Canopy Economics

CNPY

CNPY is the native token of Canopy, used for transactions and staked by validators to secure Canopy Nested Chains. Validators earn new CNPY tokens for providing security and consensus services, aiding the development of new blockchains. Users pay transaction fees in CNPY, based on computational needs and network load.

CNPY is minted as a reward for each proposed block. The mint amount depends on the block reward at that time (seeSupply below). Over time, validators earn rewards based on their stake, minus payments to other network actors (see Distribution below). Block proposers also earn rewards from transaction fees, sourced from recycled CNPY, not new issuance. Additionally, Nested Chains may offer extra rewards for work, calledSubsidies, and these too are recycled.

Supply

The native token CNPY has no mint in the Genesis file, following "managed fair launch principles." Every block that is produced on Canopy creates new CNPY tokens.

  • The starting amount of the block reward is 80 CNPY.

  • Blocks are created approximately every 20 seconds.

  • Block rewards are halved every 3,150,000 blocks or about 2 years.

  • The total tokens are projected to be 504,000,000 CNPY.

Learn more about our managed fair launch.

Distribution

The CNPY block reward is fairly distributed among actors depending on their level of participation.

5% of the block reward is given to the DAO Treasury Fund each block. The Block Reward less the DAO Cut is divided evenly among all subsidized committees.

Each committee may distribute these tokens as determined by their respective protocols, but the default is:

By default, for each block produced, tokens are distributed as follows:

  • 70% → CNPY Staker: Block Producer (miner)

  • 10% → CNPY Staker: Delegate

  • 10% → Native Token Staker: Validator

  • 10% → Native Token Staker: Delegate

Importantly, each block produced creates CNPY and Nested Chain tokens at the above distribution, resulting in a cross-pollination of tokens and actors.

These percentages are normalized based on the number of Nested blocks produced for each Canopy block.

The delegator role is unique to Canopy! Learn more by reading Staking

Burning

While CNPY can be created through block rewards, it can also be destroyed through 'burning'. When CNPY is burned, it is permanently removed from circulation. Several processes burn CNPY:

  • - The process of punishing a validator for bad behavior.

  • Autocompounding - There is a penalty for not auto-restaking CNPY. When a staker chooses not to autocompound, they receive their rewards less the autocompounding penalty, which is burned.

Restaking

Restaking allows users to stake assets such as CNPY or other Canopy native assets across multiple app chains, thereby extending a Root Chain's cryptoeconomic security to additional applications on the network. Effectively, restaking allows validators on Canopy to reuse their bonded collateral from one chain to secure multiple other chains, alleviating the L1 cold-start problem.

Gain Actual Exposure to Nested Chains by Staking

The utility of Canopy is to be the first Security Root for the ecosystem, seeding the Peer-to-Peer security future by sheltering Nested Chains. When Validators perform consensus on behalf of subsidized Nested Chains, they earn CNPY as well as the native token of the Nested Chain. Validating and Delegating in the Canopy protocol earns the participant a *portfolio of tokens* - not the speculation of value accrual, actual tokens.

Recursion

Canopy's architecture promotes a self-reinforcing chain of L0s where mature Nested Chains shelter other new chains the same way their parent Security Root did for them. This means that the native assets of Canopy chains automatically have the same staking utility as their Security Root.

Generational Diversification

This means that each asset earned in the aforementioned portfolio of tokens enables participants to earn a new portfolio of tokens. This cycle is exponential and continues from generation to generation, promoting unstoppable exposure of new assets.

Committee Subsidization

The quorum of Validators registered on the Root Chain to perform Consensus services for a Nested Chain is called a committee. A committee that receives rewards from the Canopy blockchain (or any other Security Root) is called a subsidized committee. Simply put, a subsidized committee is a committee that receives an allocation of the Root Chain block reward.

For a Committee to be subsidized, it must have more than 33% of the total stake committed to it.

Committee Subsidization Example

  • Validator A has 10 stake and is restaked for chain 1

  • Validator B has 25 stake and is restaked for chains 1 & 2

  • Validator C has 65 stake and is restaked for chain 3

  • Total stake = 100

Chain
Calculation
Percentage
Result
Subsidized?

Chain 1

valA {10} + valB {25} / totalStake {100}

35%

≥ 33%

✓

Chain 2

valB {25} / totalStake {100}

25%

< 33%

X

Chain 3

valC {65} / totalStake {100}

65%

≥ 33%

✓

The subsidized committees in this example are chains 1 and 3

Delegators

Non-technical actors may participate in Canopy by being a Delegator: a Validator that never participates in BFT Consensus. These staked participants greatly influence the subsidization status of Committees as their collateral is counted towards a Nested Chain's qualification. By staking as a Delegator, you receive Block Reward in both CNPY and the native Nested Chain assets.

Just like Validators, delegators can restake their collateral towards multiple committees!

Subsidization

Subsidization is the rewarding of participants through a native asset. While Nested Chains may be automatically subsidized by the protocol through new mint — Canopy comes pre-built with manual Subsidization functionality.

This means that anyone from community leaders to average patrons may donate tokens on the Security Root to ensure participants are appropriately compensated for their efforts.

A Competitive Fee Market

Similar to Gas Fees in Ethereum, additional subsidization may be the norm at Canopy's maturity. Specifically, the economic barrier for a chain to get security services on a root may be dictated by the market conditions of the Security Root at any given time. However, unlike Ethereum, the risk of Security Root monopoly is greatly diminished through the Peer-to-Peer architecture of Canopy, where each chain is expected to offer Security Root functionality. This allows the market to naturally ebb and flow through cycles of high and low demand.

Life After Minting

Subsidies allow the system to continue functioning after supply inflation ends (in many decades). The community can simply patronize the chains it wishes to support through subsidization, effectively replacing the mint incentive once the final halvening occurs. This future vision takes great inspiration from Bitcoin’s sustainability model, promoting an ecosystem where long-term security is maintained through voluntary economic participation rather than perpetual inflation.

DAO Treasury

The DAO pool is a dedicated fund where 5% of the total block reward each block is set aside for project budgeting. The purpose of this treasury is to cover mandatory and discretionary spending that is for the good of the project, as determined by community sentiment through a +⅔ agreement of Validator representation.

Examples of expenses that the DAO may allocate funds toward include:

  • Centralized Exchange listings

  • Launch Pad partnerships

  • Long-term development contracts

  • Sensible marketing campaigns

  • Canopy education

Examples of expenses that the DAO may reject:

  • Upfront funding

  • A self-manufactured campaign for anything

  • Overpriced/low impact

  • Duplicate development

  • Lifestyle perks like lavish events and travel

Want to know more about the process? Checkout Governance. More questions? Head to Canopy's Discord and ask!

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