> ## Documentation Index
> Fetch the complete documentation index at: https://docs.canopy.deal/llms.txt
> Use this file to discover all available pages before exploring further.

# Canopy FAQ: Collateralization, Claims, and OTC Trading

Whether you are new to Canopy or evaluating it for institutional use, the questions below address the most common points of confusion about how the protocol works. Each answer reflects Canopy's core design principles: full collateralization, trustless settlement, and permissionless access for both traders and builders.

<AccordionGroup>
  <Accordion title="Is Canopy an exchange?">
    Canopy is not a traditional exchange. It is a trustless OTC venue where liquidity comes from negotiated, collateralized offers rather than automated pools or market makers. There is no central order book managed by a custodian, no account registration, and no intermediary standing between buyer and seller. You post or accept offers directly, and the protocol enforces every term of the trade through immutable smart contracts.
  </Accordion>

  <Accordion title="Does Canopy use liquidity pools or AMMs?">
    No. Canopy does not use automated market makers or pooled liquidity. Every trade executes directly against a collateralized offer posted by another participant. The seller escrows the full asset amount before the offer becomes visible, and the buyer fills all or part of it at the stated price. Block markets form naturally as multiple offers accumulate around a trading pair, but there is no shared pool that determines price algorithmically.
  </Accordion>

  <Accordion title="Can offers be partially filled?">
    Yes. Large offers can be filled across multiple buyers in any sequence. If a seller posts 500,000 tokens at a fixed price, one buyer can fill 200,000 and a second can fill the remaining 300,000 — or the offer can be filled in any other combination of partial executions. Pricing is mathematically consistent regardless of fill order, so every buyer pays exactly the rate specified in the original offer no matter when they fill.
  </Accordion>

  <Accordion title="Do offers expire?">
    Yes. Every offer has a mandatory `expiry` timestamp set at creation. After expiry, no new fills are accepted. However, expiry does not automatically return the seller's collateral — the seller must explicitly call `cancel` to recover the unfilled portion. For deferred offers, the protocol also requires `expiry <= unlockTime`, meaning an offer always stops accepting fills before its claims become redeemable.
  </Accordion>

  <Accordion title="Are deferred positions transferable?">
    Yes. When you fill a deferred (forward) offer, you receive ERC-20 claim tokens representing your right to redeem the escrowed collateral at the unlock time. You can hold those tokens until the redemption date, sell them on a secondary market, or transfer them to any other wallet at any time. Spot offers settle immediately and do not produce claim tokens — the assets change hands atomically at execution.
  </Accordion>

  <Accordion title="Are claims always fully backed?">
    Yes, without exception. The protocol only mints claim tokens when the corresponding collateral has been escrowed. There is no fractional reserve, no synthetic exposure, and no leverage. If a claim token exists, the underlying asset backing it exists in escrow on a strict 1:1 basis. You can verify the backing on-chain at any time because the series' `backing` counter and the claim token's `totalSupply()` are fully transparent.
  </Accordion>

  <Accordion title="Can anyone create offers or markets?">
    Yes. Any wallet can post an offer by escrowing the required collateral — there are no whitelists, approvals, or minimum tier requirements. Block markets form naturally as multiple offers accumulate around the same trading pair. Because the protocol is permissionless, new markets can emerge organically around any ERC-20 asset without requiring any action from the Canopy team.
  </Accordion>

  <Accordion title="Does Canopy support stablecoins and fee-on-transfer tokens?">
    Yes on both counts. Any ERC-20 token can serve as the quote asset, including stablecoins like USDC. Fee-on-transfer tokens are explicitly supported: Canopy measures escrow deposits using actual received balances rather than nominal transfer amounts, ensuring that the protocol remains solvent even when a token charges a transfer tax. You can also specify slippage limits via `fillWithLimits` to protect both buyer and seller against unexpected fee-related shortfalls.
  </Accordion>

  <Accordion title="Can I build integrations on top of Canopy?">
    Yes. Claim tokens are standard ERC-20 tokens, which means any wallet, block explorer, lending market, analytics platform, or DeFi protocol can integrate them without special permissions or custom adapters. You can list claim tokens in a portfolio tracker, accept them as loan collateral, build a secondary market for vesting positions, or compose them into any other onchain product using the same interfaces you already use for any other ERC-20 asset.
  </Accordion>

  <Accordion title="What happens if I transfer my claim tokens?">
    The recipient of your claim tokens becomes the rightful redeemer of the underlying collateral. Redemption rights follow token ownership: whoever holds the claim tokens at the time of redemption receives the escrowed assets. The escrow itself is not modified when tokens transfer — only the address that can redeem changes, tracked automatically by the ERC-20 balance. This makes claim tokens fully composable and tradeable without any additional protocol intervention.
  </Accordion>

  <Accordion title="Is there an admin who can freeze or block redemptions?">
    No. Redemption is permissionless and automatic once the unlock time passes. Any claim token holder can call the redemption function directly on the contract without requiring approval from any administrator, operator, or protocol team member. The owner's authority is intentionally limited — they can adjust fee rates (within a 1% cap) and toggle an entry pause (which blocks new offers and fills but not cancellations or redemptions). No party has the ability to freeze escrow balances, delay redemptions, or prevent a valid claim from being settled.
  </Accordion>

  <Accordion title="How are protocol fees handled?">
    Fees are charged in basis points on the base quote cost, paid by the buyer **on top of** the seller's proceeds. Each offer snapshots the fee rate and fee recipient at creation time, so changes to the venue's fee settings do not affect existing offers. The fee is hard-capped at 1% (`MAX_FEE_BPS = 100`).
  </Accordion>
</AccordionGroup>