# 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 (see[#supply](#supply "mention") below). Over time, validators earn rewards based on their stake, minus payments to other network actors (see [#distribution](#distribution "mention") 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, called[Subsidies](/docs/canopy-network/canopy-economics/subsidies.md), 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.
{% hint style="info" %}
[Learn more about our managed fair launch](https://www.canopynetwork.org/learn-more/road-to-mainnet).
{% endhint %}
### 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](/docs/canopy-network/canopy-economics/dao-treasury-fund.md) each block. The Block Reward less the DAO Cut is divided evenly among all [subsidized committees](/docs/canopy-network/canopy-economics/staking.md#committee-subsidization).
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.
{% hint style="info" %}
These percentages are normalized based on the number of Nested blocks produced for each Canopy block.
{% endhint %}
{% hint style="warning" %}
The delegator role is unique to Canopy! Learn more by reading [Staking](/docs/canopy-network/canopy-economics/staking.md)
{% endhint %}
### 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:
* [Broken mention](broken://pages/dlMMlkpBFVTRh9VL3N1C) - 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.](/docs/canopy-network/why-canopy/background-and-industry-state.md#have-the-cold-start-problem)
#### Gain Actual Exposure to Nested Chains by Staking
The utility of Canopy is to be the first [Security Root](/docs/canopy-network/core-features/peer-to-peer-security.md) for the ecosystem, seeding the Peer-to-Peer security future by sheltering Nested Chains. When Validators perform consensus on behalf of [subsidized](/docs/canopy-network/canopy-economics/staking.md#committee-subsidization) Nested Chains, they earn [CNPY](/docs/canopy-network/canopy-economics/cnpy.md) **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.
{% hint style="info" %}
For a Committee to be subsidized, it must have more than 33% of the `total stake` committed to it.
{% endhint %}
#### Committee Subsidization Example
* Validator A has 10 stake and is [restaked](#restaking) for chain `1`
* Validator B has 25 stake and is [restaked](#restaking) for chains `1 & 2`
* Validator C has 65 stake and is [restaked](#restaking) 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%
✓
{% hint style="info" %}
The subsidized committees in this example are chains **1 and 3**
{% endhint %}
### 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](/docs/canopy-network/canopy-economics.md) in both CNPY and the native Nested Chain assets.
{% hint style="info" %}
Just like Validators, delegators can restake their collateral towards multiple committees!
{% endhint %}
### Subsidization
Subsidization is the rewarding of participants through a native asset. While Nested Chains may be automatically [subsidized](/docs/canopy-network/canopy-economics/staking.md#committee-subsidization) 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](/docs/canopy-network/core-features/peer-to-peer-security.md) 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.
{% columns %}
{% column %}
**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
{% endcolumn %}
{% column %}
**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
{% endcolumn %}
{% endcolumns %}
{% hint style="info" %}
Want to know more about the process? Checkout [State Machine](/docs/canopy-network/how-does-canopy-work/state-machine.md#governance). More questions? Head to Canopy's Discord and ask!
{% endhint %}
---
# Agent Instructions: Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.
Perform an HTTP GET request on the current page URL with the `ask` query parameter:
```
GET https://canopy-network.gitbook.io/docs/canopy-network/canopy-economics.md?ask=
```
The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.
Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.