Good morning. Welcome, everyone, to the first Canton Network Ecosystem Update, a quarterly webinar presented by Canton Strategic Holdings. I'm Mark Wendland, Chairman and CEO of Canton Strategic Holdings. You may have seen our quarterly report that we published earlier. If you haven't seen that's posted on our website, cantonstrategic.com. Jt a little bit of housekeeping before we dive right in, just the format of it. We will do a short kind of recap of the report for those that haven't seen it, kind of giving our soundbites of what we think is important. Then we will get into the topic of the day, which is more deep dive of tokenomics, which we have two guests to join us and go through that, and followed by a short Q and A, time allowing at the end. Very excited to have everyone here. Looks like we have a fairly good audience, and continues to grow as we go here. First, I will introduce the team that has worked hard to put together the report and dive into what they think the highlights are for Q1, which obviously was a very busy Q1 and continues to gain traction as people become more aware of what Canton is, and very excited to talk about it here today. First, I will introduce Mark Toomey, who's President with me at Canton Strategic Holdings. Comes from a wealth of experience, both crossing over the crypto universe and also traditional finance at the likes of Liberty City Ventures, Galaxy, and Goldman Sachs. Then also Hannah Burgess, who joins as Head of Business Development at Canton Strategic Holdings, and also comes from a blend of both crypto and digital assets, along with traditional finance at Goldman Sachs and Galaxy as well. With that, I will pass it over to Mark Toomey. Thanks, everybody. Great to see you all. I'm the President of Canton Strategic Holdings. In my seat, I talk with lots of institutional investors and investors in our company. I can tell you just my perspective versus six months ago when I first joined Canton Strategic Holdings, and we talk about Canton, it was more nascent. People hadn't heard of it. I remember a former colleague of mine said, "Never heard of Canton. Why are you doing that?" He recently came back to me after a trip in London and said every bank he went into, all they'd talk about was Canton. I love this slide and I love this diagram because it speaks to the breadth of the ecosystem and so increasing institutional adoption continues to increase, and we saw it in the first quarter. From a Super Validator perspective, there were six new Super Validators approved in Q1. We know what that process looks like to get approved as Super Validator. It's onerous. What's important is each one of those will be making specific commitments to the network as a Super Validator. It brings the total of Super Validators to 55 that are Super Validators in network. E ach of those has a stated objective they have to meet, all contributing to the ecosystem. Notable brands that are now announced new Canton initiatives for tokenization in Q1 were JP Morgan, Lloyds, Bank of New York, and London Stock Exchange Group. They're all going to be working on tokenized deposits. Again, that speaks to the name brand institutional partnerships, the utility of Canton, and increasing institutional adoption. This all translates to volumes, and I love to talk about this in meetings, the volumes on-chain, because they're staggering. It speaks volumes of the utility of Canton and investors love to see this. Often they're taken back and don't believe them, but we had meaningful on-chain transaction growth in Q1. Some highlights are we're up to $9 trillion of monthly transaction volume. You have $81.2 million of total transactions. That's a 32% increase versus last quarter. 902,000 average daily transactions. Average transaction per second is now 10.44. That's 35% increase versus last quarter. We've had milestone transactions across multiple currencies and asset classes. Also in Q1, European government bonds, U.S. Treasuries, Gilts, Euro cash, and USD cash with multiple more asset classes and assets in the pipeline for Q2, which we're really excited about. We've just had a milestone quarter and real growth from a volume perspective. Thanks. Sorry. Throughout the quarter, we saw major developments that enhanced the ways in which users interact on Canton. Fireblocks and BitGo brought institutional settlement rails to the network, and Circle brought USDCx onto the network to name a few of the big key items. Super validators like LayerZero, Zonoff, and ChainSafe enhanced interoperability, connecting Canton to the broader crypto and financial ecosystem without compromising its core values of privacy and compliance. On the protocol and ecosystem development side, January marked a change to the reward schedule on Canton by cutting issuance in half from $5 billion per quarter to $2.5 billion per quarter. The distribution of the rewards pool changed as well. Apps now take home 62% of the reward pool, and with the approval of CIP-104, apps were now aligned such that their rewards are representative of actual traffic driven on the network. Two other CIPs or improvement proposals that we discussed in the report highlight token rewards in another way. Through CIP-100, the Protocol Development Fund was created. This fund allocates 5% of network rewards to the ecosystem development as a whole, both through milestone-based grants for builders and for public reporting. CIP-105 has been a major topic of conversation as it's slated to go live tomorrow. This improvement proposal introduces an on-chain locking system for Super Validators, where they must lock a percentage of the rewards earned in order to prove their long-term commitment and maintain their full governance weight. Thanks, Hannah. There's a lot obviously that's been going on in Q1, and part of this is looking ahead to Q2. The things for me, and again, this is today, this changes every day, it gets more and more activity going on. But as Hannah talked about, the impact of CIP-105, which for those that aren't familiar, is intended to align incentives for Super Validators, those are the infrastructure providers, integrity and validation to the network, and a requirement to lock a percentage of their rewards in order to continue to receive future rewards. That just again, incentivizes the long-term participation of the network as a whole, and the impact associated with that, because those are rather large numbers of the total float of Canton Coin outstanding. Just to keep an eye on that as that goes live and see what any type of actions as a result of that happen. The second one is obviously we've talked about the mobility of collateral, and one of the components that really is key to that is DTC tokenizing U.S. Treasuries. That is being done with pilot transactions right now and kind of the hope to get that ready for launch in the June-July timeframe. Hopefully at the end of Q2, we'll be talking about kind of some actual real transactions going on live. Again, as close to native issuance as you can get on-chain is what is very important with the largest CSD in the world of DTC tokenizing Treasuries, which is the number one non-cash use of collateral to support transactions. That's another one that carefully watching the rollout of that. Last but not least is continued traction on more apps. As the rewards shift from Super Validators to applications, incentivizing those to continue to build and put more and more transactions on top, which I think is very important as well. We'll just watch as continued app development and more and more use cases come on top of Canton. That is a wrap of our report and kind of what we thought were the main components associated with the research report. I thank you all for reading that report. Now I would like to turn to the next topic of the day, which I mentioned we have two guests to do a deep dive on tokenomics and the tokenomics policy of Canton. I think I'll let them give their backgrounds and so forth. Some people that have been very involved with the network and development of tokenomics policy from day one, and so I think we couldn't ask for better guests to deep dive on this topic. I think we chose tokenomics to talk about because I think everyone understands Canton equals privacy. That's the first and foremost, I think people link those two statements. Next is I think the tokenomics policy makes it unique as well. Without further ado, I'd like to welcome Eric Czarnecki and Chris Zuehlke to the webinar. We'll just have kind of some free-flowing questions and more of a free-form conversation about some of the key components that we think about the tokenomics policy. Eric, Chris, I'll let you introduce yourself. Thank you. You want to kick it off, Eric? Thanks, Mark. Thanks for having me. Yeah. Hello, everyone. My name is Eric Czarnecki. I'm one of the co-founders of Digital Asset. We've been at this the better part of 12 years. I run our network go-to-market motion and was heavily involved in the early design of the network and the tokenomics. Prior to that, I spent roughly a decade at DRW as a commodities trader and helped get Cumberland off the ground. I'm Chris Zuehlke. I'm a partner at DRW. Been here for about 22, 23 years now, I believe. I co-lead our digital asset efforts here, which includes Cumberland, a large OTC liquidity provider and general kind of market participant in crypto assets and digital assets as they continue to grow. A large part of my focus is on our strategic initiatives in the blockchain space, and that includes a heavy participation in the Canton Network. We're board members of the Foundation, and I am also the chair of the Tokenomics Committee. Thanks, guys. Again, we'll go into some basics. We have a broad range of participants here. Here are those that are already participating in the network, some that are just learning about it, so we'll try and cover the full range. Eric, you are one of the co-founders of Digital Asset, the creator of Canton the blockchain. Could you just give kind of a background and context about how this all came to be, and specifically how you formed some of the tokenomics policy and thoughts around that? Yeah. I think that the motivation is actually super important, and maybe even before we talk about the tokenomics, some quick background about how we brought Canton into existence. First and foremost, we thought that a public network that anybody could join and credibly neutral and everything is connected and all coexists is absolutely the destination. The path that we took to get there was first working individually with different large organizations, making sure that the technology fit their very demanding requirements. We built Canton step-by-step, customer by customer, working through their requirements across a broad set of use cases, putting them into production. Some of our biggest customers today, it looks like they're net new, but some of them have been in production more than five or six years, and there's a good handful of those that have been running Canton in production for their own workflows for a good amount of time. The impetus for launching the network, even though it was a really important part of our North Star for over a decade, we deferred many times. We just didn't think that the conditions were right, both from a macro environment, and also that we didn't think that we had a big enough yet ecosystem of use cases and the right features and everything honed in yet on the network. The real catalyst for doing the network happened when our large customers that had been in production started asking us about how to connect their use cases together. It was at that moment that it started to signal that it was time to really do the connectivity part of Canton, which had always been under the hood, but not the most prevalent or heavily used component of what people were doing. From our perspective, that global composability across these distinct use cases is really the big opportunity when you think about real-world assets or capital markets or finance of any type coming on chain. That demand is what signaled time for the network to launch. The big element that goes with the network other than the technical components, which we had been working on for a long time, is really around the tokenomics. There are a few key insights. We benefited tremendously from having pretty much the existence of Digital Asset. There had been live tokenomics in production in other networks that we got to learn from and learn a lot of trade-offs that people made. I genuinely don't believe that there are good or bad decisions. There are just trade-offs. We thought that there were a number of missing trade-offs that hadn't been made and had produced some negative externalities over the course of the years on the other ecosystems. A few key insights. One is that tokenomics are incredible at creating an economic layer of first-mover advantages, where in network effects, you may have first-mover disadvantages. It's really important to structure it in such a way that those that came first, those that participated most actively early, those that helped improve the ecosystem the most through activity and feedback and use, that those benefit disproportionately to those that come much later after it's very clear that this is a good place to participate and to be very active. Creating first-mover advantages for participation was really important. Another was to make sure that all of the tokens that get distributed are being distributed to those doing something productive. Like actually doing something useful in the ecosystem. Many other ecosystems have favored instead more of a fundraising style approach where you could participate early by providing capital or funding, and that's not something that we wanted to do. We wanted to make sure that all of the rewards were distributed by doing something much harder, which is participating, doing some work, building apps, running infrastructure, introducing users, whatever that may be. We had more of a proof-of-work approach in the sense that the work was actually using the network in some meaningful way. Another really key insight is that the incentives were not necessarily aligned with the key participants in some other ecosystems. What I mean by that is if you look at most networks, they mimic a Bitcoin design where emissions and fees go to the infrastructure providers. That makes a lot of sense in a network where the total emissions approach zero over time and you have to rotate to fees, but it doesn't necessarily make sense in other ecosystems. It doesn't make sense in ecosystems where the quality of the applications are really the determinants of the value of the ecosystem. That's largely driven by smart contract ecosystems. We wanted to build a revenue model in the network where the apps are really participating in the economics more so than the infrastructure providers. Sorry, I missed one other really important thing, which is that we wanted to make sure that there was some fundamentals to the price. It's not purely a meme coin. We looked for something where we could design the tokenomics in such a way where it would be possible to do things like discounted cash flow analysis or have some reasonable expectation of a price given a certain amount of activity in the network. Instead of these kind of heuristics that people use in other ecosystems, we wanted to come up with some tokenomics model that would have higher correlation to the true utility of the network. Like I said, we had the benefit of about a decade of kind of helping us think through that. Those were kind of the things we wanted to try to achieve. That is still very much an active area of discussion. There are tweaks on the edges and on the margins that are made with some frequency, after a lot of lively and healthy debate and experience with it in production. I believe that we've done a good job of developing a model that ticks a lot of those boxes and helps us achieve those goals. Thanks, Eric. That's helpful. We'll come back to, I think it's very important to look at the rewards and the incentives and make sure they're aligned there. We'll come back to that in a second. Chris, could you talk a little bit more about the basics of the tokenomics policy, what a burn mint is, and you hear about the burn mint equilibrium, topics like that, and just explain in detail what those are? Yeah. Happy to. Thanks for including me in this. I'm happy to be here. Just put simply, minting as a concept is the creation of a.... I'm going to talk specifically about Canton Coin here. The creation of a Canton Coin, after having been awarded the right to do so as a result of performing work in the network in some capacity. Eric just mentioned how we think about things at a high level to award the participation and the introduction of utility to the network. Really, it kind of is broken down into two categories. The first is, the incentives provided to operate the infrastructure that secures and synchronizes the transactions on the network. These are just kind of emissions of the network themselves. We call those that are conducting that activity, the Super Validators, and they are rewarded the right to mint tokens as a result of that work. Then the second is driven by the activity on the network, where ultimately the goal is to reward those participating in the network. They are afforded the right to mint tokens as a result of either operating applications, and we'll talk a little bit more about that. But effectively, the fees generated by that applications drives the amount of minting afforded to that party, or the validator that the individual user that participates in the transaction uses. Those validators are also awarded a right, kind of as a function of the activity that they conduct, to generate or to mint Canton Coin, in the network. The other side of that is the burn side. Put simply there, burning is taking an existing token and essentially destroying it. Kind of moving it out of existence. That process to burn is done in order to generate what I call bandwidth in the network. What I don't think people are necessarily all familiar with is to pay for a transaction on the network, you're not actually paying directly in Canton Coin. Rather, you're paying in dollar-denominated bandwidth credits. When Canton Coin is burned, it generates those dollar-denominated bandwidth credits, based on the price conversion ratio within the MainNet. In practice, this means that a party could participate in the network without ever holding Canton Coin. Rather, they could indirectly obtain bandwidth from a third party. That minting and burning process effectively is what creates the Canton Coin, destroys the Canton Coin, generates the credits or the bandwidth necessary to power the transactions on the network, and ultimately creates a pass-through of rewards allocated to the operators of the applications and validators. Now, you asked a little bit about this concept of burn mint equilibrium, and why it's important. Kind of taking a step back. When we think about the net emissions and the net fees and the net burn in the network, you really want to understand the dynamic between those two things. In an ideal scenario, if you are awarding the right to mint Canton Coin to applications and validators as a function of the fees that they generate on the network, then that reward should be based directly on the burn associated with that activity. When you drive minting rewards based on burning rewards, what will ultimately happen is you have the ability to establish an equilibrium such that the net emissions in the terminal state should effectively be zero for that activity. Now, how does this actually work? What happens is as there's more demand to use the network, the conversion price of the Canton Coin into bandwidth should increase over time. The reason for that is, as people are burning coin to generate more bandwidth to participate on the network, supply goes down. In theory, what will happen as that conversion price goes up, the amount of bandwidth created per burn of a token will increase. Over time, as the conversion price increases, the amount of bandwidth generated per burn increases, thus slowly reducing the need to burn incremental tokens to achieve the same amount of activity. On the other side of the equation, as the conversion price in the network goes down, you'll need to burn more tokens in order to generate the same amount of bandwidth to conduct the same activity. That means supply will slowly increase because there's less burn associated with the same amount of activity. This dynamic creates a slow and a reasonably observable oscillation around that one-to-one ratio between application activity and the burns associated with that activity and the rewards. Now, let me give you an example because that can be complicated if you just hear it for the first time. Put simply, let's say the cost for me to use a ledger for a specific action is $1. The conversion price in the network for Canton Coin into the bandwidth is $0.01. I need to burn 100 tokens for that action. Now imagine a scenario where the conversion price is actually $1. For that same exact action, I only need to burn one token. You could see as the conversion price changes significantly, the amount of burn happening in the network can shift up and down significantly. That dynamic is what will create that ebb and flow of the net burn or net deflation in the network. That's not the entire picture here. When we think about burn mint equilibrium, we think about it at, or at least when I do, I think about it at two tiers. The first is the application BME. When we talk about application BME, we're talking about the participation on the network itself. That will include the rewards, and burn coming from the applications and validators themselves. It's possible to hit this concept of application BME while the network still has net emissions, because the super validators themselves will also have their own emission schedule and reward schedule. Now, you could reach network-wide BME, if the amount of activity on the network is so large that not only is it surpassing the rewards, which are capped on a per round basis for the application and validator activity, but going all the way through the rewards that are also being generated by the super validators on a per round basis. There's nothing preventing it from going above and beyond that as well. There's some interesting tooling out there that you can watch this rate of the BME oscillate above, through, below, et cetera, the various different levels of application validator and super validator rewards over time. Yeah. Listen, I think that, I tried to summarize everything Zuehlke just said for the more uninitiated. This is an oversimplification. He gave a very fulsome, good example. My way I like to communicate this, because I think that this is the way it works in practice, is that the emissions in the network are effectively distributed to the super validators. If you're like, "Well, what's the net emissions rate of the ecosystem?" It's generally going to be around the super validator rate. We'll see, but that's my expectation. The fees of the network are not really fees that you pay the validators like you would in any other ecosystem. It's a lot more like interchange. It's really a distribution of the burn to the apps and the infrastructure that users are specifically interacting with. If you imagine that on Ethereum, every time USDC moved, the fees that the user paid was distributed to the validator that submitted the transaction and USDC. That is effectively how the app and validator rewards in Canton work, and then the emissions would go to the Super Validators. That to me is a better separation of the distribution of revenues because it is a way for the valuable things in the network to participate in the fees that are being generated in the ecosystem. Whereas in most networks, the validators receive the emissions and the fees. In Canton, in reality, the emissions are going to the SVs, which are providing the common infrastructure for all these participants, and the fees are going to the things you're interacting with or support you specifically. A lot more like interchange, not one-to-one the same, but a lot more like interchange underlying the credit card networks. Got it. That's definitely a lot to unpack there. I think some of the key components for me is the fact that this equilibrium and the ratio around those, it can be deflationary, it can be inflationary, and those are things to watch. There's lots of different dashboards that you can track that. I think that's a unique feature, about how the policy was designed. I think it's one to keep track of and understand about it. Moving on to a different type of question. We've seen some comments through my interactions with various people and some out there publicly talking about it, but why not just simply mint more Canton Coin or issue more Canton Coin? Can you talk about that schedule? There's a white paper that describes that. Can you just go more about how that's described and what it takes to even change something like that? Yeah, happy to comment on that. To your point or to your question, I guess, there is a set issuance schedule, and theoretical inflation schedule that's outlined by the white paper. For those of you who aren't familiar with it creates specific time-based tranches, during which there is a rate of emissions per year or issuance per year. The network for the first half a year started at a rate of 40 billion for the year. Over the course of the following year, it shifted down to a rate of 20 billion a year. Over the course of the following three and a half years, and this is where we are today, it issues at a rate of 10 billion a year. In the terminal state, at 10 years plus, it issues at a rate of 2.5 billion tokens a year. That's not the full picture. Within each of those time-based tranches, there is an allocation to super validators, and applications, on a per round basis, such that 100% of that fixed reward or fixed emission supply is distributed, or can be distributed. Prior to the recent halving that took place earlier this year, the distribution was 40% of rewards available to applications, 12% of rewards available to validators, and 48% of rewards available to super validators. Post the recent halving, not only has the total rate of issuance in the network gone from 20 billion down to 10 billion, but those ratios have changed. To Eric's point earlier, the goal of these ratio changes is to, over time, shift the incentive and the reward in the network from the infrastructure operation to those building and participating in the network. Today, and for the next, I'll call it about three years, but I'm rounding, the ratio is applications get 62% of the rewards. That is versus 40% from the previous regime. Validators get 18% versus 12% from the previous, and Super Validators go down to 20% from the previous 48%. In the terminal state, and there's an intermediate state between now and the terminal state, but just to kind of give you a picture of the long term, the distribution of the 2.5 billion of issuance per year is 75% goes to the applications, 20% goes to the Validators, and 5% goes to the Super Validators. You could kind of see that continued shift over time. Now, to your question about why not just mint more, well, the network does have this fixed schedule. In theory, a governance process could reduce the net issuance on the schedule. It could increase the net issuance on the schedule. It can even change those ratios for the various different percentages each of the verticals is allocated. That would require a formal governance action, which, to put simply, would have to be proposed as something we call the CIP. It's effectively a proposal to make a change in the network. That proposal would need to be accepted for vote by the Tokenomics Committee. The way that acceptance works is the proposal first needs a sponsor and then an endorser. Then assuming it gets sponsors and endorsers, it then goes to a formal vote, of which it requires nine of the operating Super Validators to vote in favor of it out of 13. The important distinction here is that the entire governance and voting process, while it is communicated and debated among the entirety of the governance process, the voters for that process are those that are operating the Super Validators themselves. Now, my perspective is the mechanism of burn mint equilibrium, and it's less of a mechanism, more of a concept. That dynamic allows the net issuance or net deflation of the network to oscillate and ebb and flow to kind of reflect and meet the demands of the supply and demand of the network itself. I think that's one of the kind of really brilliant innovations here is that there is a fixed issuance schedule. It can be net inflationary, can be net deflationary based on that dynamic, and that kind of insulates the network from a need to, at least in my perspective right now, to revisit that issuance schedule. Got it. Thank you for that. I think some of these we already hit on, but I'll just kind of talk about the rewards and incentives, those matter, and kind of how that's dispersed. You talk about that from a policy perspective. The white paper outlines that, so it's transparent. It's set and schedule along with the issuance. I think that's obviously very important to the integrity of the policy. You also talked about, Chris, some of the governance aspect about what that means to make changes in the voting of 13 independent standalone Super Validators, and you need a majority of nine of 13 in order to pass those. Which again, gives it that element of that it's not just one or a unique person that's making the rules and it's transparent and out there. I think one just going through of highlighting on how fees are structured, Eric, I don't know if you wanted to talk about that. Like Canton Coin, it's a utility token. It's not meant to be necessarily, obviously, people can speculate what they want, but it's more of a means, a utility token. How do fees kind of change as the price of Canton Coin fluctuates? As an example. Yeah. Okay. This is missing my preamble. Also, another one of those really important design decisions. I think that predictability of fees is really important. The way that the network works is that all the fees are denominated in dollars. For any two transactions that are the same size in bytes, it'll cost the same no matter the price of Canton Coin. It'll cost the same in dollar terms. That allows you to build a predictable business and get your margins figured out and get your fees figured out and all that sort of stuff. The kind of underlying critical component of how the burn schedule works is that it is always a dollar. If the price of Canton Coin is a dollar or a penny, you're paying a dollar in dollar terms. Fees are denominated in dollars. There's the conversion rate at the time of the burn, but it's always fixed in some dollar amount that is consistently the same for you for the same transaction, no matter what the price of Canton Coin is. I think that, again, just to kind of simplify what Zueh lke's been explaining quite well and precisely. I think about the burn mechanism as being a natural built-in buyer on the downside. When the activity in the network is, let's just say consistent for the sake of this argument, if the price goes too low, you'll be in a net deflationary state. That means that there is some floor to the price of the coin, given an amount of activity. You can think of it almost like a buyback structure. Like at some point, if there's a publicly traded company, it has great revenues, it's sitting on a ton of cash, and the price of the stock is just too cheap, then the company will buy back shares. It's very kind of similar in concept structure, but this is built in and automated. As this activity in the network is generating burn, whether or not the price is appropriate relative to the amount of activity, ultimately kind of sets what this net inflation schedule is. You can be temporarily deflationary, or you can be very, very small deflationary, but I don't think you can be in any way materially deflationary for extended periods of time. You would, at the extreme, run out of tokens at that point. I think about it mostly as being kind of almost like a ratchet to the extent that activity in the network is consistent and growing over time, that that sets some burn level floor where if you sat underneath those activities, you would be too deflationary for too long. And that should, in theory, produce an upward movement in the price. What's important about that is that you want to track at all times in the ecosystem what is the burn in the ecosystem, what's the trend on the burn in the ecosystem. Where is it coming from? Are those things growing? Are those things durable? To create a couple extremes, bank financing and repo is a lot more durable activity that happens constantly, more or less participants based on market conditions. Bank financing, repo happens like clockwork. Payroll happens like clockwork. Meme coin trading and meme coin derivatives is a kind of ebb and flow, macro condition, not super durable type thing. That's a continuum, right? You want to, just like you would assess any other company on Earth, you would say, "Well, what's the top line number?" For us in the Canton ecosystem, that's burn. That's the most important top-line metric. Then you'll have to make your own sort of assessment about what's the quality of the burn, and you could assign your own sort of expectation on what an appropriate multiple on the quality of that burn should be. That's your perspective as an investor. Yeah, I think that just really trying to simplify this and really dumb it down, if you're looking at what that burn number is, then that implies some price under which you become deflationary. If you apply some reasonable multiple to that, and reasonable is in the eye of the beholder, so that's up to you, then you determine what you think that forward expectation of growth and quality of burn will be in the ecosystem. I wouldn't think too much beyond that. For a user of the ecosystem, your expense to use the ledger for the same transaction today, tomorrow, five years in the future, is always the same. It'll always be in dollar terms the same amount for you. Now, just to kind of chime in there a little bit. Everything Eric said, I think kind of paints a pretty clear picture. I think you also need to go back and clearly understand the emission schedule of the network overall. It's really easy to kind of get caught up in the numbers and not really understand what they mean in practice. I quoted that recently the network went from 20 billion issuance per year down to 10 billion issuance per year. The application rewards went from 40%-60%. Now, those high-level numbers I think all make sense, but when you actually break it down and overlay them on top of each other, the previous app rewards per month at a 40% rate was about 667 million, give or take. There's some rounding there. Post this happening in January, despite going up to 62% of the total distribution, the total amount of awards per month for applications actually went down. Down to about 517 million. You kind of need to understand how the distribution ratios overlay on top of the net issuance of the network, and then kind of overlay that on top of everything Eric just said from a burn perspective to understand net deflation or inflation in the network. Right. Well, thank you for going through that, Chris and Eric. There's a lot to unpack here. I think step one is reading the white paper, understanding that, and I think diving into some of the details about the policy, because I think it is definitely tried to align incentives around that and the target use case of what Canton was built. I encourage everyone to kind of understand that, read that. You can always reach out to us with questions on that. Happy to go through that. Thank you for joining here, and we'll just move on to the next segment, which is Q and A. Just one second, and we will get some questions in here. It looks like the first one is it possible to get a sense of the impact of activity moving on-chain on burn fees? For example, if DTCC brings on X amount of volume on Canton, how could that impact burn? I will kind of start, and then Eric, Chris, or anyone else chime in here. I think first I look at what DTC is, what they've talked about, and what the pilot is. They're the largest CSD in the world. They have around $30 trillion of U.S. Treasuries on their sheet, another $70 trillion of equities, corporates, and a bunch of different other securities. What they've engaged and said in their release in December was that they were going to pilot tokenizing U.S. Treasuries. That's $30 trillion of potential assets. I don't envision that it's going to be 100% activity move over. You're going to start to see tokenization of Treasuries hopefully at the end of Q2, beginning of Q3, and we'll look to scale, again, the focus on that $30 trillion of U.S. Treasuries. As more activity gets put on that tokenized format and then the use of transactions going on in the burn, which I think goes to some of the dynamics that Eric was talking about, just holding all things constant, the more activity that should require more burn to go on. I'll let anyone else kind of opine on that. I think it's unclear exactly what the size of that pool is going to move on, and that's obviously demand of DTC's customers, et cetera, will drive that. Anything else, Eric, you think to talk about how that impacts the burn specifically? As more transactions go on, that just increases the burn. A couple different ways to think about this. The first is that I find that Treasuries are kind of criminally underused today. They should have much higher velocity than they do today, similar to money. I think that blockchains, if they are successful, what they will do is they will increase the velocity of money and increase the velocity of collateral. I think that a good example of this is if you look at the amount of activity going on in something like the Broadridge DLR app. The durations on the repos are pretty interesting. They tend to be kind of much more custom than you would have otherwise anticipated. I expect that the impact of this will be about the velocity of collateral improving. However, I'm always extremely reticent to make any sort of forward statements about what that is going to do to burn for kind of two different reasons. One is that it's hard to know what the rate of adoption will be. We have tremendous demand, to be clear. There are people chomping at the bit to do this. There are many, many transactions and participants lined up excited to start to use this intraday, extended hours, over the weekend, in new contexts, interesting access patterns. So the demand is overwhelming, but it's very difficult to put a number on that, and I always hesitate to make any sort of forward statement. The other is that I wouldn't make a forward statement based on burn. I think it makes more sense to make a forward statement based on fees. Fees are the ones that are denominated in dollars, where burn would be the one that is based on the market price. If you're trying to say what would the impact on burn be, well, it depends on both the adoption rate and velocity on-chain and what the price of the coin would be at that time. You're kind of making a double statement. I try to be really careful about not creating undue forward statements about that. I do know that there is an incredible amount of demand for access to that. We have everything from new international venues that are looking to help provide access to their users in a fully compliant, fully regulated through the right channels way, but people that struggle to get good access to Treasuries today. We have primes looking to start to take it as collateral in a much more continuous collateral cycle. We have clearing houses looking to start to accept those assets in more of a 24/7 style regime. There's a lot of activity like that that's starting to line up, and you'll start to see the early signs of that happen potentially as early as in the next 30 days and through some early pilots, pre-DTC pilots. I believe that this pickup will start to happen sooner than people expect, but I don't know how to estimate what the ramp up will be other than to say that there is really, really strong demand. Thank you. I'll just add there, it also depends on the design of how they use the ledger themselves. What I've found pretty fascinating is as additional use cases come online into Canton, and there's a wide variety. Eric mentioned tokenization of collateral and intraday repo and the potential for tokenized equities all kind of introducing many things that we're kind of used to in the traditional finance space onto the Canton Network, and then unlocking new and novel use cases within that space. We've also seen some more kind of traditionally DeFi style applications get built into Canton. For instance, like a DEX or an AMM, and seeing how they've modeled the usage of the ledger for locking assets prior to a transaction to ensure that the necessary asset is there, the settlement of the transaction itself. They are finding ways to use the ledger to build resiliency and kind of risk mitigating capabilities into their applications, while also ultimately increasing their transaction count on the network commensurately. To Eric's point, it's kind of difficult to predict in the forward space what the net impact might be because it is based on demand and interest, but it is also based on the implementation details and how these organizations find ways to use the ledger to improve their offerings above and beyond what might be possible in a traditional space. Got it. Thank you. Moving on to the next question. Are you concerned about concentration of Canton Coin holdings? Are there any restrictions that could mitigate the overhang issue? I view the short answer is no. I think as Canton Strategic is one of the largest holders of Canton Coin out there, and also some questions have been asked about what our current holdings. Reminder, we are a publicly traded company and have release schedules about when we file our 10-K, and next is our 10-Q. Those will be the mechanism where you get current updates on our company. I think when I think of that question, I think of more about how we talked about aligning the rewards and the incentives associated with it. Also reminding ourselves where in the evolution of the network. We're still very early on that curve of a network that was launched publicly just about two years ago. Yes, that will continue to diversify and grow as the network matures and the concentration associated with that, too. There are also the incentives of the network in this SV locking 105 does also mitigate some of that by making sure everyone is long-term investors and holders into this network. I think that mitigates some of the risk. There's even been discussion about a locking mechanism for featured apps. More to come on that, but I feel very good about where we are in the maturity of the network, and that will continue to diversify as the network grows. Next question. Sorry, can I add one thing to that really quick, Mark? Yeah. The coins have been liquid from the very beginning. Every token that's been earned from anyone doing any type of work on the network has been fully liquid. Even in the early days pre-listing, there was a pretty deep over-the-counter market. Trading was fairly active. This is an incredibly aligned community. The locking proposals that have been put out, and the first one with the SV locking proposal has been ratified, are largely just to help the broader world understand how committed this ecosystem is. These things are not really being sold in any shape or form or size out of these early participants and out of these active participants in the network. They're long-term committed participants. The locking is just helping formalize what has been their behavior from the beginning. It hasn't been necessary, strictly speaking. It's more something that people have chosen to opt into to help the broader world understand their level of commitment to it. I think that's a point being lost on people. Things that have been totally liquid and available and people could do whatever they want with to date, they've volunteered to lock into long-term locking regimes to help the broader public understand how committed they are. Yeah, exactly. Well said. All right. We'll try and get possibly one, maybe two more, but next one. Do applications need to be featured apps to earn rewards, and how does one become a featured app? Chris, do you want to take a stab at that one? Yeah, sure. This is a pretty easy answer. A featured app is just a designation that's provided by the governance process of the network, specifically from the Tokenomics Committee. That feature designation is done via a 2/3 majority vote. The way it actually works is if you're an application developer and you want to deploy an application to the network, you can, right? You don't need to be featured. You could just be a typical application in the network. If you want to apply for the featured app designation, there's a questionnaire that tries to collect all the relevant information associated with your application. What is it doing? How is it interacting with the network? How are you claiming rewards based on the activity that you're operating? Et cetera. The Tokenomics Committee will review that application, and based on the merits of that application, as well as guidance that's been established by the committee for fair use and conduct of those applications, will vote or provide feedback on the featured app application to either give it the designation, ask for more information, ask for a change, or potentially just vote no. This is a constant ongoing process for us in the Tokenomics Committee. The queue of featured app requests is growing, which I think is a great signal that the builders in this space are really leaning into Canton and the utility provided by the network and the network effects themselves. To the question of do you need to be a featured app to earn rewards? No, you don't. The designation of a featured app increases the rate at which your application can earn rewards by a multiplier on top of the base amount of rewards available to a standard application. As a standard application, you could continue to earn rewards as well. There is ultimately an upper bound or a cap on this number on a per application basis. That all could change, increase, decrease, et cetera, over time via governance actions on the network itself. Got it. Thank you. Final question here, and then I will wrap. With so many new and impactful logos announced, can you give us an idea of what adoption looks like in terms of products, pace, network effect, and markers of success for Canton Strategic Holdings in the Canton Network more broadly. Okay, obviously every day there's a new kind of partnership and new interaction, which talks to what Mark Toomey talked about, the institutional adoption, which was the intent of what Canton was built, and you're seeing that partnership build transaction. I think what I think about that is Canton, a network of networks. It's about getting that interoperability across them, and you're seeing why people want to build on top of Canton is because then you are exposed to all of those different partnerships, use cases, versus your own walled garden, your own network, and that's the power of Canton. I think what I think of it is we have the right players on the field. Now it's about executing and building on more of the real transactions that are already being done through some of the intraday repo platform, and others. I'm really excited about having all those participants there, and now it's about executing on that vision so that you can take a tokenized treasury and use that as collateral across JPMorgan, all the different tokenized deposits that go through, and exchanges and CCPs. That's why the power of all the partnerships there is you then can pay and use collateral and use those digital assets across those networks. That's the vision. That's what we're trying to build here, and I think we're really excited about who we have on the field, and now it's about turning that into a reality. I will wrap there for Q and A, and thank everyone for dialing in. I also thank our guests and Chris Zuehlke and Eric Czarnecki for joining me and talking about tokenomics, which is not always the easiest to understand, and also Mark Toomey and Hannah for talking about the research report and kind of what we're building here. We're excited to hopefully tune in next time. Reminder, the report and a replay of the webinar will be posted on cantonstrategic.com, and I'm sure we'll also post it around socials as well. You can follow us along there, and until next quarter. Thank you.