Summary: Over the past few weeks, a relatively new Layer 1 has dominated conversations on Crypto Twitter: Canto. This blockchain was created to be as fair and transparent as possible and introduced the idea of Free Public Infrastructure. Let’s look at the technical details, how Canto sets itself apart from other chains, and whether or not ...
Over the past few weeks, a relatively new Layer 1 has dominated conversations on Crypto Twitter: Canto. This blockchain was created to be as fair and transparent as possible and introduced the idea of Free Public Infrastructure. Let’s look at the technical details, how Canto sets itself apart from other chains, and whether or not it could be a significant player in the next bull run.
Canto was released in late 2022 by a large group of contributors in an unorthodox manner compared to most projects - they did not receive any venture capital funding or create a foundation to govern the blockchain to be as decentralized and grassroots as possible. The blockchain was built using the Cosmos SDK, which allows blockchains to be rapidly created using the Tendermint consensus mechanism and provides easy interoperability between other Cosmos SDK-based chains, such as Cosmos, Osmosis, and the now-defunct Terra. It is also Ethereum Virtual Machine compatible, meaning that any contracts deployed on Ethereum can also be deployed on Canto.
Canto’s most unique feature is its focus on free public infrastructure, or FPI. On all other blockchains, DeFi primitives like exchanges, money markets, and value transfer mechanisms are governed by DAOs and run similarly to businesses. For example, every trade on a decentralized exchange like Sushiswap sees a cut of the transaction fee going to SUSHI token holders, similar to the transaction fee on a money market like Aave or Compound. While this is great for the token holders of these protocols, Canto saw this as an issue since the ultimate goal of these primitives is to extract value from their users. In response, the Canto blockchain launched with a native exchange, money market, and stablecoin-esque token protocols, all of which have no associated token or DAO and take no fees. This is the essence of free public infrastructure and helps Canto accomplish its goal of being the “best execution layer for original work.” They also plan to add more primitives in the future.
With FPI in place, developers can innovate on top of these primitives to create unique protocols not reliant on any other DAO or protocol with its economic incentive structure. It is analogous to car companies being able to create new automobiles without having to worry about also creating a network of roads. So far, very few protocols have been developed on Canto, and none seem to be incredibly early. That being said, the layer 1 is still new, and it takes time for applications to be developed and deployed.
Since the start of 2023, Canto’s total value locked has tripled from $65 million to around $190 million. The CANTO token jumped from 7 cents to 70 cents with a market capitalization of around $200 million. The token is used for blockchain governance and staking to secure the network. The token allocation is fair and community-centric, with only 13% going to the contributors and 80% being devoted to medium and long-term liquidity mining.
Canto is undoubtedly an interesting project taking a unique development and growth approach emphasizing decentralization and innovation. Whether or not this strategy will pay off remains to be seen: they could quickly lose market share to other blockchains that are more aggressive with their development and partnerships at the cost of some centralization, such as having a foundation. If there are still no exciting decentralized applications on the blockchain in a few months from now, then it is likely that the Canto experiment can be safely considered a failure. Nonetheless, following Canto will be an interesting case study into how much blockchain users value a fair and open market, as well as the benefits of FPI.
By Lincoln Murr