Canto: Free Public Infrastructure and EVM-Compatible DeFi

Scott Lewis, who co-founded DeFi Pulse, and the Plex team noticed that crypto had simply copied traditional finance's revenue model—protocols take cuts everywhere. They decided to build something without that.

What is Canto?

Canto is a Cosmos-based Layer 1 blockchain that runs Ethereum smart contracts. It launched in July 2022 with a radical idea at its core: why should DeFi protocols charge fees at all? The project implements "Free Public Infrastructure"—treating a decentralized exchange, lending market, and stablecoin as basic utilities rather than profit centers. That means zero trading fees, no lending margins going to protocol owners, and no governance tokens gatekeeping revenue.

The architecture stacks Cosmos SDK's Proof-of-Stake consensus underneath a Solana-style Tendermint engine that finalizes blocks in about 12 seconds. On top sits Ethermint, which lets Solidity developers deploy contracts exactly as they would on Ethereum. At day one, Canto shipped three core components: a zero-fee DEX, a lending market forked from Compound v2, and NOTE—a stablecoin backed by deposits rather than algorithmic tricks.

It's an experiment in radical DeFi decentralization, and it's been humbling. The project peaked at $204 million in total value locked, then crashed 98% by 2025. The idea still interests people who think about money and trust, but the execution has shown why most protocols charge fees: you need revenue to survive.

How Canto got started

The testnet kicked off in May 2022. By July 18, 2022, mainnet went live with no presale, no venture capital, and no founding team token allocation. The distribution went to early participants, community incentive pools, and liquidity mining for the first six months. This wasn't totally decentralized—sophisticated DeFi pros and Cosmos veterans heard about it before retail users—but it was more even than a typical token launch.

How it technically works

Canto runs Tendermint consensus, which is older Cosmos technology that finalizes blocks through validator agreement rather than waiting for probabilistic certainty like Bitcoin does. Validators stake CANTO, get transaction fees and inflation rewards, and can be slashed if they misbehave. Blocks come every 6 seconds.

The EVM layer lets you compile Solidity to bytecode and run Ethereum apps without rewriting. Gas pricing slightly modifies Ethereum's EIP-1559—it drops the priority fee auction (which encourages MEV) and uses simple first-in-first-out ordering instead.

The three core protocols are deliberately immutable on key parameters. You can't vote to add fees. You can't change the collateral requirements for NOTE. These constraints are written into the smart contracts themselves, making governance-based fee grabs impossible even if the community voted for them. That's the philosophical commitment.

Cross-chain bridges from Gravity and IBC connect Canto to Ethereum and the broader Cosmos ecosystem. It's not isolated.

The ecosystem and what went wrong

In 2023-2024, Canto attracted RWA (Real World Asset) projects from Fortunafi and Hashnote. The thinking was: if DeFi speculation isn't paying the bills, maybe helping traditional finance companies tokenize their assets would. This pivot raised uncomfortable questions. The whole point of Free Public Infrastructure is avoiding governance that extracts rent. RWA tokenization needs governance—lots of it. That tension has never really resolved.

The DeFi ecosystem itself had several interesting apps. Clone DEX offered alternative DEX mechanics. Slingshot provided aggregation. Various lending and derivatives platforms launched. But growth stayed weak compared to Arbitrum, Optimism, or even Solana. The ecosystem never crossed into self-sustaining adoption.

The price collapse says it all. CANTO rose 700% in 2023, then fell 98% through 2024-2025. The zero-fee model turns out to attract speculators more than sophisticated users. The TVL (total value locked) cratered from $204 million to $4.6 million. Governance participation dropped because there wasn't money to make.

Governance and what it actually does

Canto Commons handles governance without a formal governance token. Core FPI components are locked against fee introduction or parameter changes. Non-core decisions go to a voting process where CANTO holders propose and vote. It works in theory. In practice, without economic incentives, participation is thin.

The community pool funds development and infrastructure. It's a grant system, not a fee extraction engine. How long that lasts depends on whether Canto can attract developers and users at all.

Regulatory confusion

Canto's decentralization actually helps here. Without a central entity to regulate, you can't just arrest someone and shut it down. But that decentralization is also theoretical—real development and community leadership concentrate somewhere. Smart contracts deployed on Canto face normal regulatory scrutiny. NOTE's stablecoin status is ambiguous: some jurisdictions distinguish between collateralized stablecoins and algorithmic ones. Canto Commons follows this closely but can't fully resolve it.

The honest controversies

Canto went bust for real reasons. The fee-free model sounds elegant until you realize most protocols charge fees because they need revenue. Canto thought it could fund itself through ecosystem growth and inflation. It couldn't. The price collapse, TVL decline, and governance fragmentation all follow logically from that mismatch.

The RWA pivot muddies the original philosophy. If Canto was supposed to be a pure public utility, adding proprietary RWA projects feels like compromising.

The 98% price drop and governance decline created a vicious cycle. Less participation meant less legitimacy. Less legitimacy meant less reason to participate.

Recent Developments

CANTO has stabilized around $0.25-$0.40 through 2024-2025 after the worst of 2023's collapse. Some speculative interest returned, though volumes are a fraction of 2023 peaks. The pivot toward RWAs continues, with Fortunafi and Hashnote partnerships expanding. It's unclear whether this path back to "neofinance" helps or just defers the core problem.

Canto also explored Layer 2 solutions via something called Cyclone Stack. The thinking: maybe a Layer 2 on top of Canto could improve throughput and cut fees further. Early stages. The core team still believes FPI principles can work long-term, just maybe not at the scale or with the adoption they initially hoped for.

Frequently asked questions

What is Free Public Infrastructure exactly, and how is it different from other DeFi?

It eliminates fees from core services. A normal DEX takes a cut of every trade. Canto's takes zero. A normal lending protocol charges fees to borrowers. Canto's doesn't. NOTE holders don't face any governance-imposed inflation tax or fee grab. This is possible because core protocols are locked against those modifications.

Can a DEX actually survive without fees?

Canto tried to prove it could through volume and ecosystem growth. The experiment failed. Zero-fee trading did attract some volume, but not enough to sustain the network without inflation funding validators and incentivizing liquidity providers. Most economic systems need some form of revenue.

How does NOTE keep its $1 peg?

It's fully backed by collateral. You deposit eligible assets (CANTO, ETH, NOTE itself) and receive NOTE worth what you put in, minus borrow costs. If NOTE trades below $1, you profit by redeeming it for full collateral value. If it trades above $1, you profit by selling and accumulating collateral to redeem. It's pure arbitrage mechanics, not monetary policy.

Is Canto regulated?

Its decentralization provides some protection. There's no CEO to arrest. But smart contracts on Canto face the same scrutiny as anywhere else. NOTE's stablecoin status sits in regulatory ambiguity—some jurisdictions allow algorithmic stablecoins, others don't.

Why did CANTO collapse 98%?

Speculators bet on growth that didn't materialize. Ecosystem adoption disappointed. The FPI model couldn't compete on liquidity against protocols with revenue incentives. Broader crypto market cycles made things worse. The TVL decline shows the problem: if capital isn't earning returns, it leaves.

Can Free Public Infrastructure actually work?

This remains genuinely uncertain. The philosophical case is solid—why shouldn't financial infrastructure be a public good? The practical answer is harder. Every instance so far requires either accepting reduced liquidity relative to fee-charging competitors or finding alternative funding mechanisms. Canto hasn't solved this.

What's the recovery strategy?

RWAs and Layer 2 scaling are the current bets. Real World Assets aim to attract institutional interest uninterested in pure DeFi speculation. Layer 2 scaling could improve throughput and reduce costs. Neither has proven viable yet.

Does EVM compatibility actually help?

It lowers friction for Ethereum developers. But it also makes it trivial to deploy competing protocols on Canto—switching costs are zero. Numerous Cosmos chains already do EVM, so it's not a competitive moat anymore.