What Is Canto? Features And Tokenomics
Tech Deep Dives

What Is Canto? Features And Tokenomics

Created 7mo ago, last updated 7mo ago

CoinMarketCap Alexandria takes a look at trending new layer-1 blockchain Canto, which aims to support free public infrastructure for DeFi.

What Is Canto? Features And Tokenomics

Table of Contents

Canto is an Ethereum Virtual Machine (EVM) compatible, permissionless, general-purpose layer-one blockchain.
It focuses on DeFi and building a new system for accessible, transparent, decentralized and free financial structures. Canto is a fork of Evmos, another highly scalable, high-throughput blockchain running on a proof-of-stake (PoS) consensus mechanism. Both are built with the Cosmos software development kit (SDK) on top of the Tendermint Core Byzantine Fault Tolerance (BFT) consensus methodology.
This Tendermint Core BFT makes building new blockchains for developers possible in a plug-and-play fashion. Thanks to Tendermint, developers can build DApps compatible with Ethereum and Cosmos blockchains like Canto. Moreover, Cosmos’ inter-blockchain communication (IBC) allows for horizontal scalability across different blockchains in the Cosmos ecosystem.
Canto is secured by this Tendermint Core BFT and runs on an EVM execution layer built with the Cosmos SDK. Its key value proposition is to support Free Public Infrastructure (FPI):
  • A Canto decentralized exchange (DEX)
  • A Canto lending market
  • A Canto over-collateralized unit of account token named NOTE.

With these pillars, Canto strives to achieve its goal of becoming the best execution layer for original work. This is accomplished in three ways:

  • Canto provides liquidity as a free public good.
  • Canto is resistant to rent extraction.
  • Canto avoids interface-driven user ownership.

By focusing on the support of free public infrastructure, Canto eliminates centralized incentives. For example, there is no official foundation at Canto and there were no presale or venture backers. Moreover, Canto has no vested tokens. It positions itself as a distributed community of DeFi advocates for a free public infrastructure.

Join us in showcasing the cryptocurrency revolution, one newsletter at a time. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) — what are you waiting for?

How Does Canto Work?

Canto advocates for DeFi primitives like decentralized exchanges, lending protocols, and units of account to be public utilities. That is why they are provided free-to-use on Canto. In other words, a Canto DEX, a Canto Lending Market, and a fully collateralized stablecoin are all built natively into Canto.

Canto aims to pioneer the concept of rent extraction resistance. As part of its policy to provide free public infrastructure, Canto designed its smart contracts in a revenue-sharing manner. More precisely, smart contract creators receive a 20% share of all transaction fees generated from users interacting with a project. The aim is to provide a new ground for economic experiments in web3, where DeFi builders and NFT creators can collectively benefit from a flourishing blockchain ecosystem.

Canto DEX

Canto wants to prevent the possibility of predatory evolution toward rent-seeking behaviors. Thus, its native DEX cannot be upgraded, has no official interface, and runs in perpetuity without fees. Users can interact with it through Slingshot, a DEX aggregator platform.

The mechanism of the Canto DEX is similar to other DEXs. An automated market maker (AMM) provides asset prices and derives its liquidity from a liquidity pool provided by users. Canto follows the example of Uniswap, with full-range liquidity pools and concentrated liquidity pools for deeper liquidity of stablecoins and other units of account.

Users can provide liquidity and receive LP tokens to borrow against. There are no fees for liquidity providers on Canto. Protocol users, traders and arbitrageurs benefit from free liquidity access. Canto has five incentivized liquidity pools at the time of writing:

  • USDC/NOTE (concentrated liquidity)
  • USDT/NOTE (concentrated)
  • NOTE/CANTO (full range liquidity)
  • CANTO/ETH (full range)
  • CANTO/ATOM (full range)

Canto Lending Market (CLM)

Canto stakers control the governance of the Canto Lending Market. It allows liquidity provider (LP) tokens from the native decentralized exchange to be used as collateral, which can then be deposited in a lending market as supply. However, users cannot borrow LP tokens. Canto stresses that its stakers have broad interests in the ecosystem’s growth, such as fostering the best environment for both developers and users. That is why there is no dedicated lending-specific token like on other chains. Instead, Canto uses its native token to incentivize liquidity provision on CLM.

Canto Unit of Account (NOTE)

NOTE is the native unit of account on Canto. It is an over-collateralized stablecoin-like currency, which is perpetually rebalanced toward $1 through an algorithmic interest rate policy.

NOTE is not minted but borrowed from a smart contract called “the Accountant,” which sets the interest rate policy. The charged interest goes towards funding public goods and is governed by the Canto DAO. The eligible collateral assets are stablecoins USDC and USDT.

Canto claims that NOTE achieves superior capital efficiency thanks to allowing stablecoin collateral backing NOTE to be lent out to other parties. The native lending market launched with conservative parameters and aims to adjust them in the future for full capital efficiency.

The Accountant smart contract manages the supply of NOTE via its interest rate. Every six hours, the interest rate is rebalanced based on a TWAP of its market price. The algorithm aims for minimum volatility over maximal revenue, with the interest rate adjustments coming in increments of 0.25 of the difference between the price of NOTE and $1. This is called the adjustor coefficient.

The TLDR: According to Canto, NOTE is not a stablecoin. Its closest equivalent is an algorithmic stablecoin. Although Canto does not explicitly state that NOTE is one, or that it aims to perfectly rebalance to $1, it sounds like NOTE will aim to achieve price stability around $1. This is different from a normal stablecoin, which is fully collateralized by on-chain and real-world assets and is explicitly pegged to the dollar’s value.

How To Bridge to Canto

You can bridge to Canto from Ethereum with 5 simple steps:

  1. Head to the Canto Bridge and connect your wallet.
  2. Click on the red banner at the top of the page and generate a Canto public key.
  3. Select a token you want to bridge. At the time of writing, you can choose between USDC, USDT, and ETH.
  4. Confirm the approval transaction.
  5. Sign the message in your wallet to confirm the transfer.

The asset transfer will take 96 ETH blocks (19.2 minutes) to complete.

How to Stake Canto

The Canto staking site allows you to stake and earn rewards. You have to generate a public key on the Canto site before you are able to stake. There is a 0.08 CANTO cost for staking and a 1 CANTO cost for claiming rewards. Staking rewards are credited every 24 hours.

The Canto Team

Canto is operated by a team of pseudonymous accounts that refer to themselves as contributors to the project. Most of Canto’s core contributors are from DeFi Pulse and Slingshot and describe themselves as a “loosely organized collective of chain-native builders.” Canto’s core contributors are:

@scott_lew_is: co-founder of DeFi Pulse and Slingshot
@rxwald: recruiting at mkt for Slingshot, DeFi Pulse and more
@RobinWhitney_: CMO of mkt, also work experience at Acala and Karura
@0xzak: CTO of Slingshot and co-Founder of Code4rena, Technical Advisor at DeFi Pulse.

Canto Tokenomics

CANTO is the native utility token of the blockchain. It is used for staking and to pay gas fees. The total supply of CANTO is 1 billion tokens. The current circulating supply is 423 million tokens. The token allocation is as follows:

130 million (13%): initial contributors

20 million (2%): “Settlers” that took part in the launch of the testnet

450 million (45%): long-term liquidity mining

350 million (35%): medium-term liquidity mining

50 million (5%): future public goods grants

CANTO had an inflation rate of 19.84% APR for the first 30 days. The DAO set the emissions rate for each 30-day period to decrease by 35%.

Roadmap Ahead for Canto

According to a Bankless interview with Zak Cole, a core contributor at Canto, the blockchain will focus on scaling and building game-related use cases.

Although there is no way to make a reliable price prediction for Canto, the blockchain is an exciting experiment that merits keeping an eye on.

This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators. This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice. The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.
1 person liked this article