For years, the high usage fees of blockchain technologies have been a source of frustration for many crypto users. These fees have created an uneven playing field, where those who can afford to pay a higher premium benefit more from the technology than the average user. Many argue that blockchain technology should be freely accessible to all, and that newcomers shouldn’t be burdened with excessive fees to use the platform. However, there may be some good news for these users, as a solution to this problem appears to have been found.

Canto is the latest blockchain platform that has garnered significant attention in the crypto world. It is a new Layer 1 blockchain that promises to revolutionize the way we think about decentralized systems. In this article, we will explore what Canto is, how it works, and what sets it apart from other blockchain platforms in the market.

What Is Canto?

Launched in August 2022, Canto is an open-source layer 1 blockchain enabled with Ethereum Virtual Machine compatibility. The project’s basis is to deliver the ultimate decentralized finance (DeFi) promise, that is, accessibility, transparency, decentralization, and all at little to no cost.

Canto leverages the Cosmos SDK (software development Kit) in providing Tendermint consensus and validation through Canto validator nodes. The canto ecosystem is built with three public utility protocols that make up the core financial primitives of its Free Public Infrastructure. The three primitives are designed to fully align with public interest values to create a robust ecosystem free from the control of DAOs that run protocols like businesses.

History of Canto

Released in 2022, Canto is supported by the dreams of a group of contributors called the team. Scott Lewis, the co-founder of Slingshot and DeFi Pulse, leads the team of canto contributors. He is supported by the Plex team and oversees the development of the network and its Free Public Infrastructure initiative. Also part of the contributors is the B-Harvest team, best known within the Cosmos ecosystem under the canto project, and they are responsible for development.

Though released in an unorthodox manner, the canto project has seen rapid growth in just a couple of months. At its release, there was no Venture Capital funding, nor was there an established foundation for blockchain governance. Instead, the team launched the project to be as decentralized as possible. Between late 2022 and early 2023, the Canto project gained popularity, resulting in a massive growth of the coin’s Total value Locked (TVL). The popularity was mostly owed to the investment from the crypto venture fund, Variant. Upon this event, the TVL of the project doubled and then tripled, growing from $66 million to $138 million and now approximately $182 million.

How does Canto work?

Source: Canto

Canto exists as part of the Cosmos network of blockchains, apps, and services. The Canto blockchain is a fork of Evmos, a separate, highly scalable blockchain running on a proof-of-stake consensus mechanism. The Canto blockchain was built with the Cosmos Software Development Kit to run on the Tendermint Core BFT consensus mechanism. The blockchain is also imbibed with EVM compatibility, allowing Ethereum smart contracts to be deployed on the blockchain.

The canto project is comprised of three core primitives that the team has identified as crucial to healthy DeFi ecosystems. On Canto, the primitives are launched as public utility protocols or Free Public Infrastructure (FPI). Canto’s FPI differs from other DeFi projects because it prioritizes public access and resists rent extraction at all levels. Canto does this by first enabling public access to its protocols and second in the composition of its primitives.

To further the concept of rent extraction resistance, Canto DEX is left ungoverned, unable to launch a token or to implement additional fees. The lending market will also be controlled by canto stakers interested in the ecosystem’s growth and will make decisions that foster the development of an environment conducive to developers and DeFi users. Finally, interest charges on Canto’s Unit of account will be pooled towards funding public goods only, with no rent extraction at the protocol layer.

Canto’s Main Features: DEX, CLM and $NOTE

Canto’s vision to deliver on the DeFi promise is actualized through its public utility protocols, jointly known as Free Public Infrastructure (FPI):

Canto DEX

As referred to above, Canto DEX comes neither with an official interface nor the possibility of an upgrade. Instead, the DEX is designed to run perpetually without ever implementing additional fees. These features limit the possibility of the Canto project leaning toward rent-seeking behaviors.

The Canto decentralized exchange is built much like other DEXs, supporting two types of liquidity pools: Full range and concentrated liquidity pools to deepen liquidity for stablecoins. On Canto’s DEX, an automated market maker (AMM) prices assets and derives liquidity for trading pairs from user liquidity pools.

On Canto, DeFi users can borrow against the exchange or provide liquidity in exchange for Liquidity Provider tokens. Because Canto DEX is a public utility protocol, no charges are extracted from liquidity providers. Traders, arbitrageurs, and protocol users also have access to the liquidity pool with no additional fees. The incentivized pools available include:

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

Canto Lending Market (CLM)

Source: Canto - Lending

The governance of the Canto lending market resides solely in the range of canto stakers. Because stakers are more interested in the ecosystem’s growth, they can make decisions that foster the best environment for both developers and users.

The Canto Lending market does not have a specific token; instead, the native canto token is used as an incentive within the application. In addition, the CLM will accept LP tokens from Canto DEX to be used as collateral. The collateral will, in turn, be deposited in a lending market as supply. However, users are unable to borrow LP tokens from the lending market.

Canto Unit of Account ($NOTE)

$NOTE is the standard unit of account on the Canto project. It is a fully immutable ERC-20 token that is over-collateralized to achieve a value perpetually rebalanced at $1. Unlike standard stablecoins, which are collateralized by on-chain and real-world assets and pegged to the US dollar, $NOTE is an algorithmic stablecoin. So, the token is said to have achieved price stability when its value is at $1.

$NOTE is not minted on the blockchain. It is borrowed from a smart contract known as the Accountant. The Accountant implements an algorithmic interest rate policy through the Canto Lending market. This interest rate on the $NOTE token is adjusted automatically every 6 hours through a TWAP of the token market price. Because the goal of the NOTE token is to provide public utility, the algorithm that controls the automatic interest changes prioritizes less volatility over maximizing revenue. Thus, if NOTE trades under a dollar, the interest rate will be adjusted higher to support an incentive to buy NOTE on secondary markets and lend to the CLM. Conversely, if it trades below the dollar, the rate is lowered to incentivize users to borrow from the CLM and sell on secondary markets.

Interest thus accrued on the token is pooled towards funding public goods on the protocol. These funds are held in the community treasury and overseen by the Canto DAO.

$NOTE is an overcollateralized currency that can only be borrowed by users who stake collateral assets in the form of $USDC or $USDT. Due to the over-collateralized nature, every $NOTE token in circulation is supported by OVER $1 worth of collateral in the CLM.

What makes Canto Unique?

Canto’s goal to become the best-executing layer 1 blockchain for original DeFi applications sets it apart from other blockchain networks. The network supports this goal with three principles (tenets) that ring true across all the protocols of its FPI.

1. Free Public Good in the form of liquidity. Canto prioritizes free public access to liquidity. As such, fees are not extracted from liquidity providers, arbitrageurs, and traders.
2. Resistance to Rent extraction: At the core of Canto’s architecture are principles that protect the network from rent-seeking behaviors. Some of such groundwork include prohibiting the DeFi primitives from having sovereign governance tokens and a capacity to extract rent in the future.
3. Minimal Viable User capture: Canto promoted the use of swapping interfaces, such that users trade on third-party aggregators. This architecture will foster user acquisition of new protocols.

What is the CANTO token?

$CANTO is the native token on the Canto blockchain. It is used to fund gas fees on the network and for staking in return for voting rights and LP rewards. The CANTO token is designed to maintain an inflation rate to maintain the security of the network. Tokens retrieved from the inflation are then shared amongst CANTO stakers in proportion to their stakes tokens.

CANTO Tokenomics

At launch, the total supply of the CANTO token is 1 billion. Out of the total supply, over 432 million tokens are circulating at this time.

The token allocation at launch was outlined as follows:

• 13% (130 million) to initial contributors.
• 2% (20 million) for users who participated in the launch of the test net.

The remaining supply of total CANTO tokens was divided in accordance with votes by the Canto DAO as follows:

• 45% (450 million) to long-term liquidity mining to be disbursed over the succeeding 5-10 years
• 35% (350 million) for medium liquidity mining to be disbursed over the coming months and perhaps years
• 5% (5 million) for future public goods grants

Projects on the Canto Network

In addition to the DEX and lending protocols on the canto blockchain, the Canto team encourages developers to build projects on the network with their organized hackathons. Some of the projects built on the blockchain are as follows:

Canto Longnecks

The Canto Ecosystem is home to Canto Longnecks, an NFT project comprising distinct animated NFT collections. The NFTs are inspired by images of emu and pixelated art. The canto longnecks project takes a community-based approach to ensure customer satisfaction at all levels.

A hundred of the first minters received a longneck NFT for free to be traded on NFT marketplaces like Alto Market and Provenent.art.

Y2R Finance

Y2R Finance is another DeFi project on Canto. This DeFi yield optimizer allows users to maximize profits on their crypto. Smart contracts and auto-harvest strategies support the project, allowing users to maximize rewards from liquidity pools, AMMs, and other yield farming opportunities. Canto stakers can increase the value of their LP assets locked in the Canto Lending market by utilizing the project’s auto-compounding feature.

Slingshot

Another web3 trading platform, Slingshot, proposes a solution to crypto trading problems by presenting traders with maximum value through positive slippage. The trading platform gathers data on several liquidity protocols to present traders with the best available market options on their preferred trading pairs. Slingshot also offers users positive slippage experienced during trades further incentivizing traders to deal on the web3 platform.

Canto Governance

Source: Canto - Governance

Canto takes a new approach to governance with a concept called unified governance. With Canto’s unified governance, the governance of the network and the governance of the FPI applications are merged and controlled by Canto token stakeholders. Essentially, Canto stakers have a say in not just the governance of the network but also its DeFi applications, CLM and Canto DEX. Applications built under the FPI model will also be part of the unified governance model.

Canto stakers can visit the Canto governance page to vote on proposals for the network. Each proposal is displayed on the governance page with its title, start time, end time, and a bar representing the number of votes accrued.

News on Canto

Canto has plans to expand its operation in FPI applications in the future. This expansion will allow cryptocurrency users to bridge crypto from various sources and networks into the Canto DEX. The project backers believe that increasing free public infrastructure is crucial for the growth of the crypto and blockchain industries.

As time progresses, the Canto Lending Market will become less conservative and offer support for additional collateralization assets. As a result, the system’s DAO will be able to enhance the capital efficiency of the CLM after certain benchmarks have been met.

The DAO’s actions will prioritize maintaining free access to the Canto blockchain system for all users. However, the system will remain self-sustaining by rewarding stakers and discouraging rent-seekers from attempting to take control of the network.

How to own CANTO

To own CANTO, you can use the services of a centralized crypto exchange. Start by creating a Gate.io account, and get it verified and funded. Then you are ready to go through the steps to buy CANTO.

Is CANTO a Good Investment?

CANTO seems to present an exceptional investment opportunity. However, it is important to remember that investing in cryptocurrencies involves inherent risks, and success is not guaranteed. Although there are numerous optimistic predictions and expectations, CANTO is still an experimental platform. As with any investment, traders should only commit funds they can afford to lose.