SEC Filing Document

Company: Canary Staked TRX ETF
Ticker: 
CIK: 2064768
Filing Type: S-1
Document Type: S-1
Date Filed: 2025-04-18
Accession Number: 0001999371-25-004423
Exchange: 
SIC Code: 6221
SIC Description: Commodity Contracts Brokers & Dealers
URL: https://www.sec.gov/Archives/edgar/data/2064768/000199937125004423/canary-s1_041825.htm

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that attackers syphoned over $3.8 billion worth of digital assets from smart contracts in 2022. Problems with the development, deployment, and operation of smart contracts may have an adverse effect on the value of TRX, just as they have for other digital assets like ethereum. In some cases, smart contracts on the Tron Network may be controlled by one or more “admin keys” or users with special privileges, sometimes referred to as “super users.” These users may have the ability to unilaterally make changes to the smart contract, enable or disable specific features, modify how the smart contract receives external inputs and data, and alter other key functionalities. In some instances, inadequate public information may be available regarding the operation of certain smart contracts, and information asymmetries may exist even for open-source applications. As a result, certain participants may possess hidden informational or technological advantages, creating an uneven playing field.

Many
DeFi applications are currently deployed on the blockchains that are connected to the Tron Network,
and smart contracts relating to DeFi applications currently represent a significant source of demand for TRX. DeFi applications may achieve
their investment purposes through self-executing smart contracts that may allow users to invest digital assets in a pool from which other
users can borrow without requiring an intermediate party to facilitate these transactions. These investments may earn interest to the
investor based on the rates at which borrowers repay the loan, and can generally be withdrawn by the investor. For smart contracts that
hold a pool of digital asset reserves, smart contract super users or admin key holders may be able to extract funds from the pool, liquidate
assets held in the pool, or take other actions that decrease the value of the digital assets held by the smart contract in reserves. Even
for digital assets that have adopted a decentralized governance mechanism, such as smart contracts that are governed by the holders of
a governance token, such governance tokens can be concentrated in the hands of a small group of core community members, who would be able
to make similar changes unilaterally to the smart contract. If any such super user or group of core members unilaterally make adverse
changes to a smart contract, the design, functionality, features and value of the smart contract, its related digital assets may be harmed.
In addition, assets held by the smart contract in reserves may be stolen, misused, burnt, locked up or otherwise become unusable and irrecoverable.
Super users can also become targets of hackers and malicious attackers. If an attacker is able to access or obtain the super user privileges
of a smart contract, or if a smart contract’s super users or core community members take actions that adversely affect the smart
contract, users who transact with the smart contract may experience decreased functionality of the smart contract or may suffer a partial
or total loss of any digital assets they have used to transact with the smart contract. Furthermore, the underlying smart contracts may
be insecure, contain bugs or other vulnerabilities, or otherwise may not work as intended. Any of the foregoing could cause users of the
DeFi application to be negatively affected, or could cause the DeFi application to be the subject of negative publicity. Because DeFi
applications may be built on the Tron Network and represent a significant source of demand for TRX, public confidence in the Tron Network
itself could be negatively affected, such sources of demand could diminish and the value of TRX could decrease. Similar risks apply to
any smart contract or decentralized application, not just DeFi applications.

Validators
May Suffer Losses Due To Staking, Or Staking May Prove Unattractive To Validators, Which Could Make The Tron Network Less Attractive.

Validation
on the Tron Network requires TRX to be staked to elected validators known as Super Representatives, with staking controlled solely by
users who freeze TRX and delegate voting power. If the Tron Network experiences security vulnerabilities, protocol-level failures or malicious
behavior by Super Representatives, staked TRX may become inaccessible or unrecoverable. While the Tron Network does not currently implement
a slashing mechanism, validators are incentivized to perform accurately and maintain uptime in order to retain voting support. Poor performance
may result in removal from the active validator set and forfeiture of block rewards, impacting validator revenue and participation.

Although
the Tron Network does not penalize stakers by slashing their TRX, it includes certain restrictions that affect liquidity and validator
incentives. Staked TRX is frozen, and users must unfreeze their TRX to regain transferability, which triggers a mandatory three-day unbonding
period. During this time, staked TRX remains locked and inaccessible. Validators that lose community support or fail to maintain adequate
performance may lose election to the Super Representative set and become ineligible to produce blocks or receive rewards.

The
Tron Network also requires payment of transaction fees, which are satisfied through the consumption of Bandwidth and Energy resources.
During periods of high network activity, users without sufficient resources may need to burn TRX to complete transactions. As transaction
volumes increase, demand for these resources and associated TRX expenditures could affect validator and user incentives. Inadequate or
declining staking participation may reduce the security and stability of the network.

Additionally,
the limited liquidity of frozen TRX during the unbonding period may discourage participation from validators or stakers who require immediate
access to capital. If staking participation declines, the Tron Network may become less competitive relative to other blockchains, which
could negatively impact the demand for TRX and its long-term market value.

Proof-Of-Stake
Blockchains Are A Relatively Recent Innovation, And Have Not Been Subject To As Widespread Use Or Adoption Over As Long Of A Period Of
Time As Traditional Proof-Of-Work Blockchains.

Certain
digital assets, such as bitcoin, use a “proof-of-work” consensus algorithm. The genesis block on the bitcoin blockchain was
mined in 2009, and bitcoin’s blockchain has been in operation since then. Many newer blockchains enabling smart contract functionality,
including the Tron Network and the current ethereum network following the completion of the Merge in 2022, use a newer consensus algorithm
known as “proof-of-stake.” While their proponents believe that they may have certain advantages, the “proof-of-stake”
consensus mechanisms and governance systems underlying many newer blockchain protocols, including the Tron Network, and their associated
digital assets – including the TRX held by the Trust – have not been tested at scale over as long of a period of time or subject
to as widespread use or adoption as, for example, bitcoin’s proof-of-work consensus mechanism has. This could lead to these blockchains,
and their associated digital assets, having undetected vulnerabilities, structural design flaws, suboptimal incentive structures for network
participants (e.g., validators), technical disruptions, or a wide variety of other problems, any of which could cause these blockchains
not to function as intended, lead to outright failure to function entirely causing a total outage or disruption of network activity, or
to suffer other operational problems or reputational damage, leading to a loss of users or adoption or a loss in value of the associated
digital assets, including the Trust’s assets. Over the long term, there can be no assurance that the proof-of-stake blockchain on
which the Trust’s assets rely will achieve widespread scale or adoption or perform successfully; any failure to do so could negatively
impact the value of the Trust’s assets.

Operational
Cost May Exceed The Award For Validating Transaction, And Increased Transaction Fees May Adversely Affect The Usage Of The Tron Network.

transaction fees become too high, the marketplace may be reluctant to use the Tron Network. This could result in decreased usage and limit
the expansion of the Tron Network in retail, commercial and payments applications, negatively impacting investment in the Trust. Conversely,
if the rewards for validators (i.e., Super Representatives) or the value of transaction fees are insufficient to incentivize participation,
validators may reduce activity or cease validating transactions altogether.

Ultimately,
if the cost of maintaining Super Representative infrastructure exceeds the value of rewards and user-delegated voting support, validators
may operate at a loss, transition to other networks or cease operations entirely. Each of these outcomes could impair transaction throughput
and network stability, which could adversely affect the performance of the Tron Network and reduce the value of TRX held by the Trust.

Unlike
some proof-of-stake networks, the Tron Network does not burn user transaction fees. Instead, users expend Bandwidth and Energy resources—acquired
by freezing TRX—or pay TRX directly when these resources are insufficient. If Bandwidth and Energy consumption becomes prohibitively
expensive during peak activity, it could reduce user demand for on-chain activity, impacting validator income over time.