TL;DR
- Canary Capital plans to stake most of the INJ tokens held by its ETF to earn staking rewards.
- The rewards will be reinvested into the fund, increasing the amount of INJ backing each share.
- The fund will maintain a liquidity reserve to manage redemptions and Injective’s 21-day unbonding period.
Canary Capital has detailed how it will integrate Injective staking rewards into its Canary Staked INJ ETF (INJC). The fund is designed to hold INJ tokens and delegate most of its holdings to network validators. The rewards earned will be added to the fund’s assets.
The mechanism will allow shareholders to earn protocol rewards without managing token delegation themselves. Unlike an ETF that simply holds cryptocurrency, INJC is designed to gradually increase its reserves through staking rewards.
How Staking Will Work Inside Canary’s ETF
Canary will manage the program through third-party providers that delegate tokens to Injective validators. The fund will not operate its own validators, and the custodian will retain control of the private keys throughout the process.
Rewards will be paid in INJ, with fees deducted for the staking provider, sponsor, and custodian. Net rewards will be included in the fund’s daily net asset value and restaked.
Shareholders will not receive direct cash payments. Instead, the rewards will increase the amount of INJ backing each share.
The ETF will also keep a portion of its holdings unstaked to handle share creations and redemptions without having to wait for assets to be unbonded.
Risks and Restrictions of the Staking Mechanism
Injective has a 21-day unbonding period. During that time, tokens withdrawn from staking remain locked and stop earning rewards.
The fund will also face slashing risk, a penalty that can reduce delegated tokens when a validator violates protocol rules or remains offline for extended periods.
Canary warned that rewards are not guaranteed and may vary depending on network conditions and validator performance.
The proportion of INJ allocated to staking may change, and the fund does not guarantee that it will continue staking throughout its lifetime.
