> For the complete documentation index, see [llms.txt](https://canopy-network.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://canopy-network.gitbook.io/docs/canopy-network/canopy-economics.md). # Canopy Economics Understand CNPY tokenomics, including supply, rewards, burning, restaking, committee subsidization, and DAO treasury funding. CNPY is the native token of the Canopy network. It pays for transactions, provides the collateral that secures the network, and coordinates rewards across the Security Root and its Nested Chains. The economic model is designed around a simple loop. Users pay CNPY transaction fees. Validators and delegators stake CNPY to support the network. Committees secure individual Nested Chains, receive protocol rewards when eligible for subsidization, and may receive additional rewards from the chains they support. Governance directs a portion of issuance to the DAO Treasury for work that benefits the broader network. ### What CNPY does CNPY is the unit used to pay transaction fees on Canopy. Fees reflect the computational requirements of a transaction and current network conditions. They help prevent spam and are recycled into rewards for network participants, rather than creating separate issuance. CNPY is also the Security Root’s collateral asset. Validators bond CNPY to participate in consensus and can direct that stake toward committees that secure particular Nested Chains. The stake gives the protocol an economic basis for honest participation. A validator that follows the protocol can earn rewards. A validator that behaves maliciously or violates the protocol can lose bonded collateral through slashing. Finally, CNPY is used to subsidize the security of new chains. Rather than requiring every project to recruit a new validator set or raise capital for standalone security, Canopy uses existing bonded collateral to help qualified Nested Chains begin with shared security. ### Why stake CNPY? Staking is how a participant contributes to Canopy’s security model. An active validator bonds CNPY, runs the required infrastructure, and participates in Byzantine fault tolerant consensus for the committees it joins. Its stake determines its voting power and places economic consequences behind its actions. Validators may restake the same bonded collateral across multiple committees. This makes the security model more capital efficient: a validator does not need to acquire and bond separate collateral for every Nested Chain it supports, and a new chain does not need to build a validator network from scratch before it can operate. In exchange for this work and risk, validators can receive CNPY rewards and, where offered by a Nested Chain, rewards in that chain’s native asset. The economics are designed to align the people operating infrastructure with the chains they choose to secure. Delegators participate without operating validator infrastructure or voting in BFT consensus directly. They stake behind a validator and can receive a share of that committee’s rewards. Delegated stake also counts toward a committee’s subsidization threshold, making delegators important participants in determining which Nested Chains receive automatic support. Under the current model, delegators do not take validator slashing risk and may also restake toward multiple committees. ### Supply and issuance CNPY follows a declining block-reward schedule. The initial block reward is 80 CNPY. Blocks are produced approximately every 20 seconds, and the reward halves every 3,150,000 blocks, or roughly every two years. The projected issuance from block rewards is 504,000,000 CNPY. A one-time mint of 56,000,000 CNPY brings the projected maximum supply to 560,000,000 CNPY. This declining schedule rewards the early security providers of the network while limiting ongoing issuance over time. The live supply, circulating supply, bonded supply, and funds held in protocol pools are all onchain values that should be read from the current network state. Protocol parameters may also be subject to governance, so this page should describe the model while the explorer and network parameters remain the source for live figures. ### How block rewards are distributed Every block reward is first divided between the DAO Treasury and subsidized committees. Seventy percent of each block reward is allocated to the Canopy DAO Treasury. The remaining reward is divided evenly among all subsidized committees. This means that a qualifying Nested Chain does not need to receive an allocation based solely on its own budget or fundraising. It earns access to protocol-level rewards through committed stake. Each committee distributes the rewards it receives according to its own protocol. The current default distribution is: | Recipient | Share of the committee distribution | | ----------------------------------------------------- | ----------------------------------- | | CNPY staker serving as block producer | 70% | | CNPY staker delegate | 10% | | Nested Chain native-asset staker serving as validator | 10% | | Nested Chain native-asset staker delegate | 10% | This structure rewards the operator who produces blocks, the people who delegate CNPY security, and the participants who stake the Nested Chain’s own asset. A Nested Chain may define a different distribution model when its protocol requires one. ### Committee subsidization A committee is the group of validators responsible for consensus on a specific Nested Chain. A committee becomes subsidized when more than 33% of the Security Root’s total stake is committed to it. This threshold makes community participation the gate for automatic shared-security rewards. A project cannot simply buy an allocation. It needs enough validators and delegators to direct stake toward its committee. Once a committee qualifies, it shares the available committee allocation equally with other subsidized committees. Validators and delegators can choose which chains to support, and that choice directly affects the chains eligible for ongoing protocol rewards. #### 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
ChainCalculationPercentageResultSubsidized?
Chain 1valA {10} + valB {25} / totalStake {100}35%≥ 33%✓
Chain 2valB {25} / totalStake {100}25%< 33%X
Chain 3valC {65} / totalStake {100}65%≥ 33%✓
{% hint style="info" %} The subsidized committees in this example are chains **1 and 3** {% endhint %} ### Restaking and shared security Restaking allows bonded CNPY collateral to secure more than one committee at a time. A validator can contribute to the Security Root and one or more Nested Chains without creating separate pools of collateral for each assignment. For a Nested Chain, this reduces the cold-start problem. It can access a group of experienced validators and cryptoeconomic security without first building a large, independent staking base. For validators and delegators, it creates a way to participate in the security and reward systems of multiple chains with the same bonded CNPY. Restaking does not remove accountability. Validators remain responsible for the work they perform and for following the rules of the committees they join. The protocol uses slashing and other safeguards to make harmful behavior economically costly. ### Nested Chain rewards Protocol issuance is only one source of committee rewards. A Nested Chain can also provide rewards in its own native asset to attract and retain the validators and delegators it needs. This is important for long-term sustainability. As CNPY issuance declines over time, individual chains can increasingly fund their own security through their native asset, fees, and community-directed incentives. Each chain can determine the reward structure that fits its application, community, and security requirements. A chain that wants stronger or more specialized validator participation can offer additional incentives. For example, it may reward participants who stake its native asset, meet defined service requirements, or support a particular operating model. ### Community subsidies Canopy supports additional, community-funded incentives through subsidy transactions. A supporter can contribute CNPY to a Nested Chain’s committee reward pool, where it is distributed to the validators and delegators supporting that chain over a defined period. Subsidies give chains, communities, and supporters a direct way to fund security above the protocol-level reward. A Nested Chain can define the size of the reward, its duration, and the eligibility rules for receiving it. This makes security funding more flexible than a fixed emission schedule alone. Over time, community subsidies and Nested Chain rewards can become increasingly important sources of validator compensation. They give the ecosystem a path to sustain security through voluntary economic participation as block-reward issuance declines. ### Auto-compounding and burning Staking rewards are added to a validator or delegator’s stake automatically by default. This auto-compounding reduces the operational work required to maintain a position and keeps rewards contributing to the security of the network. A participant may choose not to auto-compound. In that case, the protocol applies an early-withdrawal penalty to the reward, which is burned and permanently removed from circulation. The protocol can also impose penalties on validators that violate consensus rules. These mechanisms make the security model more than a rewards program. Bonded stake represents a commitment to correct operation. ### DAO Treasury and governance The Canopy DAO Treasury receives 70% of every block reward. It is a protocol-controlled pool intended to fund work that benefits the Canopy network and ecosystem. Treasury transfers require supermajority agreement from validator representation. Governance can use the treasury for work such as long-term development, ecosystem education, infrastructure, integrations, and other community-directed priorities. Governance also provides the mechanism for changing eligible protocol parameters. This lets the network adapt its incentives and operating rules over time while preserving an onchain record of the decisions that affect the economic model. ### Key terms A **validator** runs infrastructure, stakes CNPY, and participates in consensus. A **delegator** contributes stake without operating validator infrastructure or participating in consensus directly. A **committee** is the validator group that secures a particular Nested Chain. A **subsidized committee** is a qualifying committee that receives a share of the Security Root’s block-reward allocation. **Restaking** is the use of already bonded collateral to secure more than one committee. **Subsidization** is the allocation of protocol or community-funded rewards to the participants securing a committee. Next, learn more about [who Canopy is for](app://-/who-is-canopy-for.md).