion currently tokenized. Longer-term, Canton points to a blockchain-based, 24/7 global capital market, unconstrained by time zones or national borders. Developments such as Nasdaq's application to support tokenized equity underscore this shift. Consequently, Canton positions itself as infrastructure optimized for the current transformation—bridging the advantages of blockchain with the requirements of institutions. Its trajectory will depend on how effectively it continues to balance ideals with practical realities.