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$NOTE is the unit of account on Canto. $NOTE is an over-collateralized currency backed by stablecoins and RWAs, with a value perpetually rebalanced toward $1 through an algorithmic interest rate policy. It is:
- Capital efficient
- Fully decentralized
All interest charged by the Accountant is earmarked for funding public goods. It is held in the Community Treasury and controlled by Canto governance.
$NOTE is a fully immutable ERC-20 token backed by collateral lent to the CLM. It can can only be borrowed by users who post select collateral assets.
For every $NOTE in circulation, there is more than 1 USD worth of collateral held by the CLM.
Canto Lending Market achieves superior capital efficiency by allowing stablecoin collateral backing $NOTE to be lent out to other participants. For example, a DeFi participant can lend $USDC to Canto Lending Market and then borrow $NOTE. If the borrow rate for $NOTE is less than the supply rate for $USDC, that DeFi participant will be getting paid to hold $NOTE on Canto.
Important: Canto Lending Market will launch with conservative parameters. Over time, governance will be able to raise the capital efficiency of CLM to its full potential.
Since $NOTE cannot be created, only borrowed, the Accountant contract utilizes interest rates to manage the circulating supply of $NOTE, and by proxy, its price. The interest rate on $NOTE automatically adjusts up or down every 6 hours based on a TWAP of the market price of $NOTE.
Aiming to provide a public utility, the algorithm responsible for adjusting this interest rate is designed to change the interest rate in order to promote a less volatile value as opposed to maximizing revenue.
If $NOTE is trading under $1, the interest rate is raised to strengthen the incentive for buying $NOTE on secondary markets and lending it to the CLM. If $NOTE is trading over a dollar, the interest rate is lowered to make borrowing $NOTE from the CLM and selling it on secondary markets more attractive.
For launch, each interest epoch will be 6 hours and the rate will adjust by 0.25 (the adjustor coefficient) of the difference between the price of $NOTE and $1.00.
$NOTE Interest Rate Formula:
- Current Interest Rate: 4%
- $NOTE average price over the last 6 hours: 1.04
If $NOTE is trading above $1, the interest rate is lowered to weaken the $NOTE price. If $NOTE is trading below $1, the interest rate is raised to strengthen the $NOTE price.