An introduction to SQD Partner Ecosystem: Canto
Subsquid Labs has recently partnered with Canto, an innovative Layer-1 focused on providing public infrastructure and returning power to users. To kickstart this partnership, Subsquid, and Canto team members went live on an X space to discuss what it means to build public goods in Web3 and why they are needed in the first place.
This post introduces Canto, explains the partnership with Subsquid Labs, and shares insights from the space.
What is Canto?
Canto is a permissionless general-purpose blockchain developed with the Cosmos SDK. Its consensus algorithm leverages Tendermint Core. The protocol also runs EVM, guaranteeing ease of access for anyone familiar with MetaMask. Canto’s premise is to fulfill Web3's promise of empowering users by building an ecosystem free of rent-seeking behavior, which has become commonplace among DeFi apps.
“Canto is the best execution layer for original work onchain.”
Unlike other native L1s these days, Canto did not raise 100 million dollars from Paradigm and A16Z. Quite the opposite. It started entirely as a grassroots effort driven by a community of core contributors. Canto never raised from VCs, nor did they go through a private sale.
During the X Space, Evan from Canto explained that this community-driven approach is how they see everyone contributing who is in crypto for the long run. And when Canto launched right into the void left by the FTX aftermath, which seeded distrust in the larger players, it was that exact approach that likely fuelled its first hype.
Without a large treasury, holding entity, pre-sale, and large allocations to whales, Canto probably looked like a return to the true crypto ethos to those tired of the large raises and power allocated to institutions.
“We want to establish a protocol with meritocracy in the system.”
In Canto's early days, there was a vibrant NFT scene featuring a marketplace with a chatbox and elevator music. This marked a departure from the typical aggregators trying to facilitate the buying and selling of NFTs at large. For anyone there early enough, Canto seemed to run on vibes.
Yet, the vibes have a solid foundation in its core propositions:
- Liquidity as a free public good
- Resistance to rent extraction: meaning it’s free public infra that no one actor can extract rent from
- Minimal Viable User Capture: Canto doesn’t want to lock users into their interfaces. Quite the opposite, where possible, users must trade via third-party aggregators making it easier for new protocols to enter.
The core infrastructure includes the Canto Dex, a lending market, and a fully collateralized unit of account token called $ NOTE that serves as the ecosystem’s stablecoin.
How can the infra be free?
Anyone with experience living in a capitalist society knows that nothing in life is free; even if it doesn’t cost money, it’s paid for with time or attention.
Yet, certain infrastructure should be accessible to all regardless of their ability to pay. Evan compares it to building infrastructure in a city where everyone can use the streets and parks. Similarly to how city governments subsidize the maintenance of such physical infrastructure, Canto leverages the NOTE stablecoin to keep core DeFi utilities free.
On how Note works
Note is the ecosystems unit of account stablecoin, and its entire existence was minted on launch by the lending market’s contract, also called the accountant contract. Users can borrow NOTE against collateral, including other stablecoins, $ETH, $ATOM, and $CANTO. All interest paid on NOTE is distributed to lenders; no fees are extracted by the protocol.
“The interest rate for $NOTE fluctuates based on demand, but the floor is always the treasury rate. If NOTE is overborrowed, which happens quite frequently, the rate increases, and these earnings are used to pay for free public infrastructure.” - Evan
The interest paid by users to borrow $NOTE goes to the accountant and eventually is swept into the treasury. The accountant contract cannot be edited or modified by anyone, ensuring it’s used as intended.
On Canto’s journey from L1 to supposed L2 and back
Canto has been through quite some changes since its inception. Starting as a chain in Cosmos, they gained momentum with the NFT season and were also very early in the RWA game. From the start, Canto devs were building at the edge and one of the ideas that came up quickly was that of sending proofs to Ethereum.
During the exploration phase, contributors identified Polygon zkEVM as the best choice, which quickly led to the overall perception that Canto would go all-in on ETH alignment. But with technical progress, things changed.
As Evan explained during the space, while initially, it seemed becoming an L2 was the only way to accomplish their goal since Polygon has developed a prover where Canto can become part of the ecosystem without needing to be an L2. That’s beneficial in various ways, not least because it allows them to retain their independence as a Cosmos L1.
One way to look at it is that Canto gets the best of both worlds: it can tap into the liquidity of Polygon’s AggLayer while retaining its sovereignty in the Cosmos ecosystem.
And Canto didn’t stop there. With their upcoming introduction of the Cyclone Stack, the protocol will add parallel execution for increased flexibility and performance, as well as full EVM tooling compatibility.
Subsquid <> Canto
Subsquid and Canto are united in their view on Web3 and in upholding values such as permissionlessness, open-source, and empowering users and builders. The latter was the reason Subsuqid and Canto connected in the first place.
Evan shared, “We hosted a Canto Hackathon, and pretty soon, various developers would reach out to ask us about indexing. That’s when we decided to get in touch with Subsquid and see what we could work on together.”
The premise of this partnership is simple: “Providing all the Canto data necessary to builders in a permissionless, scalable way.” (David)
If you want to experience free public infrastructure, get started with Canto here.
For anyone building on Canto or interested in accessing Canto data, our documentation has all you need to know to build your first squid (indexer).
You can listen to the recording of our discussion here.