What's going on with Canto?

Bankless Nation, we are super excited to talk about Kanto today. Specifically, what is going on with Kanto? David, this is a layer one chain. I know that. I know it's been up about 500% in price over the last 30 days. I know crypto Twitter is talking about it, angry about it, yelling about it. I'm not really sure, but I don't know precisely what it is. What are we gonna unpack today? Why is Kanto important?

Yeah, Kanto is a brand new layer one blockchain on the scene, which has caused a bunch of hype, uh as as you mentioned, because the price has done a five hundred percent in thirty days, uh which is insane, even in in crypto standards. Uh how did that come to be? Why?

Because it's a bear market.

Especially 'cause it's a bear market, right?

Okay.

Uh and uh and so how did the what has a what stars have aligned to allow for a 500% price appreciation in the Canto L1 asset? Where did the Kanto community come from? What's so unique about Kanto that is generating this uh amount of excitement and hubbub? Is it just a bunch of traders rotating? Uh what's real about Kanto? What is perhaps uh just uh just a trait? Uh there's a bunch of conversations to have here. Uh Kanto is experimenting with what's called CSR, which I believe is called Contract Secured Revenue. Uh we will ask Zach about that and make sure I got that acronym right. Uh and this all kind of started when Variant put out a blog post detailing their philosophy behind uh Canto uh and why they think it is exciting. Uh Kanto is not the first uh L1 blockchain to experiment with CSR. I believe Nier and others have worked on this as well. Um but Kanto and the way that it was designed and the way that it was bootstrapped has captured the attention in ways that other layer one blockchains have not. Uh so we are bringing on Zach Cole.

Who is a Canto Core contributor? Uh so say that three times fast, Canto Core contributor.

C C C. Um and uh while this is Kent uh Zach's first appearance on Bankless, uh I've actually done three podcasts with Zach way back in my POV crypto days. So long time bankless listeners. Might might remember some very old episodes I did with Zach a very long time ago. Uh funny guy, been around in the Ethereum ecosystem for a very long time. And that's also another conversation I like to have. A lot of Kanto developers are Ethereum community members, but they have now turned their attention to Kanto. So why has Kanto captured their attention? Uh so many questions to ask. Uh I hope we can get all of these answers today on the show.

Including what to call these guys, Cantonians, Cantonites. There's some working ideas that I have, but I want to hear what Zach has to say about that. David's uh sacrificing his voice in order to give bring you uh content. And uh we only have like three more podcasts to record this week, David. So uh light workload for the rest of the week. Um guys, we will be right back with this episode talking all about Canta, what it is, what's going on with Zach Cole. But before we do, we want to thank the sponsors that made this episode possible, including our friends over at Kraken. They are our recommended exchange for 2023. Fantastic. Proof of reserves, go check them out.

Bangless Nation, we are back doing our show with Canto. This is Zach Cole, I want to introduce you to. Zach Cole is a protocol engineer, co-founder, and CTO of Slingshot, which is a decentralized exchange, but also, more relevantly, a core contributor to Kanto and new layer one on the scene, dominating headlines lately, in no small part due to its crazy price performance of its native asset. And so we are going to dive into all things Kanto with the guidance of Zach Cole. Zach, welcome to Bankless.

Hey, hey, hey, what's up? Thank you for having me on. See your boy Zach Cole coming in to you live from Nashville, Tennessee. Beautiful day. How y'all doing?

Boxing is

has been one of the better guest intros I think we've ever seen on Bankless.

What's up, what's up?

Man, is this the kind of the uh canto energy? Are you guys always like this?

I mean, we bring it, you know. We've been known to bring it.

Okay, so the name. Alright, we're talking about uh Cantonites, um uh w what else? Um Cantaloupes, I think. Maybe someone in the YouTube chat said.

People have referred to it as that, yeah.

What what what does the Canto tribe call itself? 'Cause you know,

Yeah, I don't know. I think cantaloupes is pretty cool. Cantonites is good too. It sounds a little old testament, but uh yeah, I think

I think uh I think that's a good one too. I don't know. I mean I guess it's whatever people choose to identify as, you know.

Can we uh ask, can I ask what this Kanto thing is at the highest level? So I feel like um you know uh people are talking about Kanto mostly because of price lately, and so people are like, well, Kanto's coming on bankless, must be a top signal. I can't say that you're wrong. I don't know, have no idea. Um, but also Canto is doing uh something pretty pretty unique. It's sort of a unique experiment, and um, it was a unique experiment even before the last 30 days of sort of a 500% increase in price uh explosion. So, how would you explain this? I know, Zach, you're you're a longtime member of the Ethereum community. So explain it to uh the average bankless listener. What is Canto?

Yeah, so Canto is kind of like a novel L1 uh where we kind of like experiment as a network with different economic primitives. Um the primary one being CSR which is contract secured revenue and that's kind of like a fee sharing mechanism.

So um

Things like this haven't really existed in the way that we present them. And what we do essentially is uh like uh similar to 1559, where all of the fees for a block are burned and sent to the zero address, what we're doing is uh taking 20% of those fees that would otherwise be burned, and we're distributing them to the people that launch or deploy those contracts on the network. Um, so that kind of provides a subsidy essentially for developers and incentivizes people to kind of build without having to be concerned so much about

how are we going to generate revenue, how are we gonna monetize, what are we gonna do? Uh, because I think a big problem with people that build is that.

They're passionate about building. Uh, we like to build stuff, put things out there. I like to do that with my friends, but

all but it's not always entirely clear like how are we gonna support ourselves? How am I gonna keep the lights on? How am I gonna pay rent? What am I gonna do? Like, I build this cool stuff, uh, I'm not really getting paid to do it.

Like, what am I gonna do? So, this network kind of allows you to just like

Focus on your passion, build what you want to build, and we provide a subsidy. So if you build a like if you deploy a contract and you build a product that a lot of people use, you're going to be rewarded. That's baked into the core prim the core protocol of Canto. And I think that's kind of like what we're going for primarily. Granted, this is an experiment, completely experimental. Uh like, you know, could uh here today, gone tomorrow. It could go to zero, it could go to a billion. I have no idea. We're one twenty we're we're one tweet away from either.

As uh as we always say on bankless, uh crypto's risky, you could lose what you put in. That is uh multiply that by 10 and apply that to Canto, guys, as you're listening to this. But but let me ask you about this experiment in a little bit more detail. So um, Zach, so this is a layer one, so this is not a layer two, right? Um, I believe it uses some of the Cosmos uh stack the tenderment stack, I should say, for kind of consensus. Um, but it is uh EVM is a smart contract chain, is that right?

Yeah, so there's EVM functionality on top of the Cosmos SDK that was used to like build the underlying protocol itself. Um

We chose that because uh well first of all uh Canto is like a fork of Evmos and then we built on top of that. Evmos uses the Cosmos SDK and uh implements EVM functionality. The reason we did all of that is because the Cosmos SDK is pretty easy to kind of just uh

uh define your uh blockchain, uh not have to worry about building all that stuff necessarily and then just get it going. And then, of course, we have EVM functionality because I'm an EVM maxi myself.

So

Okay, so um full EVM capability then, and that's that's pretty conducive to the builder community that you're hoping to attract. Now, the big point of of difference, aside from sort of, you know, people will recognize uh you know uh Evmos and you know other Cosmos chains that have EVM support, like that's sort of been done before. But what Kanto is doing is this kind of unique public goods funding mechanism, right? And so whenever we've in the past described uh even like things like gas fees, for example, or um EIP uh 1559, these sorts of things, our mental model for it, and when I say ours, I mean banklesses, basically like it's kind of a tax to pay for public goods. And uh the public good that Ethereum provides is settlement assurances. And so all of this public good goes into like national defense, the uh defense fund for the chain, right? And so um that is the only public good that Ethereum provides, right? It's just chain defense, maximum security. All of the transaction fees, all of the the burning goes into the value of ETH, and ultimately that ends up uh increasing the economic value of the chain and the cost to attack the chain. So it all goes into the military and security budget. What you're saying is with Canto, um that's part of it, because you're obviously compensating validators, right? So you have a military budget, but then you also have a budget for bridges and schools and hospitals. And of course, I'm not talking about these things literally. I'm talking about other chain infrastructure types of things. And I believe the chain infrastructure from what I've uh I see in crypto is like um

Uh a dex.

What else?

uh lending market.

Okay, so a decentralized exchange and a lending market. And what you're saying is the the protocol fees that Canto generates goes towards the taxes, go towards funding these applications. And so like these are private applications almost on the Ethereum network, but for Canto, they're kind of like government provided. They're like part of the public good and um recipients of the taxes. And that's the unique flavor of the model. Um, I think. What I'm curious about.

You

don't know anything about Canto because it's

Well, I just it just seems like look, it just seems like a a logical thing that you could go try to do. What what I'm curious about, if that if that articulation was was like in the in the in the ballpark,

how so here's the problem with doing that with Ethereum is how do you determine which projects to distribute uh the the tax revenue to and the public goods? And by how much?

Yeah, and and and how much how does Canto solve that problem?

Yeah, that's a really good question. So anybody that takes part in that network, anybody that deploys an application is contributing to the overall growth of the network. So they receive a portion of that subsidy and 20% of what would be burned using an EIP 1559 type of pattern, right? So 20% of the burn fee or the base fee goes to the person that has deployed that contract. So we're not really deciding. It's more like the market is deciding. If you have an application that's getting a lot of traction and seeing a lot of traffic, then you are going to receive a portion of that base fee. So you get 20% of what would be burnt otherwise.

So uh uh uh one critique of CSR, which is again like I said in the intro, CSR is a model that uh Canto is applying, not creating. We have talked about CSR as an industry in many different respects, and like I said, other other blockchains are also working on this. Uh I believe uh for a moment in time Ethereum was also interested in this, but the one of the reasons why um this the CSR model has been critiqued is that when you take 20% of the gas fees for a specific contract and give that to the contract devs, you add in a new a new game theory. Uh, and that is involved about with well, now uh a contract dev isn't actually incentivized to make the best contract possible, they're actually con incentivized to make perhaps an overly complicated, overly inefficient contract because then they get a higher subsidy. Uh how what's Kanto's philosophy on this?

Yeah, so I totally agree with you. It seems like that at face value, but would you use an overly complicated and over you an overly expensive contract yourself, David?

Well, only if it's the only game in town I don't really have a choice.

Okay, but as soon as somebody else deploys something that does it more efficiently, you're going to start using that one, right?

Sure. Okay, so you're relying on on just

Market competition to produce efficiencies. Yeah, yeah. So if you if you don't do something well, the person that does it better is gonna come along and they're gonna eat your lunch. So you should be the best you can be.

You should deploy the best contracts you can because that's gonna ensure that you have a place at the table for as long as possible.

Until someone comes along and does it better.

Is it because you're saving gas fees in a more uh efficient smart contract, or is it you just better use

Yeah, yeah. Users are going to users are going to default to whatever provides the better user experience, whatever is cheaper, whatever is the you know, more convenient to use. And that's true in any market. You can look at like complicated smart contracts on Ethereum. Uh like most people are gonna do things that are like cheaper, they're gonna do things that are more efficient, they're gonna use things that provide a better experience for them. And that's just that's just how it works, you know. So

So so can't Canto

has this pool of public goods, but it doesn't select the winners. It it more it more kind of like

Uh creates a mechanism for this this uh pool of money to be distributed, and the market forces uh are the ones that are selecting the winners. So it's almost like the the government protocol of Canto creates like this bidding process and this healthy game of competition. They're like, we've got this pot of money, and uh all of the the private smart contract developers are the ones competing for that pot for mu pot of money. But but really it's kind of market forces and that it's users that are determining the outcomes of uh which which uh smart contracts end up winning. Is that correct?

Yeah, so when we talk about the market, like the market, it's not like this ominous like figure that we can't really understand. The market are people like me, there are people like you, there are participants within the network. They're all of those uh those uh users. Everybody that takes part within this community has a say