Some online speculate that the increase in Canto price could be attributed to an increase in the volume of Note, the quasi-stablecoin issued by Canto and pegged to USDT/USDC.
Recently, some Twitter users began to speculate that the Layer 1 decentralized token could eventually face downward pressure due to its connection to Note, warning investors that a secured peg may be different only semantically from the one TerraUSD/UST algorithmic stablecoin, which crashed in 2022 after its peg fell short, resulting in a run on nearly $45 billion worth of assets.
However, members of the Canto discord community were quick to demote the entire FUD:
“UST was not guaranteed by anything; They have 10% collateralized. Here we have 100% in stablecoins. We cannot mint Note with Song”.
What is Canton?
Canto is a permissionless Layer 1 (L1) blockchain running on the Ethereum virtual machine, providing Tendermint consensus secured by validation nodes with EVM runs via the Cosmos SDK.
Canto’s business model centers on what is known as Free Public Infrastructure, which is similar to free parking on a city street, with the Canto DEX is a zero fee DEX for liquidity providers.
The business model also includes a Canto Lending Marketplace (CLM), which provides users with pooled funds through its v2 composite lending fork. Note completes Canto’s decentralized trifecta of offerings, described as a “fully collateralized unit of account token issued by CLM that also serves the ecosystem as a USDC/USDT soft-pegged stablecoin.”
The Canto decentralized utility exists on the Cosmos chain, which uses a cross-chain protocol called Inter-Blockchain Communication (IBC) to help blockchains achieve interoperability.
As of January 26, Canto has $42 million worth of USDC and USDT in its CLM lending unit, collateral which in turn allows users to borrow notes.
USDC and USDT Total Value Locked (TVL) on Canto Chain
In theory, if the note peg were to drop below $1, the solution would be to print more notes, putting inflationary pressure on the existing note supply.
However, since the Note is based on an interest rate system, tokens cannot be created, they can only be borrowed. The rate at which these are borrowed automatically adjusts every 6 hours based on a Time Weighted Average Price (TWAP).
With Canto’s price making significant gains in the past 30 days, fueled in large part by news that it had secured investment from venture capital firm Variant, the coin has rallied from a low of $0.075 in early January. to $0.35 starting January 1. 26
This post Canto surge gives some investors pause
was published first on https://cryptoslate.com/sudden-rise-in-canto-gives-some-investors-pause/