Project Research Report | Canto: A fast-growing new DeFi public chain based on Cosmos

PANews · 2023-02-06T05:35:01.000Z
Original text: "[TokenMore] Bimeng Investment Research - Canto (CANTO)" Author: TokenMore The data in this article are as of 2023/2/2. 1. Project brief description Canto is a Layer1 network based on the Cosmos SDK and an EVM-compatible chain specially designed for DeFi. Compared with other emerging EVM chains, Canto pursues a high degree of decentralization, has no investors, does not set up a foundation, and relies more on the community. It also provides free public infrastructure (FPI) and contract revenue distribution (CSR) for developers. ). (Recommended reading: "TVL surpassed Solana, market value soared 300%, why is the new public chain Canto so popular?")
Original article: [TokenMore] Bimeng Investment Research - Canto (CANTO)
Author: TokenMore
The data in this article is as of 2/2/2023.
1. Project Description
Canto is a Layer1 network based on Cosmos SDK and an EVM-compatible chain designed specifically for DeFi. Compared with other emerging EVM chains, Canto is highly decentralized, has no investors, does not set up foundations, relies more on the community, and provides free public infrastructure (FPI) and contract revenue distribution (CSR) for developers. (Recommended reading: "TVL surpasses Solana, market value soars 300%, why is the new public chain Canto so popular?")
2. Free Public Infrastructure (FPI)
DEX, lending, and stablecoins are the basic ecological protocols of a public chain. These protocols often issue governance tokens, which is equivalent to obtaining usage rent from users. Canto changed its thinking and officially launched these three basic protocols, which are equivalent to the public utilities of the chain, without issuing additional governance tokens.
 DEX Chant
AMM DEX, cannot be upgraded, remains unregulated, runs forever, and does not require governance. Based on the principle of "minimum user capture", Canto DEX has no front-end interface and can only be traded through aggregators.
CLM (Canto Lending Market)
The lending market is forked from Compound v2, and governance is controlled by Canto stakers. All interest paid by borrowers goes to lenders, and the protocol does not charge any fees.
NOTE Stablecoins
At the beginning of its release, NOTE minted all its supply (basically unlimited) and put it into CLM for users to borrow. Users can pledge assets in CLM to borrow NOTE. In other words, NOTE can only be borrowed in CLM, and new NOTE cannot be minted. The interest generated by borrowing NOTE is used for ecosystem construction and is managed by Canto DAO.
NOTE stabilizes its price at $1 by adjusting the interest rate. First of all, there is a premise that no matter how much NOTE is worth in the trading market, its value in the lending market is always equal to $1. In the actual trading market, when NOTE is lower than $1, the lending rate is increased, and users are willing to deposit interest to reduce circulation and sell; when it is higher than $1, the lending rate is lowered, and users are more willing to borrow and sell NOTE. NOTE's interest rate will be automatically adjusted every 6 hours according to the TWAP of the market price.
3. Contractual Revenue Distribution (CSR)
CSR (Contract Secured Revenue) is a fee sharing model of the Canto network. Part of the fees generated when users interact with contracts on the chain will be allocated to the contract developer.
The specific implementation method is as follows: Contract developers registered as CSRs will receive some NFTs for claiming profits. CSRs accumulate the fee income generated by each transaction of users into NFTs, and NFT owners can withdraw this income at any time. In addition, these NFTs can be traded, split and combined in DApps created by the community.
The benefits of introducing CSR are:
Customizable distribution: Using third-party tools, a project’s accumulated revenue can be distributed from NFTs to multiple developers.
Mortgage: CSR NFT can be used as collateral for loans, making it easier for developers to raise development funds.
Support for complex projects: CSR supports the accumulation of accrued revenue from multiple contracts into 1 NFT, which means that even complex agreements involving multiple contracts can make full use of CSR to obtain revenue.
Avoid regulatory risks: Issuing tokens carries regulatory risks. CSR allows project developers to obtain stable and continuous income without issuing tokens.
In summary, the main purpose of Canto launching CSR is to provide developers with stable income, so that they can avoid relying on institutional investment, token issuance, etc. to obtain income to maintain operations. In essence, it is to make the projects in the ecosystem more decentralized and closer to "public utilities" similar to FPI. When the high-quality top projects on the Canto chain are all token-free public utilities, the native token CANTO will also capture more value.
CSR Progress
On September 2, 2022, Canto filed a CSR.
On January 25, 2023 (EST), a chain upgrade proposal to launch CSR on the mainnet and destroy basic fees was voted through.
On January 26, 2023 (EST), a proposal to increase the Canto Gas fee level and enable CSR (disabled by default) was passed.
4. Product data TVL data
As shown in the figure below, the current (2023/2/2) TVL of the Canto chain is approximately US$169 million, ranking 17th among all blockchains.
There are currently five major ecosystems on the Canto chain, including Canto DEX and lending CLM in FPI, as well as the machine gun pool Y2R, third-party DEX Forteswap and CantoSwap. Among them, the TVL of Canto DEX is 113 million US dollars, accounting for about 67% of the total TVL; the TVL of CLM is 55.3 million US dollars, accounting for about 32% of the total TVL; the TVL of the other three protocols is negligible.
 
It is worth mentioning that since the TVL of Y2R Smart Pool basically comes from the LP of Canto DEX, a deduction adjustment has been made. Currently, the LP mining income of the platform is very high.
DEX transaction data
The trading volume on 2/1/2023 was US$22.52 million, and the trading volume began to rise sharply from January 24.
Cross-chain data
As of February 2, 2023, more than $370 million worth of assets have been cross-chained to the Canto chain.
 
5. Economic Model Token Distribution
The initial total supply of CANTO is 1 billion CANTO (theoretically, there is unlimited inflation, and the upper limit may be increased many years later, but it has no reference value in recent years). Among them, the initial circulation is 150 million CANTO.
The total token distribution is as follows:
Initial circulation:
13%: Initial Contributors
2%: Users who participated in the testnet launch
Remaining Circulation:
5%: for future public goods donations
35%: Medium-term liquidity mining rewards (distributed over the coming months and years)
45%: Long-term liquidity mining rewards (distributed in the next 5-10 years)
Market value information
The current price of CANTO token is $0.56, with approximately 424 million CANTO in circulation, a circulating market value of approximately $237 million, and a fully released market value (based on the initial total of 1 billion) of approximately $560 million.
Token Release
According to DAO governance data, the current CANTO release amount (staking rewards + mining rewards) has undergone three changes, as follows:
Starting from August 18, 2022, staking rewards will be 16 million CANTO every 30 days, and LP mining rewards will be 62.5 million CANTO.
Starting from September 18, 2022, 4.5 million CANTO will be rewarded for staking every 30 days, and 30.8 million CANTO will be rewarded for LP mining.
Starting from January 17, 2023, 3.5 million CANTO will be rewarded for staking every 30 days, and 23.4 million CANTO will be rewarded for LP mining.
Currently, about 900,000 CANTO are released every day.
Token Data
According to a rough calculation based on the data disclosed on the official website, there are currently more than 200 million CANTO tokens staked. It will take 21 days to withdraw after staking.
According to block explorer data, approximately 83.84 million CANTO has been converted into wCANTO, mainly used to add LPs to Canto DEX.
 
6. Project Summary
Canto's decentralized concept is its characteristic. All rules, including token release, are strictly approved by DAO voting. The design of FPI and CSR are also closely linked to the theme of decentralization.
Canto promotes FPI and CSR to reduce the need for on-chain ecological projects to raise funds and issue tokens. Thinking further, its ultimate goal is to enable all ecological projects to empower the native token CANTO.
Judging from the growth of on-chain data/token market value, this round of increase is mainly driven by the launch of CSR. In addition, the current on-chain mining APY is very high, which also attracts many users to mine.
CANTO has a market value of approximately $237 million, and more than 200 million of the 424 million in circulation are staked. Compared with other L1s with similar TVL data, CELO (Celo), which is also an EVM, has a market value of $375 million (FDV $769 million), and OSMO (Osmosis), which is also in the Cosmos ecosystem, has a market value of $550 million (FDV $1.05 billion).
The Cosmos ecosystem has not yet produced a trump card product with absolute dominance. Canto comes with DEX, lending and stablecoins, and the ecosystem empowers the native tokens themselves. EVM is more suitable for the usage habits of most users. If various data grow steadily, it has the opportunity to become the leader of the Cosmos ecosystem.