(a) Problem the project solves

Traditional finance and onchain finance have been operating as separate systems, and capital in one has been unable to reach opportunities in the other. Grove is the credit infrastructure protocol that connects them: it provides the rails through which institutional partners allocate stablecoin capital under governance-defined mandates, offers financing solutions for asset issuers and credit originators, and supplies liquidity for tokenized real-world assets.

(b) Operational priorities

Grove Foundation supports the ongoing development and operations of Grove protocol, with Grove Labs providing certain operational and technical services to Grove Foundation under a service agreement. Grove is a profitable protocol and expects to support ongoing development and operations with protocol profits and the 25M USDS capital contribution it received from Sky.

(c) High-level project overview

Grove is capitalizing the stablecoin economy. Through institutional-grade allocation, financing, and liquidity, Grove brings real-world assets and real-world use cases onchain to build the next generation of global financial markets.

As a Prime Agent within the Sky Ecosystem, Grove builds and operates credit infrastructure, serving partners through a variety of use cases. Grove Allocator is the onchain infrastructure for institutional capital allocation. Grove Financing offers bespoke facilities for onchain and offchain credit markets. Grove Basin provides instant onchain stablecoin liquidity for tokenized real-world assets.

GROVE is the native token of the Grove Protocol, deployed on Ethereum as an ERC-20 with a supply of 10 billion. The token supports Grove governance: holders can stake GROVE, mint stGROVE, and vote on protocol proposals through a delegate or directly. The design and activation of token functionality may evolve over time and are subject to governance decisions and the evolving regulatory landscape for crypto assets.

The protocol is developed and supported by Grove Labs. Its team brings together decades of combined experience across traditional and onchain finance, led by founders Mark Phillips, Kevin Chan, and Sam Paderewski.

(d) Primary token functions

GROVE is the native token of the Grove Protocol, deployed on Ethereum as an ERC-20 with a supply of 10 billion. The token supports Grove governance: holders can stake GROVE, mint stGROVE, and vote on protocol proposals through a delegate or directly. The design and activation of token functionality may evolve over time and are subject to governance decisions and the evolving regulatory landscape for crypto assets.

(e) Control surface reliance

As a Prime Agent within the Sky Ecosystem, Grove operates under Ecosystem Accord 10 in the Sky Atlas. The Atlas is a living document: its terms, including the Accord, may be amended through Atlas Edits adopted via Sky's onchain poll and executive vote process. Grove's governance and control model may therefore evolve with Sky governance decisions, which could over time modify terms of Grove’s mandate, including the parameters of GROVE reward distributions and the scope of GROVE tokenholder voting rights.

The GROVE token contract uses the SDAO contract from the Sky Endgame Toolkit, and only Sky governance can authorize administrative actions on it.

Labs / DevCo

Foundation

DAO / Onchain Governance

(a) IP ownership & control

None. Tokenholders do not own or control any IP. Grove governance exists within the Sky Governance framework, allowing GROVE tokenholders to participate in certain protocol decisions, but this is an onchain entity, not Grove's own DAO.

(b) Contract/admin powers

None. Tokenholders do not have any onchain or administrative authorities and limits.

(c) Locked-token rights (conditional)

GROVE tokenholders can participate in Grove governance by staking GROVE to receive stGROVE. stGROVE holds voting power, which can be exercised by holders directly or delegated to designated delegates. stGROVE holders and delegates can vote on team-led proposals, initially covering operational and risk related decisions. Votes will initially be limited to veto-power only.

(d) Current tokenholder governance rights and economic arrangements

GROVE tokenholders can stake GROVE and subsequently participate in governance described in (c) above. GROVE and stGROVE holders do not have any rights over treasury actions, fee-routing, rewards, buybacks, or other protocol-controlled resources. Tokenholders have no rights over emissions or reward parameters, which is controlled by Sky governance.

(e) Control surface reliance

As a Prime Agent within the Sky Ecosystem, Grove operates under Ecosystem Accord 10 in the Sky Atlas. The Atlas is a living document: its terms, including the Accord, may be amended through Atlas Edits adopted via Sky's onchain poll and executive vote process. Grove's governance and control model may therefore evolve with Sky governance decisions, which could over time modify terms of Grove’s mandate, including the parameters of GROVE reward distributions and the scope of GROVE tokenholder voting rights.

The GROVE token contract uses the SDAO contract from the Sky Endgame Toolkit, and only Sky governance can authorize administrative actions on it.

(f) Dissolution authority

Grove operates as a Prime Agent in the Sky Ecosystem. Ecosystem Accord 10 in the Sky Atlas records the terms of agreement between Sky and Grove, which is enforceable by Sky Governance (see Sky Atlas A.2.8). The duration of Ecosystem Accord 10 is indefinite, unless terminated or modified via an Atlas Edit (see Sky Atlas A.2.8.2.10.1.2).

Atlas Edits are proposed by the Sky Core Atlas Axis teams, which are implemented by Sky’s onchain poll and executive vote system.

(a) Entity

Grove Foundation (the “Parent”) is a Cayman Islands foundation company limited by guarantee without share capital, incorporated in April 2025.

(b) IP ownership & control

The GROVE trademarks are held at the Sky Ecosystem level by Moonbow Foundation, a specialized entity within Sky that holds IP for Sky Ecosystem projects, rather than by Grove Foundation or its subsidiaries. The registered marks cover the GROVE word mark and associated logo marks. The Grove protocol codebase is open source. Grove Foundation and its subsidiaries do not hold registered IP in the protocol code but do own non-protocol related code such as the website and app.

The wholly owned Subsidiaries of Grove Foundation are:

• Deodar Grove Inc. a Panama Corporation - Operates the user-facing interface at grove.finance as a non-intermediating gateway to the underlying blockchain; does not custody user assets or alter transaction parameters
• Grove (BVI) Ltd. a BVI Business Company, - Token issuer for the GROVE token.
• Additional special-purpose subsidiaries used for different counterparty transaction types as appropriate: Aspen Grove, Bamboo Grove, Cedar Grove, and Fir Grove (each a Cayman Islands company), and Elm Grove (a Panama corporation).

The Grove Foundation is governed by its Memorandum and Articles of Association and Bylaws, while each Subsidiary is governed by its respective constitutional documents, which vest management authority in its board of directors. Grove Foundation serves as the sole shareholder and sole director of each Subsidiary and, accordingly, exercises management and control over their respective operations in accordance with their constitutional documents and applicable law. This structure ensures that the Subsidiaries remain aligned with the governance framework established by Grove Foundation and, where applicable, the broader Grove governance framework.

(c) Powers over DAO, treasury, protocol-controlled resources, and token administration

DAO governance: The Foundation designates the independent delegates to whom staked GROVE may be delegated; it does not control tokenholder voting. Tokenholder Proposals are not binding on the Foundation - under its Bylaws, the directors observe and consider Proposals passed through Onchain Governance (the Grove Artifact and the Sky Atlas) but retain sole discretion whether and to what extent to implement them, and may decline to act to ensure compliance with fiduciary and legal duties.

Treasury: The Grove Subproxy smart contract holds the initial capital plus accrued USDS and additional protocol token holdings, such as CFG. Furthermore, the Foundation controls its 4/7 operational multisig. It holds no unilateral authority over other Grove protocol-level resources, which are controlled through the governance process.

Protocol-controlled resources: Grove's onchain positions are held in the Grove ALM Proxy and are deployed through the governance process. The Foundation does not direct these deployments unilaterally.

Token administration: None. Only Sky governance can authorize administrative actions on the GROVE token contract.

Reward parameters: The Foundation can use its treasury to reward and incentivize the development and growth of the Grove ecosystem at its discretion. The Foundation does not have any control over the distribution of GROVE as rewards by Sky.

(d) Powers over DevCo

Grove Foundation does not own, and holds no equity in, Grove Labs. Grove Labs is a separate legal entity and a subsidiary of Steakhouse Financial Ltd, and does not form part of the Grove Foundation corporate structure.

Under the Grove Artifact, Grove Labs is designated as a Nested Contributor. During the three years following genesis emissions, its removal through governance requires the approval of both GROVE token holders and SKY token holders.

The relationship between Grove Foundation and Grove Labs is contractual rather than structural. Under a services agreement, Grove Labs provides operational and technical services to Grove Foundation, including software development, security, and compliance support.

As the recipient of those services, and as owner of the resulting code and strategies under the Atlas framework, Grove Foundation directs the scope of the services performed. However, it exercises no equity, board or other corporate control over Grove Labs or its internal decision-making.

(e) Contract/admin powers

Grove Foundation does not hold any upgrade, pause or governance executor authorities. Onchain protocol changes are executed through Sky Executive Votes via Grove Spells; only the Grove ALM Proxy can call configuration functions on Grove protocol contracts.

(f) Current economic arrangements and distribution policies

The following mechanisms currently exist:

(i) Genesis token allocation. Grove Foundation received 500,000,000 GROVE (5% of total supply) to support ecosystem development and growth.

(ii) Operating grant. Grove Foundation receives a grant of 800,000 USDS per month, paid to the Grove Foundation Multisig through Grove Spells included in Sky Executive Votes. This grant comes from Grove’s USDS Genesis Capital Contribution from Sky and is subject to change based on Sky Governance decisions.

(iii) Services fees. Grove Foundation and/or certain Grove subsidiaries pay fees to Grove Labs pursuant to the services agreement; the amounts are contractual and not publicly disclosed.

As a Cayman Islands foundation company, Grove Foundation has no equity holders. No dividend, repurchase, or equity-distribution mechanism exists or has been formally adopted.

(a) Entity

Grove Labs is a Cayman Islands exempted company wholly owned by Steakhouse Financial Ltd and is designated as a Nested Contributor under the Grove Artifact. In that capacity, Grove Labs operates as the DevCo within the Grove governance framework and, during the three-year period following genesis emissions, may only be removed as a Nested Contributor with the approval of both GROVE and SKY token holders.

Grove Labs provides operational and technical services to Grove Foundation pursuant to a services agreement. These services include software development, information security and compliance support. Accordingly, Grove Labs' relationship with Grove Foundation is contractual, arising from the services agreement between them rather than from any common ownership.

(b) IP ownership & control

None.

(c) Powers over DAO, treasury, protocol-controlled resources, and token administration

Grove Labs provides technical, administrative, and operational support services to Grove Foundation and certain Grove subsidiaries pursuant to services arrangements, but does not independently exercise powers over DAO governance, treasury actions, allocator, bridge, protocol-controlled resources, token administration, or reward parameters. Token administration sits with Sky governance, as described in the Foundation responses.

Grove Labs received 2,500,000,000 GROVE (25% of total supply) as part of the Grove Team and Contributors allocation, which it uses for contributor grants. Grants are subject to the Atlas transfer limits and Sky-approved distribution plans. Tokens that have not been granted are held in Grove Labs’ 3/6 multisig. Granted tokens are held in separate 2/3 multisigs for each contributor.

(d) Powers over Foundation

Grove Labs and its parent company, Steakhouse Financial, Ltd, cannot exert direct or indirect control over Grove Foundation’s decision-making. It holds no equity in the Foundation, holds no board appointment or veto rights of record, and acts solely as a contracted service provider under the service agreement. Grove Labs has no director, officer or personnel overlap with Grove Foundation. 

As a part of its contracted services, Grove Labs contributes to drafting proposals that are voted on by Grove governance.

(e) Contract/admin powers

Grove Labs holds no upgrade, veto, or governance-executor authority at any layer. Grove Labs holds one of the five keys on the 2-of-5 multisig that holds the FREEZER role on the Grove ALM Controller (see 12(b)). The other signers are individuals affiliated with Sky (majority) and an independent security firm; Grove Labs cannot invoke the freeze alone.

(f) Current economic arrangements and distribution policies

Two mechanisms currently exist.

1. Services fees. Grove Labs receives fees from Grove Foundation and/or certain Grove subsidiaries pursuant to the services agreement covering operational, compliance, and technical services.

2. Token allocation. Grove Labs received the Grove Team and Contributors allocation of 2,500,000,000 GROVE (Year 1 release of 625,000,000). Tokens that have not been granted are held in Grove Labs’ 3/6 multisig. Granted tokens are held in separate 2/3 multisigs for each contributor.

An airdrop was conducted in 2026 to eligible participants in prior Grove ecosystem activity. Discretionary allocations were determined retroactively, primarily based on the level of participation. Approximately 75.3M GROVE (0.753% of total supply) was allocated; per-address details: https://docs.google.com/spreadsheets/d/1P4sdxmtIITsOzc_wy5R2Rru86VWzFtgpuFMv1JmKinA/edit. 

No future airdrop allocations or distributions are planned at this time.

(a) Date & component affected

No exploits affecting tokenholders or protocol funds as of 2026-08-31.

(b) Exploit vector summary

N/A

(c) Quantified impact

N/A

(d) Remediation/response taken

N/A

(e) Current status

N/A

(f) References

N/A

(a) Regulatory, Legal & Tax Risks

Impact of Regulatory Change on TGE and Listings

GROVE launched in 2026 and trades on centralized exchanges including Coinbase, Bybit, and KuCoin, as well as decentralized venues. Evolving or conflicting laws and regulations, including securities, commodities, market-abuse, AML/CTF, sanctions, and exchange listing standards, could affect the continued listing, liquidity, transferability, or utility of GROVE, and could require additional disclosures, geofencing, transfer restrictions, suspensions, or delistings. A MiCAR-compliant crypto-asset white paper for GROVE was notified to the Central Bank of Ireland and published in connection with EU admission to trading; regulators or trading venues in other jurisdictions may take different views of the token. There is no guarantee that GROVE will remain listed on any platform, and delisting could reduce liquidity and market value.

Entity-Level Regulatory Impact 

Regulatory or legal changes could materially affect Grove Foundation and its subsidiaries, Grove Labs, Steakhouse Financial Ltd, and the Sky Ecosystem entities and infrastructure on which Grove depends, including through enforcement actions, licensing or registration requirements, or required changes to structure or operations. Grove's activities intersect with regulated markets, and its counterparties include regulated asset managers, tokenization platforms, and custodians. A material adverse development affecting any of these entities, counterparties, or dependencies could disrupt Grove's operations, limit its activities, or require changes to its structure, and could in turn affect GROVE. 

Tokenholder Tax Treatment:

The tax treatment of GROVE is uncertain and may vary significantly by jurisdiction and over time, and by how tokens are acquired or held (for example, ecosystem rewards, community claims, staking, or secondary-market purchase). The timing, characterization, and valuation of taxable events may be unclear, tax authorities may take positions that differ from a holder's own, and the treatment of tokens received at no cost or of staking-related activity is particularly unsettled in many jurisdictions. Changes in tax law or guidance, including any applied retroactively, could alter these outcomes. Grove does not provide tax advice and makes no representation as to the tax treatment of GROVE in any jurisdiction. Tokenholders are solely responsible for understanding and complying with their own tax obligations, including any reporting, withholding, and payment requirements, and should obtain independent tax advice.

Jurisdictional & User Access Restrictions

Participation in certain Grove and Sky programs is restricted by jurisdiction and eligibility. The Grove App is currently unavailable in the United States and in sanctioned jurisdictions, and wallet addresses appearing on applicable sanctions lists are restricted. These restrictions, and any future changes to them, may prevent some users from receiving, claiming, staking, or otherwise using GROVE, and may give rise to risks including reduced participation, lower liquidity, and fragmented access.

(b) Protocol, Technology & Security Risks

Bugs and Design Flaws

The GROVE token relies entirely on the Ethereum network, which may experience outages, congestion, forks, or consensus failures; transactions are generally irreversible. Grove's smart contracts, including Allocator vault infrastructure, Basin, staking, and token and distribution contracts could contain undiscovered bugs, design flaws, or implementation errors despite audits, and certain deployed contracts may be immutable, so errors may not be correctable. The Grove protocol operates across multiple chains (Ethereum, Avalanche, Base, Plume, Robinhood Chain), creating bridge and cross-chain dependencies, and relies on Sky Ecosystem infrastructure (USDS, sUSDS, the Sky Savings Rate, and Sky governance execution), on oracle and NAV pricing inputs for tokenized assets, on wallets, bridges, oracles, and front-end applications that are targets for cyberattacks, and on offchain processes that smart contracts cannot enforce, including fund redemption procedures, transfer agents, tokenization platforms, and custodians. Failures in any of these components could disrupt the protocol, impair allocations or redemptions, or lead to loss of funds.

Security Measures & Their Limitations

Each Grove protocol component undergoes at least two independent audit rounds per major version release, conducted by separate firms (ChainSecurity and Spearbit Cantina, and Certora); findings are remediated and verified before deployment, and audit reports are available at docs.grove.finance/security. The GROVE token contract (SDAO, from the Sky Endgame Toolkit) is audited by ChainSecurity and Spearbit. Operational safeguards include a FREEZER role on the Grove ALM Controller, held by a 2-of-5 multisig. A majority of signers are individuals affiliated with Sky, with other signers from Grove Labs and an independent security firm. In a security incident, the FREEZER provides an emergency capability to halt automated operations such as allocations into portfolio assets. A RateLimits mechanism enforces time-based limits on capital movements, and protocol changes undergo Sky Ecosystem review. These measures reduce but do not eliminate risk, and may fail to detect novel vulnerabilities, economic-design flaws, or failures in offchain dependencies.

(c) Token Economics, Unlocks & Incentive Risks

Critical Economic Assumptions

GROVE's utility depends on continued protocol adoption and potential activation of functionality over time, subject to governance decisions and regulatory considerations. Distribution is emissions-based: 70% of supply is allocated to the Sky Ecosystem and distributed over a 10-year schedule, creating structural supply growth that may outpace demand, and 2,100,000,000 GROVE (21% of supply) remains subject to future Sky governance determination. No fee accrual, revenue rights, buyback, or staking yield to GROVE holders currently exists; Seeds accrued through delegated staking are a record of participation and confer no economic rights. GROVE is not backed by any asset, reserve, or guarantee, and does not represent a claim on, or direct economic exposure to, the protocol's assets or credit portfolio; its market price is determined by supply and demand. Tokens subject to release schedules, including team and contributor allocations, may introduce additional selling pressure when released into circulation.

Governance Control over Monetary Policy & Rewards

Sky governance retains administrative authority over the GROVE token contract, determines the allocation of the reserved 2,100,000,000 GROVE, and controls reward program parameters. Grove governance rights are initially limited to veto authority; proposals are initially prepared by the team, and the Grove Foundation retains discretion over implementation. Changes to reward allocations, emissions pacing, or governance parameters could adversely affect tokenholders. While no change to the total supply is currently anticipated, the GROVE token contract retains a minting function controlled by Sky governance, which could in the future be used to increase the supply of GROVE.