Canto’s RWA and DeFi Integration What are the New Profit Opportunities with USYC’s Backing from a Well-Established Trading Company?

The Synergistic Integration of Canto's RWA and DeFi How USYC's Support from a Reputable Trading Firm Unlocks Exciting Profit Potential

Author: Jiang Haibo, LianGuaiNews

The DeFi public chain Canto on Cosmos has launched Real World Assets (RWA) on October 17th. As of November 1st, the total value of RWA has reached $11.32 million.

Canto has attracted enough attention since its launch with features such as fair launch, large airdrops, and free public infrastructure. As a public chain, it has its own native DEX, lending market, and stablecoins as the three main DeFi products, without issuing additional governance tokens for these products.

However, the continuous issuance of tokens through liquidity mining has led to a decline in the price of CANTO tokens and a decrease in on-chain liquidity. Now, with the rise of RWA, the CANTO price has increased by about 3 times compared to its lowest point on September 12th. According to DefiLlama data, as of November 1st, Canto’s TVL has increased by 57.7% compared to a month ago. The following article will introduce Canto’s RWA solution.

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USYC issuer Hashnote backed by veteran trading company DRW

The real-world assets on Canto are tokenized treasury bills issued by Hashnote called USYC (full name US Yield Coin). Hashnote is backed by DRW, a diversified trading company established in 1992. Not only are the Chief Executive Officer Leo Mizuhara and Engineering Director Alex Walchli of Hashnote from this company, but Hashnote was also established with a $5 million investment from DRW’s cryptocurrency department, Cumberland.

In comparison, in similar off-chain platforms, Rune, the founder of MakerDAO, is one of the main investors in the Monetalis Group, which manages $1.25 billion of RWA assets for MakerDAO. The partner of Frax Finance, FinresPBC, seems to specifically provide services for Frax. Hashnote has the endorsement of traditional financial institutions, making its product more trustworthy in the off-chain process.

Hashnote’s official website claims to be a regulated company under the supervision of the CFTC (Commodity Futures Trading Commission) and CIMA (Chartered Institute of Management Accountants). It is a fully regulated institutional-grade DeFi asset management platform that provides comprehensive service support to consumers, with zero counterparty risk and customizable risk/reward strategies. Purchasing products from Hashnote requires KYC approval, and only whitelisted customers are allowed to use them. Currently, Hashnote’s official website only shows acceptance of pre-selected customers. USYC yield and underlying product-related information is not available, and no secondary market purchasing path for USYC was found on Canto’s commonly-used DEX, Slingshot.

According to DefiLlama data, the total supply of USYC is 54.38 million, with 11.32 million on Canto and 40.54 million on Ethereum.

cNOTE brings new income opportunities

Along with USYC, cNOTE was also introduced. In Canto, the stablecoin NOTE is the native unit of account, previously over-collateralized by stablecoins USDC and USDT, borrowed from the Accountant smart contract through Canto’s lending market (CLM). After supporting RWA, USYC can also be used as collateral for borrowing NOTE.

The Accountant smart contract manages the circulation of NOTE by adjusting interest rates, thereby anchoring the price of NOTE to $1. The interest rate is adjusted every 6 hours. If the trading price of NOTE is below $1, the interest rate increases to incentivize users to buy NOTE and repay loans. If the trading price of NOTE is above $1, the interest rate decreases to incentivize users to borrow from CLM.

Initially, borrowing the stablecoin NOTE did not accrue interest. The borrowed stablecoin had no purpose other than providing liquidity in trading pairs with other stablecoins or CANTO. With the introduction of cNOTE by USYC, users can now deposit NOTE into the protocol to earn interest and receive deposit certificates in the form of cNOTE. The interest rate for NOTE deposits is equal to the borrowing interest rate. The introduction of cNOTE provides an additional source of income for NOTE holders. On October 20th, Canto governance decided to open liquidity mining rewards for the cNOTE/USDC trading pair. The deposit page shows an APR of 13.23% for this trading pair, with a concentrated liquidity of $7.36 million, and cNOTE also earns NOTE deposit interest.

USYC’s Circular Lending and Negative Premium of NOTE

Canto has launched a beta page for USYC lending. This page shows that the RWA assets in Canto are currently worth $11.32 million, with a collateralization factor of 0.99 for USYC. 56.29% of the borrowed NOTE has been redeposited in the protocol as cNOTE. Currently, the deposit and borrowing interest rates for NOTE are both 3.23%, and the price of cNOTE has increased to 1.0021 NOTE due to interest accumulation.

As USYC can also be used as collateral, if the borrowing interest rate for NOTE is lower than the yield of USYC, USYC holders are incentivized to borrow NOTE by collateralizing USYC, exchange it for USDC, and then mint more USYC in a circular loop.

The possible path for whitelisted users to participate in circular lending through KYC is as follows:

• Whitelisted address deposits dollars or USDC into Hashote and mints USYC;
• Deposits USYC into the Canto lending market and borrows NOTE;
• Exchanges NOTE for USDC;
• Uses USDC to mint more USYC and repeats the process.

Perhaps due to this reason, since the introduction of RWA products by Canto, the price of NOTE has shifted from being at $1 or above to consistently trading at a negative premium, currently at $0.9962.

Summary

The RWA asset USYC on Canto has reached a value of $11.32 million. The issuer of USYC, Hashnote, has a background in diversified trading company DRW. With the endorsement of such traditional institutions, the off-chain aspects of this product may be more reliable, but using USYC requires passing through KYC.

Along with the launch of USYC, cNOTE has also brought more investment opportunities. NOTE can be deposited in Canto to obtain cNOTE, and providing liquidity for cNOTE/USDC can also earn mining rewards. However, due to the circular collateral lending of certain whitelist users, NOTE currently has a negative premium.

In addition, Anzen Finance plans to launch private credit-based RWA on Canto. Canto also plans to migrate to ZK Layer2 supported by the Polygon development suite for better RWA support.

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