Overview
This proposal aims to deploy Synapse onto Canto, a permissionless general-purpose blockchain built with Tendermint consensus and EVM compatibility, enabling users to seamlessly move stablecoins between Canto and the wide variety of Synapse’s interconnected EVM chains. Synapse can enable this connection by launching a new liquidity pool on Canto comprised of nUSD and NOTE, the native stablecoin of the Canto ecosystem.
Assuming a passed proposal and successful integration, there will be ways to further integrate Synapse into the Canto ecosystem.
Motivation
Canto recently kicked off its liquidity mining program to bootstrap early growth of the network and the ecosystem’s native stablecoin, NOTE. Throughout the course of the program’s first 30 days, over $100 million of TVL has been bridged to the chain to buy CANTO, borrow NOTE through the lending market, and provide liquidity in Canto’s native DEX.
All bridging today currently happens through Gravity Bridge. Gravity only supports the bridging of assets into Canto from Ethereum and Cosmos Hub, leaving out a large swath of assets that exist on other blockchains.
Synapse can connect the Canto ecosystem to the remainder of the multi-chain ecosystem, enabling users and assets that exist on chains like Arbitrum, Optimism, Avalanche, BNB Chain, and more. Increased users and assets will help accelerate Canto’s growth plans, introducing Synapse’s unique user base to the new blockchain ecosystem. In tandem, increased volume through Synapse grows the protocol and expands Synapse to a new suite of users (Canto users).
As this Synapse bridge would be the only bridge connecting Canto beyond the Ethereum mainnet, the new integration is expected to bring over a great deal of bridge volume, and therefore protocol revenues. Similarly, the Canto ecosystem is in its infant stage. Assuming the network grows, Synapse will be extremely well positioned to help encourage this growth. Canto would also represent the first Cosmos-based chain integrated by Synapse.
Implementation
To connect Canto with other blockchains, this proposal calls for deploying Synapse on Canto, specifically deploying a new liquidity pool on the Canto blockchain comprised of nUSD and NOTE. This new pool would allow users to directly swap their stablecoins on one blockchain to NOTE ready to be used in Canto. Similarly, this new pool would allow users to directly bridge their NOTE from canto into stablecoins on any of the blockchains supported by Synapse.
The target TVL for the new pool will be $2 million USD. In order to achieve this, the proposal requests the Synapse DAO incentivize this new pool with a 2k SYN per week. This pool would therefore only represent 1% of all SYN emissions, keeping annual inflation below 5%. The incentives for the liquidity pool will run for 3 months, after which the community will evaluate the success of the integration. Similarly, the Canto team will match these incentives 1:1 to ensure deep liquidity throughout the duration of the pool.
The fee structure for the new pool will be 7bps for the actual bridge transaction (nUSD swap) and no fees will be charge for the nUSD <> NOTE transaction as is consistent with Canto’s core values.
About Canto
Canto is a permissionless general-purpose blockchain with an EVM execution layer and a tendermint consensus system designed to foster an ecosystem of free public infrastructure (FPI). FPI is different from traditional ecosystems in that the core financial primitives are public utilities that exist native to the protocol as opposed to an external application with its own governance token. The thesis to structure Canto in this way stems from the fact that many of the DeFi primitives on other chains focus more on capturing value than they do on offering superior user experiences.
Canto operates by way of three core tenets:
- Liquidity as a Free Public Good
- Zero fees for Liquidity Providers (LPs). Canto makes liquidity free for protocols, arbitrageurs and traders.
- Rent Extraction Resistant
- Canto aims to establish Free Public Infrastructure. Core DeFi primitives will not have sovereign governance tokens, nor the capacity to extract rent in the future.
- Minimal Viable User Capture
- Where possible, Canto avoids interface-driven user ownership. Public infrastructure DEXes will have no swapping interface, so all users must trade on third-party aggregators. This will facilitate user acquisition for new protocols.
In addition, Canto has no official foundation, never held a presale, has no token vesting, and has no venture backers.
Canto launched with three core DeFi primitives:
- Canto DEX — a zero-fee DEX for liquidity providers
- Canto Lending Market — a pooled lending market similar to Compound v2
- NOTE — a fully collateralized stablecoin for the ecosystem
About Note
NOTE is the unit of account on Canto. NOTE is an over-collateralized currency with a value perpetually rebalanced toward $1 through an algorithmic interest rate policy. It is:
- Over-collateralized
- Capital efficient
- Fully decentralized
- Automated
NOTE cannot be created — it must be borrowed from a smart contract that implements the algorithmic interest rate policy. Since NOTE has to be borrowed directly from the Canto Lending Market, all NOTE is overcollateralized by the assets deposited in the lending market. Current collateral assets include USDC, USDT, CANTO, ETH, ATOM, and Canto LP tokens.
