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Canto CSR event review, project analysis and discovery logic

Read this article in 29 Minutes

Sacrifice agreement revenue for a model of composability.

Title: Canto CSR Event Review, Project Analysis and Discovery Logic

Original article by Ryanqyz, SevenUp DAO

Abstract:

(1) Recently, Canto has been on a roll, up 577% in January, and only started in the last eight trading days. The reason, it turns out, is that on January 23rd Canto announced Contract Secured Revenue(CSR), a fee-sharing model that will allow contract developers to earn revenue by taking a percentage of the transaction fees paid to the network when users interact with the contract.

This has increased confidence in Canto's weak value-capture capabilities.

(2) On the basis of Canto introduced, this paper will restore the history of the discovery of Alpha, so that you can find your own Alpha in the future.

(3) Canto is a 6-month-old L1 on Cosmos, with the idea of providing core DeFi components to users as free public infrastructure to facilitate the development of other DeFi "app Legos"; Through the free form, it has brought high recent TVL growth and is currently the seventh largest Layer1 in 24h trading volume. Prior to CSR, comments on Canto were generally that the concept was good, but value capture was relatively poor.

(4) Currently, Canto is basically the fork of old DeFi ecologically, and its lower limit is an ordinary Layer1. The key lies in TVL, trading volume and ecological project quality.

(5) In summary, for the Canto ecosystem, it is only necessary to sacrifice a few head DEX, loans, and agreement revenue from stablecoin projects for richer and free composability, which is an innovation in the cookie-cookie DeFi world.

Enjoy!

I. Overview

1.1 Introduction

1.1.1 Background: Cosmos

Cosmos Ecosystem features a dedicated chain, where each DApp can be developed as a blockchain to maximize its computational speed and storage capacity. Therefore, each block chain of Cosmos is a separate DApp. At present, public chains with high social popularity have Osmosis (DEX), EVMOS (EVM communication), Secret Network (privacy), Gravity Bridge (EVM-Cosmos Asset Cross Chain) and so on. In Cosmos, communication between different blockchains is realized through IBC protocol. Instead of the cross-chain mode in which the original funds are locked in the departure chain and released to users from the capital pool on the destination chain, high-speed and secure asset cross-chain is realized.

1.1.2 Overview of Canto

Canto is a Layer 1 public chain based on Cosmos ecology, compatible with EVM, with DeFi as the development core and free core components.

Driven by developer organisation Plex, Canto aims to drive innovation in the DeFi sector and bring more accessibility, transparency and freedom to traditional finance by providing a range of free public infrastructure.

In addition, Canto claims to be a fully decentralized blockchain, with no Token presale, no official team, and no VC capital support.

1.2 Core Features - Free public infrastructure FPI

The idea: DeFi's ecosystem evolved over the years with three core components: DEX, the lending marketplace, and a decentralized unit of account. Now, regardless of the DeFi component category, many projects have made the same decision: issue governance tokens to earn user fees.

Canto, on the other hand, proposes a radical concept of even these core DeFi components existing with the DeFi ecosystem as free public infrastructure to facilitate the development of other DeFi "applied Legos".

Canto made some innovations at the application level. Specifically, Canto Public Chain developed its own fork-in-compound lending marketplace, fork-in-Solidly DEX, and a stablecoin called NOTE. It calls this set of DeFi components Free Public Infrastructure (FPI).

According to Canto's official article introduction, it draws an analogy that the existing DeFi protocol is more like a private parking lot that only serves its own community for a fee, while Canto's FPI is more like a free parking lot open to all.

最重要的是，这些核心的公共基础设施，都将不设治理 Token ，杜绝了未来向用户收租的可能。此外，核心协议也将遵循「最小用户捕获」原则，不设置用户界面，用户只能通过第三方聚合器进行交易。这可最大限度降低中心化带来的影响。把免费贯彻到底的一个项目。

1.3 Team

Judging by the tweets, Canto's team is a veteran of the crypto industry.

@scott_lew_is is a collaboration between DeFi Pulse and Slingshot; @RobinWhitney_ was a key member of Acala and Karura; @0xzak is the co-creator of Slingshot and a consultant for DeFi Pulse.

Check out their Twitter feed.

Comments:

（1）团队有初心，无 Token 预售、无官方团队、无 VC 资本扶持。

Provides users with a good defi environment, and the defi protocol interaction process does not charge fees.

High near-term TVL growth has been achieved through the free format, but value capture is currently a concern.

(2) After the above items are added, there will be new value capture points. The key is to see whether people come to play in the free parking lot now and how they act behind it.

Ii. Ecology

2.1 Ecological Data

According to DeFiLlama data, since the New Year, the total TVL of Canto chain has been showing a rapid growth trend, increasing by 20.36% in the last 7 days and 93.53% in the last month. Its TVL has grown from $66 million at the beginning of the year to $136 million now.

If Polygon, Arbitrum, Optimism three Layer2 projects are removed, it is currently the seventh largest Layer1 in 24h trading volume.

Canto's current price is near an all-time high, from $0.07 a month ago to $0.42 now, making it one of the most sparkling runners of the New Year.

2.2 Application

Canto has developed three main application modules: DEX, lending and stablecoin, which are common applications with rigid requirements in DeFi.

随着生态系统的发展，每个公链的核心 DeFi 版块都做出了相同的决定：发行治理 Token 。 Token 通过其从未来用户那里提取租金 (费用) 的能力中获得价值。

Canto has taken a different approach, choose the core DeFi service as a free public infrastructure (FPI) (https://canto.mirror.xyz/STFv6-ZnOrsR6pJ7_JyFPt5JuhBXGQ3_lHNVEZAgUW8)

That is, there is no charge for DEX, loan and stablecoin services. Where existing agreements serve their communities more like pay-per-hour private parking, Canto's FPI intends to serve its communities in a way more akin to free parking on city streets.

2.2.1 DEX

目前 Canto 的原生 DEX 只支持注入流动性，暂不支持 Token 交易。 Token 交易需要通过外部 DEX Slingshot（Polygon 上的 DEX，前身是 DEX.AG）完成，see here：https://app.slingshot.finance/trade/

Canto's native DEX is part of its Free Public Infrastructure (FPI) and there is no LP fee for transaction pairs. The DEX itself cannot be upgraded and will remain ungoverned, will run permanently on Canto, and will not issue tokens or charge additional fees to prevent predatory rent-seeking.

2.2.2 Borrowing and Lending

Canto 的借贷协议也是 FPI 的一部分，由 CANTO Token 的质押者治理，他们的主要目标是为开发者和用户营造最佳的 DeFi 环境，因此不会得到来自应用层的利息收益。借款人支付的所有利息会全部分配给贷方，Canto 不提取任何费用。

2.2.3 Stablecoin - $NOTE

$NOTE is the original stablecoin of Canto Ecology and has the following features:

- Complete decentralization

- excess mortgage

- Backed by M1 assets

- Automation

- Governance through Accountant contract

$NOTE 的全部供应量是在发布时铸造的，然后仅提供给借贷市场供用户借贷。用户可以使用协议支持的抵押品从 Canto Lending Market (CLM) 借入 $NOTE，包括：其他稳定币、$CANTO、$ETH、$ATOM 或 Canto LP Token 。$NOTE 只能从 CLM 借；发行数量固定：不能创建新的 $NOTE。

Unlike DAI, users do not simply cast DAI through their own vault. Instead, users must borrow $notes from an "Account contract" on the Canto Lending Market, which is more similar to AAVE's new stablecoin, GHO, but is essentially a Compound fork.

Since $notes cannot be created and can only be borrowed, the Accountant contract uses the interest rate to manage the circulating supply of $Notes. The interest rate on $NOTE automatically adjusts up or down every 6 hours based on the TWAP of the market price of $NOTE. Keeping with the principle of FPI, the algorithm is designed to change interest rates to promote minimum volatility rather than maximize revenue.

If $Notes are trading below $1, interest rates are raised to increase the incentive to buy and lend $Notes.

If $Notes are trading at more than $1, the interest rate is lowered to make borrowing and selling $Notes more attractive.

0xYond 评论：由于稳定币在一个区块链生态中的重要位置（作为计价单位以及任何 Token 交易的路由），$NOTE 的成败很大程度上决定了 Canto 的生死。目前$NOTE 存在的问题依然是：

1. It is not the only stablecoin in the ecosystem. Its market value is smaller than USDT/USDC, and its adoption rate is low

2. The introduced algorithm is only used to stabilize the volatility of $NOTE and cannot maximize the benefits. Moreover, due to Canto's philosophy of free public infrastructure based on FPI, the revenue generated by the agreement that $NOTE can enjoy is 0, which also leads to the low adoption rate.

2.2.4 NFT marketplace - ALTO Market

An NFT marketplace, and no trading fees: https://alto.build

Bottom line: There are no transaction fees. NFT is denominated in Canto. Currently there are 57 projects.

2.3 EVM compatibility & governance

Most of the public chains in the Cosmos ecosystem have no way to communicate with the EVM ecosystem and must bridge assets with cross-chain Bridges and centralized trading platforms. At present, a few Cosmos public chains complete EVM compatibility, such as: EVMOS, Canto.

The Canto team built a custom module called GovShuttle for DApps on the EVM to read and implement governance proposals from the Cosmos SDK.

The Canto pledge can create and vote on a governance proposal on the SDK, and the proposal and results are transmitted to the Canto network's storage contract "Port" on the EVM, which propagates the proposal to the DApp deployed on the EVM. dApp takes the proposal ID as the parameter to retrieve the corresponding data of the proposal.

As a result, any DeFi application allowed on an EVM could theoretically become the common infrastructure governed by the Canto network, and the only thing the team needs to do is connect the application's governance interface to the Canto network without any further modifications.

Comments:

Currently, Canto is basically the fork of the old DeFi ecologically, and its lower limit is an ordinary Layer1. The key lies in TVL, trading volume and ecological project quality.

Iii. Review of the CSR Event

3.1 Event Itself

On January 22, Canto announced Contract Secured Revenue(CSR). CSR is a cost-sharing model on the Canto network that enables contract developers to earn revenue by taking a percentage of the transaction fees paid to the network when users interact with the contract.

Contract developers who register as CSRS receive some NFT. As revenue from the contract accumulates, the CSR NFT holder can claim it at any time. The NFT itself can be traded and combined in DApps. This composability provides a variety of use cases, including trading, packaging, investment, loan collateral, and so on. In essence, it gives developers a clearer long-term revenue path and makes them more motivated.

Canto's gas rates will increase significantly to meet the needs of the agreement revenue and potential use cases. On 25 January, the section on combustion and base charges will go live, and CSR functions will be deployed to the mainnet (but not turned on). 24 hours later, a new governance proposal was started, which was to raise gas fees and enable CSR.

Then the Canto market began.

3.2 Resubmission

3.2.1 TVL and currency price

At the time of the resumption, the boss of our company sent this picture:

Therefore, I try to conduct correlation analysis between TVL and currency price, as well as subdivision analysis.

It can be seen that after the adoption of the CSR proposal, the TVL of Canto Dex was the first to react, followed by Lending, and finally the total TVL increased rapidly. (The TVL of other subcategories is too low and has been eliminated.)

However, there is only a correlation between TVL and price, which does not mean that TVL can explain currency price. TVL and coin prices are effects, not causes.

3.2.2 Rediscovery process

As far back as November, twitter started talking about Canto's bridge to SYN, suggesting Canto might have an Alpha chance:

If you follow carefully, you should add Canto to the Watch List after you have studied the Canto concept before the launch in July. After all, Canto's idea is still very good, that depending on its ecological changes, there is some possibility of ecological evolution, will have a great impact on the male chain that is born.

Carefully understand, will find:

(1) The community's proposal process is fast and numerous: 5-10 proposals a month. The vote was very positive and a positive sign:

(2) When the Canto SYN bridge was built, the currency price and TVL also rose simultaneously

(3) The Canto project seems to be very close to the top flow of Crypto Twitter, the popularity has not been low, search Twitter is a real interaction tweet. Whether it's "hot" or "new" there's always a hot discussion.

According to twitterscan, his infulencer is still very large, and it is still in the top ten to this day.

(4) On January 19, 2023, VC Varient announced its investment in Canto. It rose 60% that day, and on January 21, the media began reporting that Canto had started to rise after Varient's investment.

(5) On January 23, 2023, CSR announced that the 6 times offer would start until the end of the month.

Iv. Summary

4.1 For Canto itself

Canto's current ecosystem is still in its early stages, and apart from the DeFi triad of DEX, lending, and stablecoin, it lacks innovative applications. At the same time, due to the team's main concept of free public facilities, the liquidity provider (LP) can get very limited economic benefits. However, its value capture capability has been improved after CSR.

For the Canto ecosystem, the tradeoff of a few head item agreement revenues for richer and free composability is an innovation in the cookie-cutter DeFi world.

It is believed that with the high speed and efficiency of Cosmos and zero rates, Canto can attract a wave of DeFi developers to start their innovative experiments.

4.2 For discovering Alpha

(1) For innovative concepts and new public chains, it is necessary to have a certain understanding of the advance, so as to grasp Alpha.

(2) Pay attention to the monthly Alpha opportunities summarized by English streamers, see if there are any objects related to their Watchlist, and understand the events for tracking

(3) Observe the Twitter popularity of English stream, understand English stream meme, and top stream CT, observe community discussion, and understand the community depth of the project.

(4) Events, currency price and TVL all have a transmission process. Depending on which slice of profit you want. Don't wait for the Chinese information to come out again, then you can only accept the offer.

(5) If it's just speculation, take a look at the chart below.