8 min read

Canto: The Real World Asset Chain

Towards a NeoFinance Future.

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Published on

17 June, 2024


Imagine a world where one has to pay to sit on a park bench. It's quite certain that the number of people using these benches or even visiting the park would decrease over time. Public infrastructure and its availability dictate how the world works, and it's no different for crypto. The contributors to the Canto network are prioritizing a people-first approach in their project development. Their core belief is that “essential financial tools should never be locked away from the public”.

An important piece of the puzzle when building a people-centric system is to bring stability and transparency to the digital currency ecosystem, and Canto blockchain achieves this by being one of the earliest proponents and adopters of Real World Assets (RWAs) Tokenization. We take a look into how the Canto network is molding itself into the premier RWA Chain.

Canto Tenets

Canto network unlike most other Layer 1 solutions, is built by a decentralized, non-hierarchial group of enthusiasts. They have gone the extra mile to bake the transparent and public-service nature of the project into its very structure. Canto network’s unique mission results from the observation of 3 particular systematic flaws present in most L1s -

  • Fee Extraction: Platforms often charge fees for transactions, lending, and other services, creating a barrier to entry and ongoing costs for users.

  • Governance Tokens and Rent-seeking: Projects usually launch governance tokens that can extract rent from users. These tokens often lead to centralization of control and can evolve to prioritize profit over user benefits.

  • Volatility and Stability: Stablecoins like DAI, USDC, and USDT aim to maintain value, but the mechanisms to achieve this can sometimes prioritize revenue over stability.

Canto’s tenets involve making sure that the chain avoids these critical issues. The arsenal to tackle these issues consists of

  • Free Public Infrastructure/ Ungoverned Core Financial Primitives

  • Real World Asset (RWA) Tokenization

For this article, we will take a brief look at Free public Infrastructures (FPIs) and then focus on the fast-growing sector of RWA Tokenization, out of which Canto network is building the world of NeoFinance.

Free Public Infrastructure

Canto blockchain's vision for Free Public Infrastructure (FPI) is inspired by early DeFi builders. They focus on providing core financial services without the typical fees or governance tokens that other DeFi projects use. This tackles the aforementioned problems of platform fees and rent-seeking via tokens.

  • Decentralized Exchanges (DEXes): Unlike platforms like Uniswap, Canto's DEX cannot be upgraded or have fees added. It remains free and ungoverned, ensuring it can't evolve into a fee-extracting entity.

  • Lending Markets: Managed by Canto stakers who have a vested interest in the ecosystem's growth rather than extracting rent. This ensures a focus on creating a developer and user-friendly environment.

  • Unit of Account (NOTE): The stable token of the Canto blockchain, designed to minimize volatility. Interest charged for stabilizing NOTE's price funds public goods. All interest paid by borrowers goes to lenders without protocol-level fees.

This model aligns the operation of these financial primitives with the public interest, aiming to create a robust and fair ecosystem. This ensures that liquidity is available to the public, and rent extraction is avoided.

Real World Asset Tokenization

What is RWA in Crypto?

Real-World Assets (RWAs) are physical or traditional financial assets, such as real estate, treasury bills, or bonds, that are tokenized to exist on a blockchain. Tokenization involves converting these assets into digital tokens that can be traded on a blockchain platform, offering greater liquidity and accessibility.

Advent of Real World Assets

The tokenization of Real World Assets (RWAs) has been a steadily growing narrative in the crypto world over the past few months. Although discussions about RWAs have been around for years, the proliferation of stablecoins, regulatory uncertainty, and growing institutional interest have made diversifying and tokenizing novel assets a clear next step.

Through Real World Assets, the crypto world gains much-needed stability by providing a hedge against fluctuating prices. This is achieved by anchoring value in physical and financial assets, which are less volatile than many cryptocurrencies. Tokenizing assets also provides liquidity and accessibility to new asset types, opening the digital currency market to a broad range of investors. A BNY Mellon report suggested the inevitability of tokenization.

Tokenizing real-world assets like U.S. Treasury bonds, real estate, and commodities offers new avenues for earning returns that are traditionally more stable compared to typical cryptocurrency investments. This stability attracts more institutional investors, who are more aligned with traditional finance. The tokenization of RWAs could be the bridge that connects traditional finance and decentralized finance, bringing credibility to digital currencies and exposing traditional investors to the benefits of digital assets.

To add some more substance to our words, a study last year claimed a $10 trillion opportunity in the RWA space by 2030. Moreover, BlackRock recently launched its first tokenized fund on the Ethereum network. Further, in the first quarter of 2024, Fortunafi reported RWAs continuing their steady rise.

Canto Network - The RWA Chain

Last year, as a part of its vision towards building a novel financial system aka NeoFinance, Canto blockchain took the path of RWAs to enhance its Free Public Infrastructure. The team considered multiple approaches and had its initial rendezvous with Fortunafi - a leading financial institution focused on RWAs. Soon, Hashnote joined Canto’s RWA infrastructure.

​Fortunafi is a platform that tokenizes real-world assets to provide liquidity and accessibility in the digital finance space.

Hashnote is a DeFi startup offering yield-bearing tokens and crypto investment strategies tailored for institutions​.

Recently the $CANTO coin was announced as a component of Fortunafi and Indexcoop’s first RWA ETF. Evidently, over the last year, Canto has been building a firm footing in the RWA infrastructure space. Today, with developments in Cyclone Stack and further growth, Canto has become a promising L1. Dedicated to building Free Public Infrastructure, with its NOTE token stabilized by RWAs.

Canto's Approach to RWAs

Canto’s vision of providing Free Public Infrastructure can be realized only through the integration of RWAs. Canto’s genius lies in the very structural implementation of RWAs in its ecosystem -

  • ​​Enhanced Capital Efficiency: By backing the decentralized unit of account, NOTE, with tokenized treasury bills and other RWAs, Canto ensures that these assets provide a stable and reliable value base. This stability allows users to borrow against these assets, improving capital efficiency and enabling more efficient use of capital within the ecosystem.

  • Transparent and Competitive Financial Terms: Incorporating RWAs such as short-term US treasury bill tokens (e.g., USYC, fBILL, and ifBILL) allows Canto to offer transparent and competitive financial services. These assets are well-understood and carry less volatility compared to purely crypto-native assets, providing a stable foundation for financial activities.

  • Deep Liquidity and Incentives: Canto incentivizes the use of cNOTE (a tokenized deposit of NOTE) in lending markets and trading pools to ensure deep liquidity. Liquidity mining incentives are provided for cNOTE/USDC and NOTE/USDC trading pools, funded by Canto governance, which helps maintain a robust and liquid market.

Canto’s ecosystem consists of the NOTE currency, the Canto Lending Market (CLM), and the Canto DEX. CLM is governed by Canto stakers and provides a lending platform for its neofinance via RWAs and cNOTE. Canto Dex operates without governance or the ability to implement fees, running in perpetuity, to avoid rent-seeking behaviors. NOTE, meanwhile acts as the central currency and is supported by RWAs.

Real World Assets (RWAs) to bolster the stability and functionality of its currency, NOTE:

  • Over-Collateralization: NOTE is backed by more than $1 worth of collateral, primarily tokenized US Treasury bills like USYC, fBILL, and ifBILL. This ensures that each NOTE in circulation has substantial backing, promoting confidence and stability.

  • Price Stability: The price of NOTE is maintained around $1 through an algorithmic interest rate policy. This policy adjusts the interest rates based on the market price of NOTE. If NOTE trades below $1, interest rates increase to encourage buying; if above $1, rates decrease to incentivize borrowing.

  • Public Goods Funding: The interest charged on borrowing NOTE is directed towards funding public goods. This interest is collected in the Community Treasury and managed by Canto governance, ensuring that the funds are used for the community’s benefit.

Canto Stands Out as an RWA Chain

Canto has taken a truly unique approach to this space, building without an official foundation, presales, vesting, or venture backers—putting decentralization at its core. Built by a team of enthusiasts with the goal of creating a more inclusive, transparent, and efficient financial system, Canto's strength lies in its stability through the use of Real World Assets. By synthesizing the interests of crypto-native users and traditional finance, the Canto network is well-positioned for a long and reliable future.

About Luganodes

Luganodes is a world-class, Swiss-operated, non-custodial blockchain infrastructure provider that has rapidly gained recognition in the industry for offering institutional-grade services. It was born out of the Lugano Plan B Program, an initiative driven by Tether and the City of Lugano. Luganodes maintains an exceptional 99.9% uptime with round-the-clock monitoring by SRE experts. With support for 45+ PoS networks, it ranks among the top validators on Polygon, Polkadot, Sui, and Tron. Luganodes prioritizes security and compliance, holding the distinction of being one of the first staking providers to adhere to all SOC 2 Type II, GDPR, and ISO 27001 standards as well as offering Chainproof insurance to institutional clients.

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