Understanding Canton Network in One Article: A Public Blockchain with Institutional-Grade Privacy and Compliance - ChainCatcher

Original Title: Canton Network: Most Realistic Blockchain Source: Tiger Research Compiled by: Zhou, ChainCatcher

Editor’s Note: Canton was born at the turning point of institutional on-chain and RWA tokenization acceleration. The complete openness and decentralization of public chains have long been misaligned with the privacy, compliance, and governance needs of financial institutions. Canton achieves selective transparency at the sub-transaction level and a rights-obligations workflow through "public permissioned + Daml," combined with the "network of networks" architecture of Participant/CSP/vCSP, which retains real-time settlement and atomic composability while making it easier to reduce capital requirements under Basel norms, enabling institutions to protect privacy while complying with regulations.

It is worth noting that the developer of Canton Network, Digital Asset, announced in June the completion of a $135 million strategic financing round, led by DRW Venture Capital and Tradeweb Markets, with participation from well-known companies in traditional finance and the crypto sector, including BNP Paribas, Circle Ventures, Citadel Securities, DTCC, Virtu Financial, Paxos, among others; currently, the tokenized assets on Canton exceed $60 trillion, a scale larger than the GDP of most countries. The network also processes over $280 billion in U.S. Treasury repurchase transactions daily. Additionally, its token, Canton Coin, has no VC/foundation allocation and is fully distributed according to contributions, incentivizing early super validators with a balanced mechanism of fee burning + reward minting.

The following is the main text:

• Addressing the mismatch between blockchain and institutions: The complete transparency and decentralization of traditional blockchain conflicts with the requirements of financial institutions for privacy, regulatory compliance, and control, limiting its adoption to the pilot phase.
• Implement selective transparency architecture: The "public license type" model combined with Daml smart contracts allows for privacy control at the transaction level, meets Basel regulatory standards, and supports institutional workflows through a rights-obligations framework.
• Achieving true institutional-grade scale: over 400 institutions, more than $6 trillion in tokenized assets, 3 million transactions daily, and since its launch in 2024, major participants like Bank of America have executed 24/7 on-chain treasury transactions.

1. Between the ideal and reality of blockchain

Since its inception, blockchain technology has been built on two core principles: 1) complete transparency, meaning all transactions are visible to the public; 2) decentralization, meaning the system operates without a central authority. Although these ideals shaped the early development of blockchain, reality has significantly deviated.

In the early stages, early adopters developed services around transparency and decentralization. However, the adopters were limited to niche communities. As broader participation became necessary, it gradually became clear that it was not realistic to completely replace existing systems with blockchain infrastructure.

For financial institutions, the challenges are more pronounced. Complete transparency means that trading strategies and corporate financial data may be exposed; decentralization conflicts with the need for control and governance.

As a result, the fundamental concept of blockchain conflicts with institutions' requirements for privacy, oversight, regulatory compliance, and scalability. Although institutions recognize clear advantages such as real-time settlement and capital efficiency, most remain in the pilot stage.

However, sustained growth cannot rely on a small group of ideological supporters. The adoption of systems and broader market expansion require placing pragmatic needs above philosophical purity.

2. Canton Network: A Pragmatic Path

Source: Canton Network

The emergence of the Canton Network is to address the contradiction between the ideals of blockchain and the realities of institutional governance. Unlike early blockchains that relied on absolute models, it introduces flexibility, allowing institutions to choose how to manage information and control.

This approach reflects the actual needs of financial institutions: some information must be completely transparent to regulators but kept confidential from competitors; internal audits must still be conducted while protecting customer privacy. Traditional blockchains, with their binary model of complete disclosure or complete opacity, cannot accommodate these subtle requirements.

Canton Network differentiates itself through the Canton Protocol, which allows institutions to meet regulatory requirements and manage risks while retaining the advantages of real-time settlement and capital efficiency on the blockchain. This positions it as the infrastructure that supports the transition from pilot projects to large-scale institutional adoption.

Essentially, the Canton protocol enables independent control over applications and transactions, achieves configurable privacy through a unique "stakeholder proof" consensus model, and ensures interoperability across independent operating systems.

2.1. Institutional-level Workflow Design

This feature is implemented by Daml, a functional programming language designed for securely and efficiently automating multi-party financial workflows. By leveraging Daml, the Canton Network offers an alternative to existing smart contract frameworks (such as Ethereum's Solidity) and provides an architecture tailored to institutional use cases.

Daml constructs contracts around rights and obligations, which is directly related to the nature of financial transactions. Each financial agreement can be broken down into the transfer of rights and a series of obligations.

For example, in a lease agreement, the tenant has the right to occupy the apartment but is obligated to pay maintenance fees; the landlord has the right to collect a deposit but is obligated to provide the right to use the property. Daml encodes such relationships accurately into an executable form.

Daml and Canton integrate different systems into an automated workflow through smart contract-level atomic composability. In this model, all interdependent steps can either succeed simultaneously or fail simultaneously, ensuring the integrity of the transaction.

Real estate transactions serve as an example: once the buyer deposits the funds, the loan review process is automatically initiated; after approval, the transfer of property rights proceeds. Each stage is bound by clearly defined rights and obligations, and the entire process is viewed as an indivisible transaction. If any step fails, the system rolls back to the initial state.

Equally important is the system's flexibility and controllability. By mutual agreement, contracts can be modified to accommodate unforeseen circumstances such as regulatory changes or court rulings.

Through Daml, the Canton Network provides the conditions needed for institutional operations: clear definitions of rights and obligations, practical workflows, and built-in adaptability and governance capabilities. This enables institutions to meet compliance and privacy requirements without sacrificing efficiency.

2.2. Regulation and Privacy

The primary obstacle for financial institutions adopting blockchain is regulation, which is closely related to data privacy and operational control. One of the most significant barriers is the Basel Accord, an international standard set by the Basel Committee on Banking Supervision, which is a part of the Bank for International Settlements (BIS). Although these standards are not legally binding, they are usually implemented through national legislation, thus having practical effect.

Source: Basel Rules

According to the Basel Accord, uncollateralized assets issued on public chains belong to "Category 2," with a risk weight of up to 1250%. In practice, this means that holding 100 million won in blockchain assets requires 1.25 billion won in regulatory capital, making large-scale use uneconomical.

Canton Network addresses this issue through a "publicly licensed" architecture. Similar to the internet itself being open, but restricting access to sensitive platforms like bank websites; Canton combines openness with fine-grained access control.

This is achieved through the aforementioned sub-transaction level privacy features. Only the parties directly involved in the transaction can view and record the specific data related to them, while other participants cannot see anything beyond what they need to know. For example, in a Delivery versus Payment (DvP) transaction, the bank will only see the cash transfer, and the securities custodian will only see the securities delivery.

Daml smart contracts allow for fine-grained control over data access and actions, ensuring that tokenized traditional assets can be recognized as "first-class" risk exposures, thereby avoiding punitive capital charges. The same mechanism also supports selective disclosure for auditors, enabling supervision without compromising confidentiality.

Thus, Canton addresses a key constraint in the early development of blockchain. The complete transparency of public chains can compromise privacy, while the complete opacity of private chains can hinder interoperability. By providing selective transparency, Canton enables institutions to comply with regulations while protecting privacy.

2.3. Performance under the scale of the financial system

For blockchain to survive in the capital markets, it must match the scale of existing financial infrastructure. The daily trading volume of foreign exchange alone exceeds $7.5 trillion, while the total trading volume of stocks, bonds, and derivatives reaches hundreds of trillions of dollars. Therefore, institutions require blockchain systems that can meet existing performance benchmarks, maintain stability during peak periods, and support uninterrupted operation around the clock.

Canton Network meets this requirement through its "network of networks" architecture. Unlike traditional blockchains that operate as monolithic systems, Canton’s structure resembles a transportation network, where multiple sub-networks are interconnected to share the load and ensure resilience.

Participant Node: A node representing an organization that only verifies its own transactions and can securely host multiple entities.

CSP (Canton Service Provider): Regional infrastructure provider that connects participant nodes and offers services that comply with local regulatory requirements.

vCSP (Virtual Cloud Service): Global synchronization layer that provides a common backbone for cross-application and cross-region settlement; the first production-level example is currently operated by more than 30 major institutions.

The functionality of this layered design is similar to that of an urban transportation system. Participant nodes are like buildings, CSP is the regional road network, and vCSP is equivalent to the highways connecting various regions. Nodes can connect to multiple CSPs; when a path is congested, transactions can be rerouted; capacity can be expanded by adding new CSPs.

Take the cross-border transaction between Samsung and Apple as an example.

Samsung's node connects to the Korean CSP holding digital won, while Apple's node connects to the US CSP holding digital dollars. Both connect to global vCSPs simultaneously. When Apple places an order, the smart contract escrows $100,000; once Samsung confirms the shipment, the escrowed funds are automatically released to Samsung. The entire process is completed within minutes, whereas traditional international wire transfers typically take two to three days.

In this process, the Korean CSP verifies Samsung's digital won activities, the American CSP verifies Apple's digital dollar activities, and the vCSP ensures atomic settlement between the two networks. At the same time, other CSPs can process unrelated transactions in parallel (e.g., transactions between LG–Sony or Google–Microsoft), thereby amplifying the system's throughput. As CSPs operate independently, the overall capacity expands with the increase in the number of providers.

This parallel approach supports concurrent execution across synchronous domains. Currently, Canton processes over four transactions per second, with a daily record of more than 3.5 million Canton Coin-related events. Digital Asset and its institutional partners have successfully executed on-chain US Treasury transactions and repurchase transactions, demonstrating continuous settlement capability even on weekends.

3. Build the Canton ecosystem

Canton Network solves the classic "which came first, the chicken or the egg" problem of blockchain adoption: without users, there are no services, and without services, users will not join. It achieves this through a unique incentive and distribution model.

The core of the network is Canton Coin, which is the native cryptocurrency of the network. Many blockchain projects pre-mine tokens and distribute them proportionally to founders or venture capitalists, while the distribution of Canton Coin is entirely based on contributions to the network. It will not be pre-allocated to venture capital or foundations. Participants can only earn tokens by providing tangible value, whether through operating infrastructure, developing applications, or conducting transactions. In practice, this distribution is similar to wages paid for labor.

Source: Cantonscan

The second characteristic is the balance mechanism of "burning and minting." The transaction fees paid by users will be burned, thereby permanently reducing the supply, while new coins will be minted as rewards for contributors. This establishes a balance between scarcity driven by usage and issuance driven by contribution.

The reward distribution will also evolve over time. In the early stages, the super validators responsible for establishing the network infrastructure will receive higher rewards. As the system gradually stabilizes, the share of rewards will shift towards developers building applications and services. This is similar to the development of a new city, where initial investments are primarily focused on roads and utilities, followed by the growth of retail and service providers.

4. The Path Forward for Canton Network

Since its official launch in July 2024, Canton Network has demonstrated its practical value to financial institutions, surpassing technical milestones and achieving strong growth.

Source: Cryptodiffer

This is reflected in the financing. In June 2025, Canton completed a $135 million financing round, led by DRW Trading and Tradeweb, with widespread participation from numerous traditional financial institutions. These institutions are not only investors but also active contributors to service development and operations.

The scale of its asset handling is even more remarkable. The tokenized assets on Canton exceed $60 trillion, larger than the GDP of most countries. The network also processes over $280 billion in U.S. Treasury repurchase transactions daily.

Specific application cases are emerging. On August 12, 2025, Bank of America, Circle, Citadel Securities, DTCC, Societe Generale, and Tradeweb completed the first weekend on-chain financing transaction involving U.S. Treasury bonds and USDC, marking the emergence of a 24/7 capital market.

Stablecoin settlement is another area of significant focus. Circle integrates USDC with Canton, emphasizing the role of privacy control, while Paxos joins as a validator. Institutions stress that in inter-company payments, stablecoins can meet regulatory requirements while ensuring the confidentiality of transaction details.

Looking to the future, broader applications are expected, especially in the area of RWA tokenization. Real estate, commodities, and artworks may follow closely behind, thereby enhancing liquidity and surpassing the currently tokenized $60 trillion.

In the long run, Canton aims to establish a blockchain-based global capital market that operates around the clock, free from the constraints of time zones or borders. Developments such as Nasdaq's support for applications for tokenized stocks highlight this shift.

Therefore, Canton positions itself as an infrastructure optimized for the current transformation—connecting the advantages of blockchain with institutional needs. Its development trajectory will depend on how effectively it balances ideals with real-world demands.

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