MiCAR White Paper

Canopy Network Corp. is a wholly owned subsidiary of the Canopy Network Foundation. Canopy Network Corp. is responsible for the creation and distribution of the CNPY token, as well as managing the Company's relationships with trading platforms and other counterparties in connection with the token's go-to-market activities, including its admission to trading.

As Canopy Network Corp. was established on 2025-02-24, three-year historical financial data is not available.

Canopy Network Corp. is a newly established entity in the early stages of development. The company has not yet generated substantial revenue or incurred significant expenses.

A brief summary of Canopy Network Corp.'s financial performance at the time of writing is as follows:

Funding and Capitalization:

• The company's initial share capital is USD 10,000.

• The entity is sufficiently funded by $8.5M of external investment. The USD 8.5 million raised consists of approximately USD 6 million in financing and approximately USD 2.5 million in in-kind services (for further clarification on the in-kind services please see item E.38).

• As of the date of this white paper, and based on the Company's current level of expenditure, the funds available to the Company are estimated to provide a runway of more than two years. This estimate may be materially reduced by future increases in expenditure, including planned hiring and go-to-market activities.

Canopy is a blockchain stack facilitating low-cost, global transactions at scale  focusing on highly-scalable infrastructure for sovereign applications.

The platform's architecture features a network-of-networks powered by NestBFT, a novel consensus mechanism combining Proof-of-Stake and Proof-of-Age. The project's mission is to support infrastructure for sovereign apps by leveraging AI-based tools, creating an effective and cost efficient way to build onchain applications.

The Canopy token (CNPY) is the native utility token of the Canopy ecosystem. It is designed to facilitate transactions, staking, and governance within this interconnected ecosystem.

Given the technical nature of the Canopy a glossary has been included in this section of the MiCAR whitepaper to clarify the key terms and concepts used throughout the MiCAR whitepaper.

Blockchain Architecture & Infrastructure

• Appchains (Sovereign Blockchain Applications): Dedicated blockchains designed for specific applications to provide exclusive blockspace, high scalability, and autonomy.

• Blockchain: A shared digital state maintained by a group of independent participants (Validators) who finalize transactions in sequential blocks without requiring trust.

• L1 (Layer 1): Traditional standalone blockchains, such as Bitcoin or Ethereum, that provide their own security and consensus.

• L2s / Rollups: Dependent frameworks built on top of a "host" (Security Root) to offload computation while relying on the host for security.

• Nested Chains: Sub-chains or applications launched under a Security Root that inherit its security while maintaining independent execution environments.

• Security Root: A foundational blockchain that provides consensus, security, and communication for nested applications or chains.

• Sovereignty: The property of a blockchain to operate autonomously without censorship from middlemen or dependence on external protocol changes.

Consensus & Security Mechanisms

• BFT (Byzantine Fault Tolerant): A system property that ensures the network continues to operate correctly even if up to one-third of participants fail or act maliciously.

• Consensus: The process by which validators agree on the next block of transactions.

• NestBFT: Canopy's custom consensus algorithm that combines Proof-of-Stake for efficiency and Proof-of-Age for trustless syncing.

• Proof-of-Age: A security mechanism using Verifiable Delay Functions (VDFs) to prove elapsed time, allowing nodes to trustlessly identify the correct blockchain fork.

• Proof-of-Stake (PoS): A consensus mechanism where validators are chosen to finalize blocks based on the amount of native tokens they have "staked" as collateral.

• Restaking (Capital Efficient): A model allowing validators to use their existing staked collateral to secure multiple chains simultaneously without needing additional capital.

• VDF (Verifiable Delay Function): A cryptographic tool that requires sequential computational work to prove the passage of time.

• VRF (Verifiable Random Function): A cryptographic tool used for non-biasable, random leader election to prevent DDoS attacks.

Network Interaction & Operations

• RPC (Remote Procedure Call): A communication protocol used for interacting with blockchain nodes; Canopy is Ethereum RPC compatible.

• Smart Contract: Digital accounts on a blockchain capable of executing automated code and storing state.

• Validator: An independent participant responsible for verifying transactions and maintaining the blockchain's integrity.

The CNPY token has several key functionalities within the Canopy Network ecosystem. The platform offers a suite of goods and services designed to provide an AI-native development platform for sovereign blockchain networks, enabling developers to build, deploy, and scale application-specific blockchains with shared security and a seamless path to full independence.

Key utilities of the CNPY token include:

• Transaction Fees: CNPY holders can pay for network transaction fees based on computational needs and the current network load.

• Staking and Security: The token is used as a surety bond by validators and delegators to secure Canopy Nested Chains, utilizing a capital-efficient restaking model that allows the same collateral to protect multiple chains simultaneously.

• Governance: Users can participate in the decentralized governance of the ecosystem by casting votes on protocol parameter changes, DAO treasury fund allocations, and community straw polls. Treasury fund allocations are grants directed toward ecosystem development (e.g., funding for builders, infrastructure, or public goods) and do not constitute a distribution of profits to token holders.

• Ecosystem Rewards: Users who actively participate in securing the network by staking or restaking CNPY (as described above) can earn rewards composed of newly minted CNPY block rewards and the native cryptocurrency assets of the specific Nested Chains they help secure. These rewards are earned in exchange for the ongoing service of providing validation and security to the network, and are not an automatic or passive distribution of rewards or profits.

The Company recently completed a funding round of approximately USD 8.5 million. A significant portion of these proceeds is intended to be directed toward technical development of the protocol and go-to-market support. The majority of the remainder is expected to support marketing, business development, and partnerships, with the balance allocated to legal, administrative, and other operational needs, including costs associated with pursuing the admission to trading described in this white paper. This allocation reflects the Company's current plans as of the date of this whitepaper and remains subject to change based on the Company's evolving priorities and circumstances. Further detail on the Company's financial condition, including estimated runway, is set out in A.17.

In addition to the funding round described above, the Company also holds retained CNPY tokens, as described in G.5, which may provide additional resources to support the Network's development over time.

In addition to the directors at Canopy Network Corp., the project is supported by a team of 7 experienced web3 technologists and operators with expertise in developing protocols.

This is not applicable because there will be no raising of funds. This is not an offer of the CNPY token but rather an admission of the CNPY token to trading, as it is already in circulation.

The admission to trading of Canopy (CNPY) is intended to:

• Increase Accessibility and Liquidity: To make the CNPY token more accessible to European users and improve its liquidity on secondary markets. This can result in more efficient price discovery and reliable trade execution.
• Enhance Transparency and Compliance: This MiCA-compliant disclosure is filed to enhance transparency, regulatory clarity, and investor confidence. It signals the project's readiness to align with the high disclosure standards of Regulation (EU) 2023/1114.
• Support Ecosystem Growth: By increasing access, Canopy Network Corp. aims to encourage wider participation and contribution to the Canopy ecosystem, allowing a broader user base to utilize the token's utility.

This initiative is an admission to trading and not a fundraising event or public offer.

The project is targeted at all types of investors . No restrictions are being applied other than those required by relevant laws, regulations, or the internal policies of the trading platforms.

Access to the CNPY token may be restricted by the individual trading platforms where it is made available. These restrictions may include, but are not limited to, geo-fencing for users in OFAC-sanctioned jurisdictions or other individuals prohibited under the platform's terms and conditions and applicable laws.

Purchases of CNPY on several trading platforms may be made using supported crypto-assets (e.g., USDC) or fiat currencies (e.g., EUR, USD), as per the available trading pairs on the platform. The information on the specific payment methods and providers of payment services is available at https://www.kraken.com, https://www.okx.com, https://www.bitvavo.com, https://www.coinbase.com, https://www.gate.com/en-eu, and https://www.kucoin.eu and their use is subject to the applicable terms and conditions of the specific service provider.

If applicable, any valid reimbursements shall be made to the account or wallet originally used to participate in the offer.

The CNPY acquired as a result of trades shall be transferred through means designated by the trading platform to the compatible wallet or account as designated by the selected Trading Platforms.

Purchasers must have an account on a trading platform where CNPY is listed and abide by that platform's terms.

Technically, purchasers must have a digital wallet capable of holding, sending, and receiving CNPY. CNPY is the native asset of the Canopy Layer-1 blockchain; it is not an ERC-20 token or other token standard issued on a separate underlying chain. Because Canopy's RPC layer is compatible with Ethereum RPC standards, CNPY can be held, sent, and received using standard EVM-compatible wallet software (e.g., MetaMask). Certain functionality native to Canopy, including staking and restaking, requires the native Canopy wallet and is not supported by general-purpose EVM wallets.

CNPY is available on several centralized and decentralized trading platforms. Investors can access these platforms by creating an account on their respective websites (e.g., https://www.kraken.com, https://www.okx.com, https://www.bitvavo.com, https://www.coinbase.com, https://www.gate.com/en-eu, and https://www.kucoin.eu) and complying with the platform's requirements, including KYC/AML verification.

The use of services offered by Trading Platforms may involve costs, including transaction fees, withdrawal fees, and other charges, as notified to users in advance. These costs are determined and set by the respective Trading Platforms and are not controlled, influenced, or governed by the Company. Consequently, any changes to initially announced fee structures or the introduction of new costs for the future are solely at the discretion of the Trading Platforms.

To the best knowledge of Canopy Network Corp., no conflicts of interest have been identified in relation to the admission to trading.

To provide a complete understanding of the information disclosed, Canopy notes that while the number of CNPY tokens retained by the issuer (see G.05) is ~16% of circulating at launch, the majority of these tokens (72%) are held for go-to-market, airdrop, and other ecosystem allocations, including the allocations described in G.11. Canopy does not consider this concentration to constitute a conflict of interest.

Canopy further notes that it has engaged an external service provider to provide marketing and go-to-market services under an arrangement compensated through CNPY, with an estimated value of approximately USD 2.5 million, as further described in A.17. These tokens are subject to a 12-month cliff followed by linear vesting over 2 years, consistent with the vesting terms described in G.11. As a result, the service provider holds no vested tokens as of the date of this white paper, and will not receive any tokens during the period in which the admission to trading described in this white paper is being pursued. Canopy considers this arrangement, including its vesting structure, to reflect standard industry practice and does not consider it to constitute a material conflict of interest.

Subject to mandatory applicable law, any dispute arising out of or in connection with this white paper shall be governed by and construed in accordance with the laws of Panama.

Consumers: For disputes arising out of or in connection with this white paper where the counterparty qualifies as a consumer, jurisdiction shall be determined in accordance with the mandatory consumer protection rules of the applicable law, including any rules granting consumers the right to bring proceedings before the courts of their place of residence.

Business-to-Business (B2B): In the event of any controversy or claim arising out of or relating to this whitepaper, the parties hereto agree first to try and settle the dispute by mediation, administered by the International Centre for Dispute Resolution under its Mediation Rules. If settlement is not reached within 60 days after service of a written demand for mediation, any unresolved controversy or claim arising out of or relating to this contract shall be settled by arbitration in accordance with the International Arbitration Rules of the International Centre for Dispute Resolution.

Where arbitration under the foregoing is found to be unenforceable, in whole or in part, with respect to a given dispute, the competent venue shall default to the courts of Panama. Where the courts of Panama are not available or competent to hear the dispute, jurisdiction shall be determined in accordance with the applicable mandatory rules of the jurisdiction in which the counterparty is domiciled or in which proceedings are otherwise required to be brought.

Canopy is classified as an "Other Crypto-Asset" under Regulation (EU) 2023/1114, as it is not an Asset-Referenced Token (ART) or E-Money Token (EMT). It is a fungible token based on the Canopy native token standard.

The CNPY token's primary functionalities within the Canopy Network ecosystem include:

• Transaction Fees: Users pay transaction fees in CNPY based on computational needs and network load. These fees are recycled to reward block proposers rather than requiring new token issuance.

• Staking and Network Security: Participants can stake CNPY as validators or delegators to secure both the root chain and multiple Nested Chains. Through a novel restaking mechanism, this collateral is reused across various application chains, allowing participants to earn a portfolio of tokens as block rewards in exchange for the ongoing service of providing validation and security to the network.

• Governance: The token facilitates decentralized governance by allowing validators to participate in on-chain straw polling to signal community sentiment. Furthermore, staked validators act as decision-makers who authorize protocol parameter changes and treasury transfers from the DAO pool. Treasury transfers are grants directed toward ecosystem development (e.g., funding for builders, infrastructure, or public goods) and do not constitute a distribution of profits to token holders.

• Ecosystem Subsidization: CNPY holders can subsidize the block reward for Canopy or a specific Nested Chain by contributing additional CNPY or native token on top of the chain's existing security budget. This creates a market-based mechanism for chains to attract sufficient validator participation: a chain with insufficient validators securing it can offer a higher effective reward, drawing more validators to stake on it. Subsidizers do not receive rewards or other consideration in return for these contributions; the additional CNPY is paid out to the validators who perform the security work.

The functionalities described in F.2 are already live and operational.

CNPY is a fungible crypto-asset classified as an "Other Crypto-Asset" under MiCA. It operates on the Canopy blockchain as a native token. The underlying network, Canopy, uses a Proof-of-Stake consensus mechanism designed for high throughput and low fees. CNPY does not represent ownership, profit rights, or legal claims, and functions solely to support the protocol's technical and economic operations.

The issuer does not provide any other services not covered under this whitepaper or the relevant regulations.

Purchasers or holders of CNPY do not acquire any contractual rights, equity interests, profit-sharing rights, dividends, or other legal claims against Canopy Network Corp. or any affiliated entity by virtue of holding the token.

The CNPY token is a decentralized digital asset designed for functional use within the Canopy Network ecosystem. Any "functionality" are limited to the token's protocol-level utility, such as:

• Staking and Restaking: The ability to stake tokens as collateral to secure the Canopy root chain and restake across multiple nested chains, allowing participants to earn consensus block rewards and native application tokens without requiring additional capital.

• Transaction Fees: The ability to pay for operational costs, transaction processing, and computational resources required to deploy and interact with sovereign applications on the network.

• Decentralized Governance: The ability to participate in on-chain governance decisions, enabling validators to vote on protocol parameter updates, DAO treasury fund allocations, and community straw polls.

Holding CNPY does not represent ownership in any legal entity and does not confer any right to financial returns.

Any functionality associated with CNPY is exercised technically by interacting with the Canopy protocol.

For example:

• Governance: Rights are exercised by staking as a validator and participating in on-chain governance actions, or by submitting a transaction as a token holder, both validated by the decentralized network rather than by any centralized party.

• Utility: Rights are exercised by using CNPY to pay transaction fees, stake for network security, or transact on the protocol, validated on-chain by the decentralized network rather than by any centralized party.

These actions are carried out on-chain and are validated by the decentralized network, not by Canopy Network Corp.. Procedures are defined in the project's public documentation (e.g., https://canopy-network.gitbook.io/docs).

Canopy Network Corp. cannot unilaterally modify the token's functionalities. As Canopy is a decentralized protocol, any changes to the token's utility or the network's rules are subject to the project's established governance process.

Modifications occur through on-chain governance proposals, such as parameter changes that allow real-time adjustments to the protocol, which must be approved by a supermajority agreement of at least two-thirds of the voting power of the validator committee.

Canopy Network Corp. does not intend to conduct any future public offerings of the CNPY token. The token is already in circulation and available on secondary markets.

The Token grants access to the functionalities presented under Section F.2, namely:

• Transaction Fees: Users pay transaction fees in CNPY based on computational needs and network load. These fees are recycled to reward block proposers rather than requiring new token issuance.

• Staking and Network Security: Participants can stake CNPY as validators or delegators to secure both the root chain and multiple Nested Chains. Through a novel restaking mechanism, this collateral is reused across various application chains, allowing participants to earn a portfolio of tokens as block rewards.

• Governance: The token facilitates decentralized governance by allowing validators to participate in on-chain straw polling to signal community sentiment. Furthermore, staked validators act as decision-makers who authorize protocol parameter changes and treasury transfers from the DAO pool.

• Ecosystem Subsidization: Ecosystem participants can utilize CNPY to manually subsidize specific Nested Chain committees. This allows community members and project leaders to directly donate tokens to ensure validators are appropriately compensated for their consensus work.

The quantity and quality of each functionality is determined respectively, by the circulating supply of the Token available for effective use and the overall state of the Network. As the Network evolves and engagement therewith too, both factors will be shaped by effective Network participants at any given time and overall Network development, making them currently unquantifiable.

The functionalities described under G.6 can be redeemed by using the Network and calling the appropriate functions thereof. In case of Network issues, Tokens may not be usable and effectively become irredeemable. No fiduciary redemption exists, a User cannot redeem Tokens with the Issuer, the Company or any other entity, for money or other assets.

Unstaked CNPY tokens may be freely transferred between users at the protocol level and are subject to no transfer restrictions. Staked CNPY is subject to an unstaking period before it can be transferred.

CNPY tokens may also be temporarily locked at the protocol level to facilitate cross-chain swaps. Tokens locked for this purpose are released upon completion of the transaction or, where the transaction is not completed, upon user request or another applicable unlock condition.

A significant portion of the token supply is subject to protocol lock-up and/or vesting schedules, as summarized below (percentages reflect share of max supply):

• Investors & Advisors (6.01%): Tokens allocated to seed and private-round investors under Simple Agreements for Future Tokens (SAFTs). 0% unlocked at TGE; 12-month cliff, followed by linear vesting over 24 months.

• Team & Contributors (7.92%): Tokens allocated to core team members and contributors for past and ongoing protocol development. 0% unlocked at TGE; 12-month cliff, followed by linear vesting over 24 months.

• Community & DAO (16.51%): Includes Masternode incentives (locked at TGE via Canopy's protocol per protocol staking logic), an Airdrop Budget (50% unlocked at TGE, 3-month cliff, then linear vesting over 12 months), and a DAO Pool for governance and grants (0% unlocked at TGE, 12-month cliff, then linear vesting over 12 months).

• Foundation & Operations (8.13%): Includes a Funding Reserve for ongoing operations, grants, and business development (50% unlocked at TGE, 12-month cliff, then linear vesting over 24 months), and Liquidity reserved for seeding exchange and DEX liquidity (100% unlocked at TGE, no lock-up).

The remaining portion of total supply, comprising Protocol Emissions/Staking Rewards (61.43%), is not subject to lock-up or vesting. Protocol burns are permanently removed from supply and never circulate.

Individual trading platforms may also impose their own transfer restrictions in accordance with applicable laws and internal policies.

There is no written legal agreement between the person seeking admission to trading and the crypto asset-holder that sets out the laws that govern the legal relationship between those two parties. In the absence of such an agreement, the law and competent court applicable to the CNPY shall be the law of Panama, unless prescribed otherwise by applicable legislation (incl. consumer law).

Consumers: For disputes arising out of or in connection with this white paper where the counterparty qualifies as a consumer, jurisdiction shall be determined in accordance with the mandatory consumer protection rules of the applicable law, including any rules granting consumers the right to bring proceedings before the courts of their place of residence.

Business-to-Business (B2B): In the event of any controversy or claim arising out of or relating to whitepaper, the parties hereto agree first to try and settle the dispute by mediation, administered by the International Centre for Dispute Resolution under its Mediation Rules. If settlement is not reached within 60 days after service of a written demand for mediation, any unresolved controversy or claim arising out of or relating to this contract shall be settled by arbitration in accordance with the International Arbitration Rules of the International Centre for Dispute Resolution.

Where arbitration under the foregoing is found to be unenforceable, in whole or in part, with respect to a given dispute, the competent venue shall default to the courts of Panama. Where the courts of Panama are not available or competent to hear the dispute, jurisdiction shall be determined in accordance with the applicable mandatory rules of the jurisdiction in which the counterparty is domiciled or in which proceedings are otherwise required to be brought.

CNPY is a Canopy Token that adheres to Canopy standards. Canopy is ETH-RPC compatible. The Canopy network itself is a sovereign Layer-1 blockchain (referred to as the Security Root Chain) built on a recursive, multi-chain architecture, in which application-specific "Nested Chains" launch as sub-chains that inherit security from the Security Root without needing to bootstrap their own validator sets, and that utilizes NestBFT, a hybrid Proof-of-Stake and Proof-of-Age consensus mechanism, for its operations.
This standard ensures industry compatibility with wallets and exchanges.

CNPY is the native token of the Canopy Layer-1 blockchain. While Canopy is not EVM-compatible, its RPC layer is compatible with Ethereum RPC standards, allowing users to hold, store, send, and receive CNPY using standard EVM-compatible wallet software (non-custodial or self-custody). Certain functionality native to Canopy, including staking and restaking, is only accessible through a native Canopy wallet and is not supported by general-purpose EVM wallets. Users may also hold and manage CNPY through accounts provided by third-party custodians or centralized exchanges.

The Canopy network, which CNPY relies on, operates using a NestBFT consensus mechanism.

In this system, validators are chosen to propose and validate new blocks, both on Canopy's Security Root chain and on its Nested Chains, based on the amount of native tokens (CNPY) they have staked as collateral, combined with a Proof-of-Age component that uses Verifiable Delay Functions (VDFs) as a cryptographic proof of elapsed time, protecting against long-range attacks. Leader selection among validators uses verifiable random functions (VRFs) to resist manipulation and DDoS-style targeting.

The validators who secure the network are rewarded with economic incentives for their work. These incentives consist of newly minted CNPY block rewards distributed among block producers and delegators, transaction fees paid by users for network computational needs, and the native token rewards or manual subsidies provided by the specific Nested Chains they secure.

The Canopy protocol DLT is a decentralized, permissionless network. It is not operated or controlled by Canopy Network Corp. (the issuer) or any other single, central entity. It is maintained by a distributed, global network of participants (e.g., validators).

The Canopy blockchain has undergone a security audit by Nodefleet, covering its Layer-1 protocol. Critical issues were remediated before release, with audit reports published publicly on GitHub, reflecting strong transparency.

Following best practices, the Canopy Network Corp. makes all protocol code publicly available. This transparency allows independent security researchers to assess the code for potential vulnerabilities.

Link to the audit: https://github.com/nodefleet/publications/blob/main/CANOPY-NETWORK-SECURITY-ASSESSMENT.pdf

Disclaimer: While audits strengthen security, they do not guarantee the absence of all vulnerabilities. Undetected issues or new exploits could still arise, and investors should consider these risks. See also Part I and the information about the risks.

A non-exhaustive list of the main risks relating to admitting a token to trading include:

• Third-Party Platform Risk: Holders are subject to the terms and conditions of the trading platforms. The platform's operational disruptions (e.g., outages, cyberattacks) or a decision to delist CNPY (due to low liquidity, regulatory pressure, or internal policy) could severely impact the token's accessibility and liquidity.

• Platform Insolvency Risk: If a trading platform holding a user's CNPY tokens becomes insolvent or bankrupt, users risk the partial or total loss of those assets.

• Regulatory Risk (Platforms): Crypto-asset service providers are subject to evolving regulations. New rules could force platforms to halt trading, restrict access for users from certain jurisdictions, or delist CNPY.

N/A

A non-exhaustive list of the main risks relating to crypto-assets, including CNPY, include:

• Market Volatility: Crypto-asset prices are extremely volatile and subject to significant, rapid fluctuations. The value of CNPY can be influenced by market speculation, shifts in sentiment, and macroeconomic factors, and may not reflect the project's fundamentals. There is no guaranteed price floor, buyback, or redeemability mechanism, meaning acquiring CNPY may result in total loss of invested amounts.

• Liquidity Risk: The market for CNPY may lack depth and liquidity. It may be difficult to buy or sell large quantities at a desired price, or at all, leading to significant financial losses.

• Custody & Private Key Risk: Holders are responsible for securing the private keys to their wallets. The loss, theft, or compromise of these keys will result in the irreversible loss of all associated CNPY tokens, with no recourse.

• Regulatory Risk: The legal and regulatory treatment of crypto-assets is uncertain and evolving. Future regulations could impose restrictions on the holding, use, or trading of CNPY, or classify it in a way that adversely affects its value or legality.

• Utility Risk: The expected utility of CNPY within the Canopy ecosystem may fail to materialize due to low user adoption, technical failures, or superior competing projects, undermining its fundamental value proposition.

• Scam Risk: Holders may be targeted by scams or fraud from third parties, including phishing, fake giveaways, identity theft of Canopy or its personnel, counterfeit token contracts, or fake airdrops.

• AML/CFT Risk: Wallets holding or transacting in CNPY may be flagged in connection with anti-money laundering or counter-terrorism financing efforts, regardless of the holder's own conduct, potentially resulting in restrictions on transactions or frozen assets.

• Taxation Risk: The tax treatment of acquiring, holding, or disposing of CNPY depends on each holder's jurisdiction. Canopy does not guarantee any particular tax treatment, and holders are solely responsible for complying with applicable tax laws.

• Market Abuse Risk: The market for CNPY may be subject to manipulative practices such as wash trading, spoofing, frontrunning, or pump-and-dump schemes, particularly given limited regulatory oversight across trading venues.

• Counterparty Risk: Holders relying on centralized exchanges, custody providers, or cross-chain bridge mechanisms are exposed to risks including insolvency, security breaches, operational failure, or compromise of the multi-signature or validator arrangements underlying such services.

• Unanticipated Risks: In addition to the risks outlined in this section, unforeseen risks may arise, including unexpected variations or combinations of the risks discussed above.

A non-exhaustive list of the risks relating to the Canopy implementation include:

• Novel Ecosystem Risk: The Network is built on emerging and rapidly evolving technologies. The underlying software, infrastructure, and related components are in an early stage of development, and there is no guarantee that receiving, using, or holding CNPY will be uninterrupted or error-free, despite audits being conducted.

• Withdrawing Partner Risk: The successful implementation of the Network depends on collaboration with third-party service providers and partners. There is no assurance the Network will be successfully implemented as planned.

• Decentralized Governance Risk: Participation in the Network's governance, involves risks and uncertainties. Canopy cannot predict or control the outcomes of decentralized governance decisions, which could result in changes adverse to the ecosystem, and has no unilateral authority to override such decisions.

• Suitability Risk: The Network is deployed on an "as is" and "as available" basis without warranties of any kind. Canopy does not warrant that CNPY or the Network are reliable, current, or error-free, or that defects will be corrected.

• Unanticipated Risks: In addition to the risks outlined in this section, unforeseen risks may arise, including unexpected variations or combinations of the risks discussed above.

The CNPY token and Canopy platform rely on complex, emerging technology, which introduces specific risks:

• Underlying DLT Risk: The project relies on the security and performance of the underlying Canopy network. This network is subject to its own risks, such as network congestion, high transaction fees, consensus failures (e.g., 51% attacks), forks, or operational halts. Execution of transactions requires gas fees, which are subject to market conditions and may fluctuate during periods of high activity. Users who interact with CNPY via decentralized exchanges (DEXs) may face exposure to front-running or Maximal Extractable Value (MEV), where third parties reorder or insert transactions for their advantage.

• Cybersecurity Risk: The ecosystem, including its protocols, bridges, and front-end applications, is a target for cyber-attacks (e.g., DDoS attacks, hacks). A successful attack could disrupt services or lead to a loss of user assets.

• Bridge risk: If CNPY is made available on multiple blockchains in the future, then the bridges connecting them are a critical vulnerability. An exploit of a bridge protocol could lead to de-pegging or unrecoverable losses.

• Scalability Risk: The underlying technology may not scale effectively to handle a high volume of users or transactions, leading to slow performance and high fees, which would deter adoption.

• Network-Level Risk: Technical failure, malfunction, or vulnerability within the Network, including oracle manipulation or exploits affecting appchains deployed on the Network, could directly or indirectly impact the value of CNPY.

• Unanticipated Risks: In addition to the risks outlined in this section, unforeseen risks may arise, including unexpected variations or combinations of the risks discussed above.

Canopy Network Corp. has implemented several measures to mitigate the identified risks:

• Security Audits: Commissioned comprehensive security audit of protocol code from a third-party security firm.

• Regulatory Monitoring: Actively monitoring the global regulatory landscape with the assistance of external legal counsel to ensure compliance with applicable laws.

• Use of Reputable Technology: Building on a secure and battle-tested DLT (like Hotstuff BFT) to leverage its established consensus mechanism and security.

• Decentralized Governance: Implementing a decentralized governance framework to distribute decision-making and align stakeholder incentives for the long-term health of the protocol.

• Strategic Partnerships: Strategic partnerships and exchange listings are pursued to improve liquidity and operational resilience.

The Canopy network, which CNPY relies on, operates using a NestBFT consensus mechanism.

In this system, validators are chosen to propose and validate new blocks, both on Canopy's Security Root chain and on its Nested Chains, based on the amount of native tokens (CNPY) they have staked as collateral, combined with a Proof-of-Age component that uses Verifiable Delay Functions (VDFs) as a cryptographic proof of elapsed time, protecting against long-range attacks. Leader selection among validators uses verifiable random functions (VRFs) to resist manipulation and DDoS-style targeting.

The validators who secure the network are rewarded with economic incentives for their work. These incentives consist of newly minted CNPY block rewards distributed among block producers and delegators, transaction fees paid by users for network computational needs, and the native token rewards or manual subsidies provided by the specific Nested Chains they secure.

Data provided by CCRI; all indicators are based on a set of assumptions and thus represent estimates; methodology description and overview of input data, external datasets and underlying assumptions available at: carbon-ratings.com/dl/whitepaper-mica-methods-2024 and docs.mica.api.carbon-ratings.com. We do not account for any offsetting of energy consumption or other market-based mechanism as of today.