Strengths and Weaknesses
- Block creation: Creating a block on Ethereum takes around 17 seconds, while Canto creates blocks in just 7 seconds
- Free Public Infrastructure (FPI): The vision of building a free, low-cost blockchain
- NOTE: The architecture of stablecoins makes for an interesting product for a lending platform
- Fairly new blockchain: Canto has only been around for a short time and is still evolving
- Marketing: There is no foundation or clear promotion behind the project
Canto is an Ethereum Virtual Machine (EVM)-based permissionless blockchain with a Tendermint consensus core that operates on Proof of Stake (PoS) consensus, and an EVM execution layer, as well as basic financial primitives to support Free Public Infrastructure (FPI).
Canto is built on the idea of providing public infrastructure for free, which is one of the main principles of the DeFi movement. It offers several financial tools, including Canto DEX and Canto Lending Market, which are free for liquidity providers and aim to support FPI. Free Public Infrastructure is a cornerstone of Canto and aims to ensure that basic DeFi elements do not have any governance by sovereign assets or the ability to profit from revenue.
Canto is also very engaged with its community and supports a completely open approach to discussing its products and services. The company has not established any official resources or branding materials, but developers and community members have the opportunity to create their own resources, channels, and discussions on the platform. The company enjoys strong community support, thanks to its strong focus on FPI and its efforts to minimize the influence of centralized incentives in the DeFi environment.
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Functioning of the Chain
Canto EVM is fully compatible with Geth and EVM, which means that developers can use the same wallets, deploy the same smart contract source code, and use the same tools as on the Ethereum blockchain. The Canto execution layer has a shorter block time and a modified gas fee model compared with Ethereum. After the merge, Ethereum's block time is 17 seconds, while Canto EVM has a block time of approximately 7 seconds. Canto EVM uses the modified gas model EIP-1559 without priority fees, with a minimum base fee of 1,000 acanto (the equivalent of gwei), which adjusts itself based on block congestion.
Contract Secured Revenue model (CSR) is a fee-sharing model that allows users to claim a percentage of transaction fees paid when interacting with their smart contracts. CSR was added to the Canto chain update v5.0.0 with an initial fee split of 20% based on a successful governance proposal. To receive CSR fees, you must register your contracts with the CSR Turnstile smart contract and receive a transferable NFT that represents the right to claim income from that contract. CSR fees accumulate in the Turnstile contract and can be collected by entering the ID of the CSR NFT token you own.
The governance system on the Canto blockchain is based on the x/gov module of the Cosmos SDK. This module allows CANTO stakers to vote on proposals with votes weighted in proportion to their stake.
The governance module supports the following basic functions:
- Proposal submission: Users can submit governance proposals with a deposit. Once the minimum deposit is reached, the proposal enters the voting period
- Voting: Participants can vote on proposals that have reached the minimum deposit. Votes are weighted in proportion to the staker's stake in the network
- Inheritance and sanctions: If a delegate does not use their vote, that vote can be transferred to another validator. If a validator violates the system's rules, their deposit can be reduced
- Deposit withdrawal: Users who have deposited for proposals have the option to get their deposit back if the proposal is accepted, or if it never enters the voting period
The module was specifically created to manage applications deployed in the EVM system at the network level of the Canto blockchain. Functionally, it allows for information transfer from Cosmos SDK governance proposals to an EVM oracle address, which can be read and implemented by dApps on the Canto blockchain.
The block explorer allows for the verification of smart contracts and for sharing their code and methods with other users. The explorer only supports contract verification through the Sourcify tool.
Canto Lending Protocol (CLP)
Canto Lending is a protocol deployed on the EVM network and based on the Compound Protocol v2. The main differences between Canto Lending and Compound are that Canto Lending does not use a specific asset, and management is controlled by and voted on by Canto network validators. The Canto Lending Market allows for the use of LP tokens from the Canto DEX as collateral, but users cannot borrow these tokens.
Canto Lending Market (CLM)
CLM is a decentralized lending platform designed to offer users a secure and transparent environment for borrowing and lending digital assets. One of the key features of this lending market is that management is controlled by Canto stakeholders. These stakeholders have a vested interest in the growth of the Canto ecosystem and strive to support the best environment for DeFi developers and users. CLM allows for the use of LP tokens from the Canto DEX as collateral. This means users can deposit their LP tokens as collateral, which will then be held on the loan market as an offer.
Canto DEX has limited updating capabilities and no official interface, but users can use the Slingshot platform to interact with DEX contracts. Canto blockchain utilizes Automated Market Makers (AMMs) to price assets and acquire liquidity from liquidity pools. Two types of liquidity pools are available: full ranges using the constant product and concentrated liquidity pools using yx^3 + xy^3 = k formulas for stablecoins and accounting units. Users can provide liquidity at this address and receive LP tokens, which can be provided on the Canto credit market or used as collateral for borrowing. Canto has 5 motivated pools, including concentrated liquidity pools for the USDC/NOTE and USDT/NOTE pairs, and full ranges for the CANTO/ETH, CANTO/ATOM, and NOTE/CANTO pairs.
Canto uses Gravity Bridge as a bridge between Ethereum and Cosmos, which is integrated into their user interface. Gravity Bridge works by locking tokens on one side and minting a representation of that token on the other side using validators instead of a set of actors with multiple signatures or permissions. Gravity Bridge has two components: a Solidity contract on Ethereum and a Cosmos SDK module on the Gravity Bridge blockchain. The contract is compact and audited by three independent teams. Gravity is fully controlled by the validators of the Gravity Bridge blockchain in proportion to their stake. This means that its security and decentralization are the same as the security of the Gravity Bridge blockchain itself.
NOTE is an accounting unit on the Canto account that has a value that adjusts towards 1 USD using an algorithmic interest rate policy. NOTE cannot be created; only borrowed from the "accountant" on CLM. All interest charged by the accountant is earmarked for financing public goods and is managed by the Canto DAO. NOTE is a fully immutable ERC-20 token backed by collateral borrowed on CLM (currently, this only applies to USDC and USDT). Canto Lending Market enables excellent capital efficiency by allowing participants to borrow stablecoin collateral that backs NOTE. The interest rate on NOTE automatically adjusts up or down every 6 hours based on the TWAP market price. The algorithm that manages this interest rate adjustment aims to maintain the stability of the NOTE price, not to maximize profits.
NOTE stablecoin is not as ordinary as it may seem. Many stablecoins that are managed by smart contracts do not last long and lose their value over time. However, NOTE is backed by more than 100% (overcollateralized), which could help maintain its peg in the future. Canto claims that NOTE is not pegged to a fixed value of 1 USD, but will move around that price. So far, it appears that their system is properly set up, as this "stablecoin" has never fallen below the value of 1 USD in its 8 months of existence, remaining above that value for the entirety.
You can see the price history here. Of course, eight months is a short period of time, but compared to USDX, which is issued by the Kava blockchain and also backed by collateral, it behaves completely differently. The decentralization of the entire blockchain may contribute to this, as the community votes on every step that will be taken, and there are no VC funds or greedy founders around. Whatever the case may be, we will see in the future how NOTE performs, but in my opinion, it has good prospects for the future, as does the entire Canto blockchain.
- In the spring, the Canto blockchain was launched
- August, an upgrade to version 2.0.0 was released
- October, the development team was expanded to include the B-Harvest team
- October, upgrades to versions 3.0.0 and 4.0.0 were released
- January, an upgrade to version 5.0.0 was released
- February, ERC-20 tokens for Canto blockchain were added, including INJ, KAVA, AKT, OSMO, SOMM, GRAV, CMDX, and CRE
Upgrade to 5.0.0:
- Update the CSR module in x/csr - This update is intended to improve the performance and stability of the module
- Update the Store for CSR key storage - This update is intended to improve security and prevent unauthorized access to sensitive data
- Upgrade utilities for version 5.0.0 - These utilities are intended to make it easier for developers to update their code to the latest version of the software. They provide a simplified process for identifying and resolving compatibility issues that may arise during the update process
Scott Lewis, co-founder of DeFi Pulse and Slingshot Crypto, is a key pillar of the Canto blockchain. His experience and vision in the field of decentralized finance and cryptocurrencies bring excellent opportunities for further development to Canto.
In addition to Scott Lewis, the development of Canto is also overseen by the Plex team, which specializes in network development, free public infrastructure, and the canto.io frontend. The Plex team is a key partner of Canto, and its work significantly contributes to creating a user-friendly and secure environment for decentralized finance.
Recently, a DAO proposal was approved to make the B-Harvest team, the main developers for Canto. This team has extensive experience in development within the Cosmos ecosystem, and its work with the Canto team will only increase the expertise and technical knowledge behind the project.
Another significant contributor to the development of Canto is NeoBase. This company manages the Canto EVM blockchain explorer and has developed the Canto analytics panel, which provides detailed information about the protocol, including the lending market, and also covers Canto DEX and Forteswap. These tools provide Canto users with the necessary information for decision-making and investing in decentralized finance.
The native coin of the Canto blockchain is CANTO.
Its uses include:
- Paying transaction fees
- Rewarding developers and users who contribute to the operation of the blockchain
Since the Canto blockchain aims to be truly decentralized and has no foundation or entity to manage it, it has several types of governance arrangements:
- Proposal governance: Each account can submit a proposal through the Canto node. Once submitted, the proposal is identified by a unique proposal ID. To prevent spamming the system, proposals must be accompanied by a minimum deposit of 1,000 CANTO. Newly created proposals that do not have the minimum number of coins are placed in a queue of inactive proposals and remain there until their deposit exceeds the required minimum. Other users holding CANTO coins can increase the deposit by submitting a deposit transaction. If the number of deposited coins does not exceed the minimum required value before the expiration of the coin deposit period, the proposal will be destroyed (removed from the system) and the coin deposit will be burned. The deposit is held in escrow and managed by the governance module until the proposal has been completed (either accepted or rejected)
- Lending market governance: Management proposals are initiated by the network and voted on by validators using the governance module. A special type of proposal, the Canto proposal, is used for managing the lending protocol. The proposal is then placed in a queue and processed in the same way as traditional governance proposals. When a proposal is approved, the GovShuttle module sends the proposal type to the EVM module, where it can be read by calling a smart contract at a specific oracle address
The first 25 validators out of 100 have 99% of their coins staked, which does not contribute much to decentralization. If the coin holders do not vote and instead leave it up to the validators, there is great potential for manipulation. Proposals go through approximately 80 to 120 million votes, which are represented by the first 5 to 6 validators.
Revenue & Tokenomics
The Canto blockchain has no foundation or entity to negotiate investments; everything is in the hands of the community and public voting. All revenue from network transaction fees is distributed according to the voting. The Contract Secured Revenue model manages the distribution of funds.
Distribution of Canto coin and inflation
The initial circulating supply of CANTO is divided as follows:
- 130,000,000 CANTO (13%) is allocated to initial contributors
- 20,000,000 CANTO (2%) is reserved for settlers
The remaining total supply of CANTO was subject to community voting and has been allocated as follows:
- 450,000,000 CANTO (45%) is allocated to long-term liquidity mining and will be distributed over the next 5-10 years
- 350,000,000 CANTO (35%) is allocated to medium-term liquidity mining, which will be distributed over the coming months and years
- 50,000,000 CANTO (5%) is allocated to future grants for public goods
Inflation plays a significant role in maintaining the security of the Canto blockchain. The total maximum supply of CANTO increases over time at a decreasing rate. All tokens from inflation are distributed proportionally to CANTO stakers based on their share of the network.
The emissions are structured into 30-day periods, after which future settings are voted upon, and rewards are distributed daily. As of March 18, 2023, the inflation rate is 3.26%, and the staking reward is 13.24% APR.
As of March 18, 2023, there are 459,182,866 CANTO coins in circulation. Of this amount, 257,275,210 CANTO coins are staked with validators, representing 56% of the total coins. These staked coins can affect the decentralization of the network. However, it should be noted that the distribution of coins is determined by Canto DAO voting, which ensures transparency and a democratic approach to decision-making regarding coin distribution. Nonetheless, it is important to monitor the ratio of coins staked with validators to ensure the security and stability of the Canto blockchain in the long term.
The Uniqueness of the Chain
Free Public Infrastructure (FPI)
Every blockchain ecosystem has made the same decision to launch a governance protocol asset that derives its value from the ability to earn rent from future users. However, Canto takes a different approach by launching these DeFi primitives as public benefit protocols, or FPI.
The goal of Canto's FPI is to provide services to its community that are similar to a public parking lot, as opposed to existing blockchains, which provide services to their community in a manner more akin to private, paid parking lots. Canto's DEX cannot be upgraded and remains unmanaged, preventing the possibility of predatory development towards rent-seeking behavior.
The management of the Canto loan market is controlled by Canto stakers, who have a broad interest in growing the ecosystem and supporting the best environment for DeFi developers and users. Therefore, they have no incentive to earn rent on the application layer.
In the case of NOTE, the accounting unit, interest charged for the purpose of stabilizing its price will contribute to the financing of public goods. The algorithm responsible for adjusting this interest rate is designed to support less volatile value instead of maximizing yields. All interest paid by borrowers will be distributed to lenders, with no protocol-level fees collected.
By entrusting the power to manage the chain to the users, Canto expects the functioning to naturally align with the public interest, leading to a healthy and robust ecosystem without the zero-sum games that have dominated the DeFi system.
How the Network is Secured
Chain security is maintained by 100 active validators on the Canto blockchain. Slashing in the Canto blockchain aims to maintain the network's integrity and deter validators from engaging in incorrect behavior.
Validators should exercise caution and ensure they avoid consensus errors and downtime to avoid penalties.
- Downtime slashing is a penalty imposed on a validator who fails to sign 3,000 consecutive blocks, which equates to approximately five hours of downtime. The validator will subsequently incur a penalty equivalent to 0.75% of their stake and be locked up for 1800 seconds (30 minutes)
- Consensus Fault Slashing is also penalized as it disrupts the network's consensus. If a validator makes any consensus errors, they are punished with a 5% reduction of their stake and are locked up indefinitely, meaning they are in tombstone. A validator who finds themselves in this state is permanently removed from the set of validators and cannot rejoin
- Double signing is the most common consensus error. Users should not run two validators with the same private key, as this would lead to double signing and a breach of consensus
- Tombstoning: The operator of a validator in tombstone can resume operations with a different key, but they will have to create their delegations from scratch. Delegates who were assigned to the validator in tombstone will have to revoke their delegations and re-delegate them to another validator
Slashing in the Canto blockchain aims to maintain the network's integrity and deter validators from engaging in incorrect behavior.
To ensure its security and reliability, the Canto blockchain has undergone several rigorous audits, including the Canto Open Audit Contest 1 and Contest2 as well as a solo audit by Ghoul.sol, all based on mitigations from the previous audits. In addition, the Gravity Bridge, an integral part of the Canto blockchain, has also been audited by Code4rena. These audits help maintain the trust of the Canto community and ensure the safety of their investments.
Running your own validator node requires owning your own hardware and having a continuous internet connection.
Minimum hardware requirements:
- CPU: 3.2 GHz with 4 cores
- RAM: 16 GB
- SSD: 100 GB
- CPU: 4.2 GHz with 6 cores
- RAM: 32 GB
- SSD: 500 GB
If your hardware meets the requirements, visit this page, which will guide you through the detailed setup and launch of your validator node.
Benefits of a validator:
- Rewards in the form of new CANTO coins
- Contribution to blockchain security
- Increased voting power
If you're interested in supporting the security of the Canto blockchain and earning rewards but don't want to operate your own node, delegating your coins to a validator is the best way to go. It's a simple process that can be done in a few steps.
First, visit Staking page and select a validator to delegate your coins to. Make sure to pay attention to the validator's fee structure and consider their track record before making a decision.
Once you've chosen a validator, you can delegate your coins to them through the staking interface. The process is secure and transparent, and you'll still maintain full control over your coins while they're delegated.
Keep in mind that the rewards you earn from delegation will depend on the validator's performance, so it's important to choose a reliable validator that you trust. You can monitor a validator's activity and performance on the Canto blockchain by checking their stats.
By delegating your coins to a validator, you'll be contributing to the overall security and decentralization of the Canto blockchain, while also earning rewards for your participation. So, if you're interested in getting involved in the Canto ecosystem, delegation is a great way to start.
Benefits of a delegate:
- No hardware required
- Rewards from the validator
- Contribution to the decentralization and security of the blockchain
As of April 20, 2023, Canto blockchain does not have a publicly released Road Map for 2023. However, the development of new features and updates is ongoing and based on proposals submitted by development teams or community members. These proposals are then discussed and decisions are made about their implementation in real time.
The Canto blockchain currently has 9 DeFi dApps. The three largest of these are:
- Canto DEX - DEX
- Canto Lending - Lending
- Beefy - Yield Aggregator
As of March 20, 2023, the Canto blockchain does not operate a grant program for the development of its ecosystem, but it does hold its Canto Online Hackathon. The hackathon is an ideal opportunity for those who want to contribute to the Canto community by creating new applications, expanding existing features, or improving the overall user experience. Participants have the chance to win prizes funded from the Canto treasury and future grants for public goods, which is a decentralized fund aimed at supporting innovation within the Canto ecosystem. The Canto hackathon is a good example of how Canto supports the development of its community and creates opportunities for anyone who wants to contribute to the development of the blockchain and its applications.
Canto focuses mainly on Discord and Twitter as its main platforms for communicating with the community. On Discord, you can find a wide range of discussions where you can learn all the important information about the projects and find many people and moderators who are ready to help you with your questions.
Canto also regularly shares updates on its Twitter account, where you can learn about new proposals, votes, and protocols coming to the Canto ecosystem.
On the other hand, Canto has not yet utilized its YouTube channel and other social media platforms, which may be a disadvantage for some users. However, this could be due to the decentralized structure of the platform, as it means that there is no specific foundation or group to take care of these networks. Nevertheless, with the expansion of the Canto blockchain, we can hope that the situation will change in the future, and Canto will expand its activities to other social platforms.
In keeping with the spirit of decentralization that lies at the heart of Canto, the project does not have any investors from large corporations or multinational companies. This also extends to the operation of the blockchain itself, as there is no centralized entity responsible for its management. In fact, the decision to distribute the initial supply of CANTO was made based on community voting. Furthermore, the community has not yet voted on any partnerships with other projects.
Where to Buy
When purchasing on a DEX (decentralized exchange), use the Canto blockchain directly:
When purchasing on a CEX (centralized exchange), always check if it supports CANTO. The CANTO coin is the 227th largest cryptocurrency but it is not yet very well-known, so most CEXs do not support it.
Examples of CEXs listing CANTO:
The Canto blockchain is one of the few blockchains that hasn't yet been funded from outside sources. There are currently no VC funds or large investors behind the project who hold a large number of CANTO and could therefore influence voting or price in the future. While the decentralization of locked coins among validators may not be attractive to some users, I believe that with wider adoption, staked coins will be distributed among other validators, making decentralization a reality. The Canto blockchain is in its early stages and, given the potential for market collapse, I would think carefully about investing in the ecosystem. You can find new projects on the Canto blockchain on Discord in the "Canto native projects" section.
Their FPI (Future Public Issuance) reads very nicely, and its implementation will certainly be time-consuming. After all, almost no DeFi project has yet succeeded in being fully decentralized and leaving all decisions to the community. In this regard, I wish Canto all the best and believe that they can achieve their goals. They certainly have the necessary tools to do so, and the community seems to be quite together, which is important for the success of the project.