As Canto’s first month of liquidity mining incentives nears its completion, early contributors propose to the DAO an extension of the program with new parameters to improve capital efficiency and further align Canto stakeholders. The proposal calls for the reduction of net emissions across security and liquidity mining to be reduced by ~54% over the prior period, as recommended below.

Analysis

It’s clear that Canto’s initial incentives were well received. Since launching, $116M worth of assets were bridged to the Canto network and subsequently used to buy CANTO, borrow NOTE in Canto’s Lending Market, and provide liquidity in Canto’s native DEX.

Balancing Liquidity Provision

Over the past 30 days we have seen TVL grow to $92M with the high being $103M. This TVL is spread out across five incentivised pools in the following manner:

• NOTE/CANTO: $7M

• ETH/CANTO: $3.5M

• ATOM/CANTO: $4M

• NOTE/USDC: $22.9M

• NOTE/USDT: $21.8M

In order to incentivise a more even distribution of TVL, early contributors recommend increasing the relative distribution of emissions to volatile pairs and reducing emissions to stable pairs.

Exceeding Network Security Target

On the network security side, we have seen approximately 57% (~129 million) of the total CANTO in circulation staked with validators. Given a target staking rate between 30-40%, and Canto’s aim of bootstrapping network security through minimum viable issuance, early contributors recommend increasing the emissions designated for liquidity mining and reducing the emissions designated for network security.

Adjusting Overall Emissions

Finally, in order to raise capital efficiency across Canto’s Free Public Infrastructure, it is recommended that Canto implement a reduction of overall emissions. Given these objectives, early contributors plan to propose the following liquidity mining schedule to the DAO.

Inflation Changes

Network security emissions will move from an inflation rate of 37.74 Canto per block (roughly 20% annualized) to an inflation rate of 10 Canto per block (roughly 5.3 % annualized) minting ~4.5m new CANTO tokens over a 30-day period. This is a reduction of 70% over the prior period.

Liquidity Mining Program

Per Canto’s Genesis and token distribution model, the second-month liquidity mining program will release tokens linearly per block to LP token holders:

• 30.8 million CANTO will be released to LP token holders over a 30-day period

• 72 CANTO per block

• Will begin when the proposal is executed on-chain.

This is a reduction of ~50% over the prior period.

CANTO/NOTE LP Token Supply Market

• Receives 44.08% of the block reward for Liquidity Mining

• 32 CANTO per block

ETH/CANTO LP Token Supply Market

• Receives 22.03% of the block reward for Liquidity Mining

• 16 CANTO per block

ATOM/CANTO LP Token Supply Market

• Receives 22.03% of the block reward for Liquidity Mining

• 16 CANTO per block

NOTE/USDC LP Token Supply Market

• Receives 5.51% of the block reward for Liquidity Mining

• 4 CANTO per block

NOTE/USDT LP Token Supply Market

• Receives 5.51% of the block reward for Liquidity Mining

• 4 CANTO Canto per block

USDC Token Supply Market

• Receives .41% of the block reward for Liquidity Mining

• 0.3 CANTO per block

USDT Token Supply Market

• Receives .41% of the block reward for Liquidity Mining

• 0.3 CANTO per block

Net emissions across network security and liquidity mining will be reduced by ~54% over the prior period. The program will begin immediately when the proposal is executed on-chain.

About Canto

Canto is a Layer 1 blockchain built to deliver on the promise of DeFi – that through a post-traditional financial movement, new systems will be made accessible, transparent, decentralized, and free. Created by a loosely organized collective of chain-native builders, Canto is a new commons powered by Free Public Infrastructure.

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