MiCAR White Paper

Ethos Foundation is a Cayman Islands exempted foundation company limited by guarantee dedicated to the long-term governance, neutrality, and stewardship of the Ethos decentralized reputation protocol and its associated token ($WHUF). The company's core business activities include protocol governance, ecosystem development, and oversight of token distribution to ensure the Ethos reputation layer operates as impartial, permissionless public infrastructure. Ethos Foundation operates globally.

As Ethos Foundation was established on 2026-05-15, three-year historical financial data is not available.

Ethos Foundation 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 Ethos Foundation's financial performance at the time of writing is as follows:

Funding and Capitalization:

• The company's initial share capital is USD $1.

• The entity is sufficiently self-funded.

• The $WHUF token has not yet been offered to the public and the price will be determined by an English Auction.

Ethos Token Ltd. is a BVI business company dedicated to conducting the public sale of $WHUF. The company's core business activities include token distribution, sale administration, and participant compliance (KYC/AML) to support the adoption of the Ethos decentralized reputation. Ethos Token Ltd. operates globally.

Ethos is a decentralized reputation protocol built on Base (Ethereum L2) focusing on onchain credibility scoring, trust verification, reputation markets and human verification.

The platform's architecture features smart contracts for vouching (economic staking in others), perpetual reputation markets, onchain reviews, slashing mechanisms and human verification bonds. The project's mission is to create neutral, permissionless reputation infrastructure for web3 by leveraging onchain social signals and economic security.

The Whuffie token ($WHUF) is the native utility token of the Ethos ecosystem. It is designed to denominate vouching stakes, pay protocol fees, and serve as the base asset for reputation markets within this interconnected ecosystem.

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

Protocol Concepts

• Ethos Ecosystem: A decentralized reputation protocol where users build credibility through vouching, reviews, and social coordination.

• Vouching: The core mechanic of the protocol where a user stakes $WHUF in another person's profile to signal trust. This creates "skin in the game" as the stake can be slashed if the party behaves badly.

• Slashing: A penalty mechanism where a portion of a voucher's staked $WHUF is permanently removed due to the dishonest behavior of the vouched-for party or fraudulent human verification.

• Reputation Markets: Perpetual markets where users buy "trust" or "distrust" votes to speculate on the credibility of a specific profile.

• Broker: A peer-to-peer bulletin within the protocol where users can post service listings, requiring a nominal $WHUF fee to prevent spam.

• Human Verification Bonds: A $WHUF deposit made by a validator to attest that another user is human, which is slashable if the verification is proven fraudulent.

• XP (Experience Points): A measure of a user's historical contribution to the network, used to calculate bonuses for token sale participants.

Tokenomics and sale mechanics

• English Auction: The bidding format used for the token sale where participants submit prices and quantities, and the market determines a single uniform clearing price.

• Clearing Price: The final settlement price of the auction, which is the highest price at which the total supply can be sold; all successful bidders pay this price.

• Burn Mechanism: A protocol feature where 100% of $WHUF collected from fees is permanently destroyed (burned) rather than redistributed.

• Contributor Rewards: A pool of 18% of the total supply distributed to active vouchers through a continuous exponential decay model (emission proportional to remaining pool), contract-enforced via the EthosRewards smart contract.

• Exponential Decay: A continuous emission model where the rate of token distribution decreases proportionally to the remaining pool, implemented in the EthosRewards smart contract. Unlike a discrete halving, the decay is smooth and continuous.

• Price Guarantee: A mechanism where sale participants can redeem 85% of their original purchase price in USDC (upgrading to 90% if the auction clearing price reaches or exceeds $7.50/token) if they vouch their tokens for a specific period.

• Cliff: A specific period during a vesting schedule before any tokens are unlocked for the recipient.

Technical and legal terms

• Base: An Ethereum Layer 2 (L2) optimistic rollup blockchain where the Ethos protocol is deployed.

• ERC-20: The technical standard for fungible tokens on the Ethereum and Base networks.

The $WHUF token has several key functionalities within the Ethos Network ecosystem. The platform offers a suite of goods and services designed to enable users to build, verify, and stake onchain reputation through vouching, reviews, and reputation markets.

Key utilities of the $WHUF token include:

• Vouching: $WHUF holders can stake tokens in other users' profiles to signal trust. If the vouched-for party behaves dishonestly, the voucher's stake can be slashed. Vouching is the core mechanism that secures the reputation graph.
• Protocol fees: The token is used as the unit of account for all protocol actions, writing reviews, creating attestations, initiating vouches, and posting service listings on Broker. All fees are permanently burned by the smart contract.
• Reputation Markets: Users can  take trust and distrust positions on any Ethos profile, denominated in $WHUF. Markets provide a continuous, crowd-sourced signal on the credibility of any participant in the network.
• Bonds and Rewards: The token grants access to human verification bonds, where validators deposit $WHUF to attest that another user is human and allows users to earn contributor rewards proportional to their vouching activity, distributed through a continuous exponential decay model enforced by the EthosRewards smart contract.

Ethos has secured financial resources (approximately $5M USD) through pre-seed and seed fundraising.

These resources have been allocated to key areas, including:

• Product Development: Built and shipped the Ethos reputation protocol, including vouching, reviews, reputation markets, human verification, and credibility scoring, live in production since 2024.

• Security & Infrastructure: Completed smart contract audits, ongoing infrastructure and hosting costs for protocol operations.

• Legal & Compliance: Entity formation, regulatory counsel, and token sale compliance.

The project has been supported by a core team of engineers, product designers, and business development professionals who have built and operated the protocol for over two years. Operational support included community management, partner integrations, and ongoing protocol maintenance.

All resource allocation amounts and percentages are estimates based on data available at the time of disclosure.

The funds collected as part of the offering are intended to be used as follows:

• Product Development: Protocol stewardship, including funding smart contract maintenance and security audits.

  Infrastructure & Security: Ensuring continued availability and security of the onchain reputation infrastructure.

  Community & Growth: Bounties and grants for independent contributors to the protocol.

  Legal & Compliance: Foundation entity administration, regulatory compliance, and legal counsel.

  Operational Costs: Foundation administrative costs and third-party service providers.

The offer to the public of $WHUF is intended to distribute the protocol's native asset to participants who will use it within the Ethos reputation network.

• $WHUF is required to vouch for other users, pay protocol fees, participate in reputation markets, and create human verification bonds, without broad distribution of the token, the protocol cannot function as designed.

• The sale is the primary mechanism for decentralizing ownership of the protocol asset, ensuring that no single entity or narrow group controls the token supply.

• This offering is conducted in adherence to Regulation (EU) 2023/1114 (MiCA) to comply with regulatory requirements and maximize transparency during the offering period. The associated disclosures are filed to comply with regulatory requirements, maximize transparency and investor protection during the offering period.

• By offering the token directly to the public, Ethos Token Ltd. enables a broader user base to obtain the utility required to participate in the Ethos reputation protocol.

The offer price is not fixed and will be determined in accordance with demand through an English auction. The issuer's best assessment of the price window is that it will be between 2,50 USDC to 7,50 USDC. The auction enforces a hard cap of 9,90 USDC per token. Each participant indicates the maximum price they are willing to pay per token and their maximum purchase size. At the close of the offer period, the sale settles at a single clearing price, the highest price at which the maximum allocation can be sold, which all successful participants pay. The goal for this offering is to sell all $WHUF tokens at 2,50 USDC each. The final settlement price will not be known until the offer concludes.

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 $WHUF 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.

Refunds, where applicable, will be processed to the original payment method used.

If the present offer is cancelled, it shall be ensured that any funds collected from holders or prospective holders are duly returned to them no later than 25 calendar days after the date of cancellation. The refund will be initiated automatically if the offer is cancelled.

Prior to the public offering, Ethos conducted two private rounds, a pre-seed and a seed round via Echo. These rounds were community-driven, with no institutional lead. Early supporter tokens are subject to lockup schedules with cliffs and linear vesting. Following publication of the whitepaper, the offer will be available for a period prescribed in this whitepaper. The public sale is conducted as an English Auction with uniform clearing price. Participants submit bids in USDC specifying a maximum price per token and quantity. All successful bidders pay the same clearing price. Minimum bid is $500 USDC. Bids can be revised upward but not decreased during the auction window. Following the offer period, the $WHUF will be issued to eligible holders within 3 days.

There are no early purchase discounts. All successful participants pay the same uniform clearing price. A separate bonus pool (10% of sale allocation) is distributed to eligible participants based on their contribution history in the Ethos network, but this does not reduce the purchase price.

Funds received during the public offer will be processed by licensed third-party payment processors and/or smart contract infrastructure.

Funds received for the purchase of $WHUF are held in escrow operated by the auction smart contract until settlement. Buyers retain the right of withdrawal within 14 days in accordance with MiCA and Section E.26 below.

Terms and conditions apply to the services of external service providers offered as part of this offer.

Purchases of $WHUF are made exclusively in USDC on Base. No fiat currency is directly accepted. Participants must acquire USDC independently before participating in the auction.

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

Purchased $WHUF tokens on Ethos Token sale Platform may be withdrawn by the user to a compatible external wallet address (e.g., a wallet supporting the ERC-20 on the Base (Ethereum L2) blockchain). This is subject to the platform's standard withdrawal procedures, network availability, and compliance checks. To exercise the right of withdrawal the users need to submit a withdrawal request through the official platform's dedicated channel.

The $WHUF acquired as a result of the public token sale shall be transferred through smart-contract to the compatible wallet or account as designated to the smart-contract.

Purchasers must have an account on a trading platform where $WHUF is listed and abide by that platform's terms. Technically, holders must have a digital wallet compatible with the ERC-20 on the Base (Ethereum L2) blockchain. This can be a self-custodial wallet or an account managed by a third party (like an exchange). Basic requirements include internet access and a compatible device (computer or mobile).

$WHUF is available only on the platform of Ethos Token, Ltd. Investors can access this platform by creating an account on the website (sale.ethos-foundation.org) and complying with the platform's requirements, including KYC/AML verification.

Access to the trading platforms is typically free, but users will incur costs related to trading and transactions. These may include transaction fees (maker/taker fees), withdrawal fees, and network fees. These costs are set by the individual exchanges and are not controlled by Ethos Token Ltd. Users are advised to review the fee schedule on the respective platform's website.

To the best knowledge of Ethos Foundation, no conflicts of interest have been identified in relation to the offer to the public.

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 the British Virgin Islands.

Subject to mandatory applicable law, any dispute arising out of or in connection with this white paper shall be exclusively subject to the jurisdiction of the courts in the British Virgin Islands.

$WHUF 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 ERC-20 standard.

The $WHUF token's primary functionalities within the Ethos Network ecosystem include:

• Vouching / Reputation Staking: $WHUF holders stake tokens in other users' profiles to signal trust, securing the reputation graph. Vouchers who back bad actors can be slashed.
• Protocol Fees: $WHUF is used to pay for all protocol actions, writing reviews, creating attestations, initiating vouches, and posting service listings. All fees are permanently burned.
• Reputation Markets: $WHUF is used to take trust and distrust positions on any Ethos profile, creating a continuous crowd-sourced credibility signal.
• Bonds and Rewards: $WHUF is required for human verification bonds and is earned through contributor rewards distributed to active vouchers via a continuous exponential decay model.

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

$WHUF is a fungible, transferable crypto-asset classified as an "Other Crypto-Asset" under MiCA. It operates on the Base (Ethereum L2) blockchain as an ERC-20 token. The underlying network, Base, uses a optimistic rollup consensus mechanism designed for scalable, low-cost transaction processing with security inherited from Ethereum Layer 1 through fraud proofs and data availability on mainnet. $WHUF does not represent ownership, profit rights, or legal claims, and functions solely to support the protocol's technical and economic operations.

The issuer operates in the field of decentralized reputation infrastructure and provides the following services as part of its everyday business activity: protocol governance, ecosystem grants and bounties, and oversight of token distribution. The Foundation does not provide custodial services, financial services, or services involving crypto-assets beyond the issuance and stewardship of $WHUF.

Purchasers or holders of $WHUF do not acquire any contractual rights, equity interests, profit-sharing rights, dividends, or other legal claims against Ethos Foundation or any affiliated entity by virtue of holding the token.

The $WHUF token is a decentralized digital asset designed for functional use within the Ethos ecosystem. Its functions operate on a permissionless basis through smart contracts deployed on Base (Ethereum L2), meaning that vouching, fee payment, and reputation market activity are executed automatically by the protocol rather than administered or controlled by the Ethos Foundation or any other central party. Any "rights" are limited to the token's protocol-level utility, such as:

• Vouching: The ability to stake $WHUF in other users' profiles to signal trust, with slashing penalties for backing dishonest actors.

• Protocol fees: The ability to pay for protocol actions including reviews, attestations, vouch initiation, and service listings. All fees are permanently burned.

• Reputation Markets: The ability to take trust and distrust positions on any Ethos profile, denominated in $WHUF.

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

There are no formal contractual rights to 'exercise.' Any functionality associated with $WHUF is exercised technically by interacting with the Ethos Network protocol's smart contracts.

For example, vouching is performed by calling the vouch smart contract with a specified $WHUF amount and target profile. Protocol fees are deducted automatically when a user performs an onchain action such as writing a review or creating an attestation. Reputation market positions are taken by interacting with the market AMM contract.

These actions are carried out onchain and are validated by the decentralized network, not by Ethos Token Ltd. or any affiliated entity.

Ethos Foundation may decide on amendments or updates to the rights and functionalities associated with the $WHUF.

Changes are suggested by the issuer and implemented through updates to the token terms or related documentation. Where feasible, the issuer may inform and request the token holders to provide an opinion on the material changes in advance, but such changes do not require token-holder approval.

Ethos Foundation does not intend to conduct any future public offerings of the $WHUF token. The token is already in circulation and available on secondary markets.

$WHUF functions as a utility token within the Ethos Network ecosystem, providing access to its core goods and services. These include:

• Reputation Staking (Vouching): Users stake $WHUF in other users' profiles to signal trust. Vouchers who back dishonest actors are slashed. This is the core mechanism that secures the reputation graph.
• Protocol Actions: $WHUF is required to perform onchain actions including writing reviews, creating attestations, initiating vouches, and posting service listings. All fees are permanently burned.
• Reputation Markets: Users take trust and distrust positions on any Ethos profile, denominated in $WHUF, creating a continuous credibility signal priced by an automated market maker.

The $WHUF token is "redeemed" or used within the ecosystem to access the goods and services listed in G7. This occurs when a user submits an onchain transaction that spends $WHUF, for example, staking tokens in a vouch, paying a protocol fee to write a review, depositing $WHUF in a human verification bond, or purchasing trust/distrust positions in a reputation market. The type of goods or services that can be redeemed may evolve over time based on ecosystem development and governance.

There are no restrictions on the transferability of $WHUF at the protocol level; it may be freely transferred between users.

However, a portion of the token supply allocated to early supporters, the team, and the Foundation is subject to contractual lock-up and/or vesting schedules (e.g., early supporters vest over 24 months with a 6-month cliff; team tokens vest over 48 months with a 12-month cliff; treasury has a 12-month cliff with 24-month linear unlock. Additionally, all token sale participants are subject to a 30-day lock from TGE during which tokens cannot be transferred). Furthermore, individual trading platforms may impose their own transfer restrictions in accordance with applicable laws and internal policies.

The supply of the crypto-asset is adjusted automatically based on predefined protocol rules. These rules include permanently burning 100% of all $WHUF collected through protocol fees. Every protocol action, vouching, reviews, attestations, service listings, requires a $WHUF fee that is destroyed by the smart contract upon receipt. There is no minting mechanism. The total supply is fixed at 10,000,000 tokens and can only decrease over time through fee burns. The mechanism operates without discretionary intervention by the issuer.

The burn is executed automatically by the smart contract when a user performs any fee-bearing protocol action. The burn rate is proportional to network usage, higher activity results in more tokens burned. No entity has discretionary control over the burn; it is hardcoded into the protocol.

Token sale participants who vouch their purchased tokens in other Ethos users within a 30-day registration window are eligible for an 85% price guarantee (upgrading to 90% if the auction clears at or above $7.50/token), redeemable within 12 months of the token unlock date. To redeem, participants submit a request to the Ethos Foundation and complete KYC/AML verification. Redemptions are paid in USDC on Base to the originating wallet. The guarantee is permanently forfeited if the participant unvouches their tokens for any reason. The guarantee covers 85% (or 90% at the higher threshold) of the original purchase price; the remaining gap ensures the protection is not risk-free and partially covers token sale platform fees.

The relationship between Ethos Foundation and the crypto asset-holder is subject to the terms and conditions available at: https://ethos-foundation.org/terms.

The competent court in the case of disputes between Ethos Foundation and the crypto asset-holder is subject to the terms and conditions available at: https://ethos-foundation.org/terms.

$WHUF is a ERC-20 token. This standard ensures industry compatibility with wallets, exchanges, and smart contracts. The Base network itself is an Ethereum Layer 2 optimistic rollup developed by Coinbase that utilizes optimistic rollup technology with Ethereum Layer 1 as its settlement and data availability layer for its operations.

As a ERC-20 token, $WHUF is deployed as a smart contract. Users can hold, store, and transfer the token using any wallet software (non-custodial or self-custody) that is compatible with the Base (Ethereum L2) network. Users may also manage the token through accounts provided by third-party custodians or centralized exchanges.

The Base (Ethereum L2) network, which $WHUF relies on, operates using a optimistic rollup consensus mechanism.

In this system, sequencers are chosen to order and batch transactions for submission to Ethereum Layer 1 for final settlement based on the optimistic rollup model, where transactions are assumed valid unless challenged via a fraud proof on Ethereum mainnet.

The sequencers who order and batch transactions on Base who secure the network are rewarded with economic incentives for their work. These incentives consist of transaction fees (gas fees) paid by users in ETH. Base operates as an optimistic rollup on Ethereum, where the sequencer collects gas fees for processing transactions. Final settlement and security are inherited from Ethereum Layer 1, where validators are incentivized through ETH staking rewards and transaction fees.

The audit was successfully completed. The audit reviewed the smart contract for Ethos Protocol — covering rewards, vouching, slashing, reviews, market logic, and supporting access-control utilities across 28 contracts (2,227 SLOC). The outcome was that Guardian assigned a Confidence Ranking of 4 out of 5 (High Confidence). No Critical or High severity findings were identified. The review surfaced 5 Medium, 17 Low, and 34 Informational findings, of which 3 Medium and 8 Low were resolved, with the remainder acknowledged. The codebase was deemed suitable for deployment after remediations. Audit firm: Guardian. Auditors: Cosine, Zdravko Hristov, Michael Lett. Audit window: June 9–25, 2026. Final report: July 9, 2026. Repository: trust-ethos/ethos-protocol..

https://ethos-foundation.org/audit/2026-07-09.pdf

Ethos Foundation, as the entity related to the Ethos Network ecosystem, is subject to several risks that could impact the project and, consequently, the token:

• Regulatory Compliance Risk: Ethos Foundation operates in a highly uncertain regulatory environment. Evolving laws or enforcement actions in various jurisdictions could lead to fines, sanctions, or the inability to continue operations, which could negatively affect the project.
• Operational & Financial Risk: The issuer faces internal risks, including failures in processes, personnel, or technology. It is also exposed to financial risks (e.g., liquidity, market) that could affect its ability to fund operations and support the ecosystem.
• Legal & Reputational Risk: The project could face litigation or adverse publicity. Negative sentiment, whether due to operational failures, security breaches, or other events, could damage the project's reputation and the token's perceived value.
• Dependency on Key Individuals: The project's success may be highly dependent on a small group of key individuals. The loss or departure of these members could disrupt development and strategic direction.

Ethos network is a decentralized network and does not have a central corporate issuer, the ecosystem supporting it entails several entities, dependencies, and decentralized factors whose risks must be considered.

• Lack of Central Accountability: With no central issuer, there is no single entity legally obligated to support the value of the $WHUF or guarantee the network's operations. While this is a core feature of decentralization, it means that in the event of a critical failure, there is no single company to hold accountable or to provide recourse. The network's continued development and maintenance rely on the contributions of the decentralized community of open-source developers; a loss of interest or funding could slow progress and affect $WHUF's competitiveness.
• Ethos Foundation: Ethos Foundation holds a central role in funding, guiding, and encouraging development of Ethos network [Entity Incentive Method]. The project could lose a significant portion of its momentum if the Ethos Foundation were to face legal, operational, or financial issues, or cease operations voluntarily or due to external factors. If any of the most active community members, developers or key leadership were to leave, then a significant portion of the knowhow, experience and processes could be lost without a way for recovery. Any of the above could delay critical network upgrades, introduce vulnerabilities and result in loss of achieved competitive advantage.
• Regulatory/Legal Risks for related entities: While the Ethos network is a decentralized protocol, specific entities that support Ethos network may be subject to regulatory inquiries, investigations, limitations or sanction in the jurisdictions in which they operate. Such actions could prevent or prohibit operational, financial or other types of support of the Ethos network.
• Network Governance & Forks: Upgrades and parameter changes to the Ethos network are managed through [Governance Process]. Disagreements among major token holders, key individuals, disputes, bad actors, on critical issues could slow down decision-making or, in extreme cases, lead to a contentious hard fork that splits the chain and community.
• Validator Centralization: The security and neutrality of the Ethos network network depend on a sufficiently decentralized set of validators. If a large portion of the total staked $WHUF were to become concentrated within a small number of validators or staking pools, those entities influence transaction ordering, governance outcomes, potentially compromising the network's decentralization or acting in bad faith. The network holds no formal service level guarantees for public-facing infrastructure like the warranty of security, availability or suitability. In the event of an attack or outage affecting these services, their restoration would depend on the efforts of the community, which may be less immediate or effective than the response from a centralized service provider.

Holding $WHUF involves risks inherent to most crypto-assets:

• Market Volatility: Crypto-asset prices are extremely volatile and subject to significant, rapid fluctuations. The value of $WHUF 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, which means that acquiring the $WHUF may result in total loss of the invested amounts.
• Liquidity Risk: The market for $WHUF 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 $WHUF 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 $WHUF, or it could be classified in a way that adversely affects its value or legality.
• Utility Risk: The expected utility of the $WHUF token within the Ethos Network ecosystem may fail to materialize due to low user adoption, technical failures, or superior competing projects, undermining its fundamental value proposition.

The future success of the Ethos Network ecosystem is subject to significant implementation risks:

• Adoption & Competition Risk: The project may fail to attract a sufficient number of users, developers, and participants to create a viable ecosystem. It faces competition from other projects that may have substantially greater financial, technical, and marketing resources.

• Funding & Treasury Risk: Continued operations depend on the effective management of the project's treasury. A shortfall in funding or misallocation of resources could slow or halt operational activities.

• Decentralisation Risk: A decentralised protocol is one in which control over the network is distributed across many independent participants rather than held by any single party, so that no individual or small group can unilaterally alter the rules, validate transactions, or direct the project's development. Although the Ethos Network intends to operate in this manner, control may become concentrated in practice. A limited number of validators could come to operate a majority of the nodes, and a small number of wallets could hold a majority of the $WHUF supply. Such concentration could allow these parties to exert disproportionate influence over the network and over the token's price.

The $WHUF token and Ethos Network platform rely on complex, emerging technology, which introduces specific risks:

• Smart Contract Risk: The smart contracts for $WHUF and the ecosystem's applications, despite audits, may contain hidden bugs, flaws, or vulnerabilities. Such flaws could be exploited by malicious actors, potentially resulting in the theft or irreversible loss of funds.
• Underlying DLT Risk: The project relies on the security and performance of the underlying Base (Ethereum L2) 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 $WHUF 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 applicable): If $WHUF exists on multiple blockchains, 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.

Ethos Foundation has implemented several measures to mitigate the identified risks:

• Security Audits: Commissioning comprehensive security audits of all smart contract code from reputable, independent third-party security firms before deployment.
• Bug Bounty Program: Operating an active bug bounty program to incentivize ethical hackers and security researchers to discover and responsibly report vulnerabilities.
• 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 Base (Ethereum L2)) 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.

N/A

The Base (Ethereum L2) network, which $WHUF relies on, operates using a optimistic rollup consensus mechanism.

In this system, sequencers are chosen to order and batch transactions for submission to Ethereum Layer 1 for final settlement based on the optimistic rollup model, where transactions are assumed valid unless challenged via a fraud proof on Ethereum mainnet.

The sequencers who order and batch transactions on Base who secure the network are rewarded with economic incentives for their work. These incentives consist of transaction fees (gas fees) paid by users in ETH. Base operates as an optimistic rollup on Ethereum, where the sequencer collects gas fees for processing transactions. Final settlement and security are inherited from Ethereum Layer 1, where validators are incentivized through ETH staking rewards and transaction fees.

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.