New post: “Canto: A Layer-1 Incentive Experiment”
has built a position in Canto, an EVM compatible L1 with a small but active and organic developer community drawn by its opinionated economics
Read our thesis here:
Conversation
1/ Unlike many other L1 chains, Canto’s primary innovation is not technical, but socioeconomic. The ecosystem is centered around a differentiated ideology: public goods.
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2/ Zooming out, some of the largest communities in crypto started with small but hyper-loyal, quasi-religious followings:
Early Bitcoiners sought to create a new monetary system
The first Ethereum devs espoused the “world computer” vision
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3/ Canto is running a new experiment in crypto: investing a chain’s resources in the development and maintenance of public goods, and application development more broadly.
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4/ Canto was launched with a number of core applications: fee-less, largely unchangeable DeFi protocols, referred to as FPI for Free Public Infra: a DEX, lending market, and native unit of account.
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5/ These protocols charge no fees - there’s not even a swap fee on the DEX. Instead, liquidity is subsidized with the chain’s CANTO token treasury to attract LPs. This benefits users through cheaper transactions, and limits fee extraction/platform risk for devs building on top.
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6/ To incentivize the development of more public goods, Canto proposes a new funding mechanism: contract secured revenue (CSR).
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7/ If approved by governance, smart contract devs will be able to accrue a percent of the gas from people using their contract to an NFT.
Replying to
8/ So what? These NFTs can serve as collateral, be fractionalized, and used in other ways since they generate revenue tied to the protocol.
CSR offers an alternative to the standard fee / token model that developers have to consider when building a protocol.
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9/ Combined, FPI + CSR create a new set of defaults for devs. They aren’t building on rails subject to fees, and are able to create protocols that accrue value from the jump, without the need to prematurely introduce fees or launch a token.
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10/ To explore the community and learn more, check out:
Discord: discord.gg/canto
Website: canto.io
Docs: docs.canto.io
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