Canto has been a very “hot” Layer-1 over the past time, with the project’s token growing over x6 times in less than 1 month. Many KOLs on Twitter also mentioned Canto. So, what is this project and should it be honored at this time? Come find out with me in this article!
Corner (SONG)
Launched in August 2022, Canto (CANTO) is a Layer-1 project that aims to build DeFi exactly what it aims to be: decentralized, decentralized, cheap and accessible.
Canto is built on Cosmos’ Tendermint consensus engine, powered by Canto validator nodes and an EVM implementation layer via the Cosmos SDK builder.
Canto’s original core products include:
Canto DEX: Free DEX for liquidity providers.
Canto Lending Market: Private lending pool from Compound v2.
Stablecoin NOTE: It is a stable currency issued by Canto Lending Market.
CANTO is the project’s native token. Initially, the total supply of CANTO will be 1,000,000,000 (one billion) tokens. In the future, CANTO can continue to expand and increase the total supply based on the demand of the network.
You can learn more about CANTO in this article.
In terms of use, CANTO is currently mainly used for Staking and as a reward for Liquidity Mining, but it can also be used for Governance (protocol governance). Among them, you should pay attention to the token distribution of liquidity mining activities:
45% of the tokens will be used to reward liquidity mining in the long term and distributed over the next 5-10 years.
35% of the tokens will be used to reward short-term liquidity mining and will be distributed in the next few months.
Highlights of CANTO
To achieve its goals, Canto focuses on 3 competitive advantages:
Free for Liquidity Providers (LPs): Those who provide liquidity on Canto will be completely exempt from associated fees (liquidity deposits/withdrawals).
Limit future inflation: The DeFi protocol on Canto will be built for the community, issue no tokens, and use tokens as a way to “borrow from the future” to attract liquidity.
Minimizing “owning” users: Canto will only be a liquidity platform and manipulation will be pushed mainly to 3rd party protocols.
Comment
Typically, DeFi projects use their own tokens to attract liquidity and users through programs such as Liquidity Rewards, Retroactive, etc…
Limiting token issuance for DeFi protocols can be challenging for the projects themselves to attract liquidity and users. To solve this problem, Canto will follow the following path:
Although this direction has the advantage of avoiding the "future inflation" of many old DeFi projects; however, the actual cost of providing/withdrawing liquidity may not be too large, so reducing costs only for LPs may not be an attractive enough condition.
Furthermore, if you understand the token economics of the project, you will immediately see that Canto is also using CANTO tokens to encourage liquidity by providing rewards for liquidity. The only difference between Canto and the traditional ecosystem is that they always use Layer-1 tokens instead of creating more tokens from other projects.
Support and development team
At present, the information of the project development team is not yet known. There is also no fundraising going on for the project.
Actual operating conditions
Products currently developed by Canto include Bridge, Staking, LP Interface, Lending-Borrowing and Governance.
Bridge
Serving as a bridge for asset transfers between Canto and other ecosystems will initially be Ethereum.
According to data from Dune Analytics, as of noon on January 30, the total cash flow between Ethereum and Canto was approximately $347 million, with an inflow of $225.5 million and an outflow of $194.95 million.
As a bridge to the new ecosystem, the total amount circulated between Ethereum and Canto since it started operating in August 2022 is US$347 million, indicating that this bridge operates well and is stable.
The main circulating assets are stablecoins (USDC, USDT) and WETH.
Staking
Currently, Canto has 93 active verification nodes, and the total Staking value is approximately US$95.97 million, accounting for approximately 50% of the circulating capital. It is particularly important to note that the total amount of staking tokens held by the first three wallets exceeds 30%.
Lending & Borrowing
The product will operate similarly to Compound, allowing users to use crypto assets as collateral and borrow a percentage of other crypto assets. Currently, Canto Lending only allows two types of collateral, USDC and USDT. In the future, the project will continue to add other types of assets, including LP Tokens, to diversify collateral.
According to DeFiLlama data, Canto Lending currently has total assets of approximately US$47.9 million, of which the amount of lending assets is 267,570 USDT. The above data shows that Canto’s current capital utilization efficiency is very low. Most of the funds are deposited into the ecosystem only for farming to obtain CANTO.
Canto DEX and LP interface
This is a product for users to provide liquidity to Canto DEX and execute trades. There are currently 5 liquidity pools, including CANTO/ATOM, CANTO/ETH, CANTO/NOTE, NOTE/USDC and NOTE/USDT.
You can see that stablecoin pools NOTE/USDC and NOTE/USDT have the highest TVL. This is understandable because the liquidity provided by stablecoins is quite safe and there is almost no risk of impermanent losses. The CANTO/NOTE liquidity pair is also a very liquid pair, as most users need to purchase CANTO with the stablecoin in order to participate in the ecosystem.
Governance
A product that allows token holders to vote to implement proposals related to protocol governance. You can stake your CANTO to participate in voting.
generalize
Basically, Canto’s model will operate under the Free Public mechanism, which focuses on community building and empowerment. Unlike other Layer-1 projects that only build infrastructure supporting protocols, Canto will even build the most important basic parts of DeFi: DEX, Lending, and Stablecoins, without the need for the 3 projects to be judged individually. This helps Canto focus all of its value on the project’s CANTO coin.
However, we also need to admit that Cantor is still "young". The large trading volume is the reason for the market's attention on this project, but in fact the trading volume mainly comes from the CANTO/NOTE pair. If the price of CANTO drops, trading volume will decrease rapidly accordingly.
Additionally, Canto’s lending component is limited. Generally speaking, the cash flow flowing into the ecosystem at this time is mainly speculating on CANTO or farming for rewards (also known as CANTO). Therefore, CANTO may face greater unloading pressure in the near future.
Additionally, you need to be aware of the risks when the project development team is completely anonymous. The project’s tokenomics design also suggests that liquidity mining activities will lead to significant inflation in the near future (35% of total supply) and long-term (45% of total supply). Therefore, although Canto is a very popular keyword that leads to fomo, if you don’t have a good position, you still have to be careful when making money.
Those are my current thoughts on #layer-1 Canto (CANTO). See you in the next post!
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