What is Note (NOTE)? Explore the stablecoin of the Canto ecosystem.

Introduction to NOTE and its Role in Canto

NOTE (stock code: NOTE) is an over-collateralized stablecoin on the Canto blockchain, designed to maintain a value pegged to 1 USD. Unlike fiat-backed stablecoins or purely algorithmic models, NOTE is collateralized by assets deposited in the Canto Lending Market (CLM). The system allows users to deposit collateral (such as USDC, ETH, or CANTO LP tokens) and receive NOTE in return through a lending mechanism. The goal of this model is to provide a decentralized, transparent, and self-correcting stable digital currency, promoting the development of the Canto DeFi ecosystem. NOTE stablecoin serves as the core unit of account in Canto, supporting on-chain activities such as lending, providing liquidity, and decentralized trading. Its peg stability is not maintained by external custodians but dynamically adjusted through protocol-controlled interest rates, which are adjusted every six hours. This makes NOTE one of the more novel experiments in the decentralized finance space—combining algorithmic control elements with collateral backing to enhance resilience.

How the Hook Mechanism Works

The peg of NOTE to the US dollar is managed through an algorithmic interest rate adjustment process. When the price of NOTE in the open market is below $1, the protocol raises the interest rate to curb borrowing and encourage repayment, tightening supply and driving the price up. Conversely, if the trading price of NOTE is above $1, the interest rate is lowered, encouraging more borrowing and increasing supply to bring the price down. These adjustments occur every six hours and are entirely autonomous, relying on smart contracts without centralized intervention. This method creates a supply-demand adjustment reflective system designed to keep the value of NOTE close to $1. By linking its maintenance to borrower incentives and collateral market activities, Canto's mechanism aims to maintain decentralization while providing DeFi participants with a reliable stablecoin option.

NOTE's Position in the Market

By mid-2025, NOTE consistently trades at a price close to $1 across multiple platforms tracking its price. However, the trading volume is relatively low, fluctuating between $800 and $1,600 daily, indicating that NOTE is primarily used within the Canto ecosystem rather than for large-scale trading or investment purposes. Its market capitalization has not been explicitly released, as data on circulating supply remains unclear. This limited data is common in decentralized stablecoins that do not adhere to centralized minting and burning frameworks or regulatory disclosure standards. Despite having lower visibility compared to larger stablecoins like USDT or USDC, NOTE demonstrates significant price stability thanks to its built-in rebalancing mechanism. This makes it a promising candidate for use cases requiring reliable, decentralized value transfer, especially within local Canto applications.

The Practicality and Use Cases of Canto

NOTE plays a key role in the decentralized financial infrastructure of Canto. It serves as the default transaction currency for on-chain dApps, as well as the underlying asset for lending, trading, and collateral management. Users can borrow NOTE by depositing over-collateralized positions in CLM, allowing them to obtain liquidity without needing to sell the underlying assets. In fact, this makes DeFi strategies such as yield farming, liquidity provision, or collateral debt positions possible—all of which revolve around the NOTE stablecoin. For developers building on Canto, NOTE also provides a programmable and interoperable unit of value that can be seamlessly integrated with smart contracts. Its predictable value and on-chain governance allow dApps to rely on it for settlement, margin trading, and reward distribution. Since the protocol is autonomous and transparent, participants can evaluate the underlying mechanisms through open-source smart contracts, which aligns with the principles of decentralized finance.

Risks and Limitations

Despite the attractive model that NOTE provides, it also carries inherent risks. The most prominent challenge is maintaining its peg under volatile market conditions. While the interest rate adjustment mechanism is designed to correct imbalances, it assumes sufficient liquidity and rational actors. During periods of market stress, users may be unwilling or unable to repay the borrowed NOTE, undermining the rebalancing system. Another limitation is the lack of real-time transparency regarding circulating supply and total collateral backing. Although the system is decentralized, users may find it difficult to verify solvency metrics unless they actively monitor on-chain data or use analytical tools. Furthermore, the reliance of NOTE on the health of the Canto ecosystem means that any decline in user activity, liquidity, or the value of collateral assets could pose a threat to its peg stability.

Frequently Asked Questions (FAQs)

What is NOTE?

NOTE is an over-collateralized stablecoin, native to the Canto blockchain, designed to maintain a value of $1 through dynamic interest rate adjustments and decentralized lending mechanisms.

How does NOTE maintain its value at $1?

The agreement adjusts the interest rate every six hours based on the market price of NOTE. When its trading price is below $1, borrowing becomes more expensive, thereby reducing supply. When its trading price is above $1, borrowing becomes cheaper, thereby increasing supply.

What assets are behind the NOTE?

NOTE is backed by collateral assets deposited in the Canto loan market, including USDC, ETH, ATOM, and LP tokens. Each NOTE in circulation is over-collateralized to ensure solvency.

Is it safe to use NOTE ###?

NOTE aims to achieve stability and decentralization, but users should be aware of the risks associated with liquidity, peg maintenance, and data transparency. As with all DeFi products, thorough research and caution are recommended.

Conclusion

NOTE, by combining over-collateralization with algorithmic interest rate control, provides an innovative perspective for decentralized stablecoins. As the native stable asset of the Canto blockchain, it empowers a wide range of DeFi activities while striving to maintain price stability without relying on centralized custodians. Although its trading activity remains moderate and there are some transparency challenges, NOTE's core mechanism offers a promising alternative for users and developers seeking decentralized stability. For those interested in stablecoins that transcend fiat-backed models, NOTE is a project worth closely watching as DeFi continues to evolve.

Author: Blog Team *This content does not constitute any offer, solicitation, or suggestion. You should seek independent professional advice before making any investment decisions. *Please note that Gate may restrict or prohibit the use of all or part of its services in restricted locations. For more information, please read the user agreement.