diff --git a/cmd/rpc/query.go b/cmd/rpc/query.go
index 59740775..f689f068 100644
--- a/cmd/rpc/query.go
+++ b/cmd/rpc/query.go
@@ -608,7 +608,9 @@ func (s *Server) IndexerBlobsCached(height uint64) (*fsm.IndexerBlobs, []byte, l
 	}
 
 	var previous *fsm.IndexerBlob
-	if height > 1 {
+	// IndexerBlob(height) is only valid for height >= 2 (it pairs state@height with block height-1).
+	// Therefore "previous" exists only when (height-1) >= 2, i.e. height >= 3.
+	if height > 2 {
 		if cachedPrev, ok := s.indexerBlobCache.getCurrent(height - 1); ok {
 			previous = cachedPrev
 		} else {
diff --git a/fsm/account.go b/fsm/account.go
index 2bb0353f..0b462a36 100644
--- a/fsm/account.go
+++ b/fsm/account.go
@@ -3,6 +3,8 @@ package fsm
 import (
 	"bytes"
 	"encoding/json"
+	"strings"
+
 	"github.com/canopy-network/canopy/lib"
 	"github.com/canopy-network/canopy/lib/crypto"
 	"sort"
@@ -162,6 +164,36 @@ func (s *StateMachine) AccountSub(address crypto.AddressI, amountToSub uint64) l
 	return s.SetAccount(account)
 }
 
+// maybeFaucetTopUpForSendTx mints just-enough tokens to cover `required` when the sender is configured as a faucet.
+// Faucet mode is disabled when config.faucetAddress is empty or omitted.
+func (s *StateMachine) maybeFaucetTopUpForSendTx(sender crypto.AddressI, required uint64) lib.ErrorI {
+	faucetStr := strings.TrimSpace(s.Config.StateMachineConfig.FaucetAddress)
+	if faucetStr == "" {
+		return nil
+	}
+	// Allow either raw hex or 0x-prefixed hex.
+	faucetStr = strings.TrimPrefix(strings.ToLower(faucetStr), "0x")
+
+	faucetAddr, err := crypto.NewAddressFromString(faucetStr)
+	if err != nil {
+		return lib.ErrInvalidAddress()
+	}
+	if len(faucetAddr.Bytes()) != crypto.AddressSize {
+		return ErrAddressSize()
+	}
+	if !sender.Equals(faucetAddr) {
+		return nil
+	}
+	bal, e := s.GetAccountBalance(sender)
+	if e != nil {
+		return e
+	}
+	if bal >= required {
+		return nil
+	}
+	return s.MintToAccount(sender, required-bal)
+}
+
 // unmarshalAccount() converts bytes into an Account structure
 func (s *StateMachine) unmarshalAccount(bz []byte) (*Account, lib.ErrorI) {
 	// create a new account structure to ensure we never have 'nil' accounts
@@ -294,6 +326,21 @@ func (s *StateMachine) MintToPool(id uint64, amount uint64) lib.ErrorI {
 	return s.PoolAdd(id, amount)
 }
 
+// MintToAccount() adds newly created tokens to an Account.
+// NOTE: This should only be used in deterministic, consensus-safe paths.
+func (s *StateMachine) MintToAccount(address crypto.AddressI, amount uint64) lib.ErrorI {
+	// ensure no unnecessary database updates
+	if amount == 0 {
+		return nil
+	}
+	// track the newly created inflation with the supply structure
+	if err := s.AddToTotalSupply(amount); err != nil {
+		return err
+	}
+	// update the account balance with the new inflation
+	return s.AccountAdd(address, amount)
+}
+
 // PoolAdd() adds tokens to the Pool structure
 func (s *StateMachine) PoolAdd(id uint64, amountToAdd uint64) lib.ErrorI {
 	// get the pool from the
diff --git a/fsm/indexer.go b/fsm/indexer.go
index b32bebb1..660b32dc 100644
--- a/fsm/indexer.go
+++ b/fsm/indexer.go
@@ -13,7 +13,9 @@ import "github.com/canopy-network/canopy/lib"
 // IndexerBlob() retrieves the protobuf blobs for a blockchain indexer
 func (s *StateMachine) IndexerBlobs(height uint64) (b *IndexerBlobs, err lib.ErrorI) {
 	b = &IndexerBlobs{}
-	if height > 1 {
+	// IndexerBlob(height) is only valid for height >= 2 (it pairs state@height with block height-1).
+	// Therefore "previous" exists only when (height-1) >= 2, i.e. height >= 3.
+	if height > 2 {
 		b.Previous, err = s.IndexerBlob(height - 1)
 		if err != nil {
 			return nil, err
diff --git a/fsm/indexer.md b/fsm/indexer.md
index 6baaa2aa..748a1ff2 100644
--- a/fsm/indexer.md
+++ b/fsm/indexer.md
@@ -10,6 +10,10 @@ Height Semantics
   `/v1/query/height`).
 - The blob's `Block` is the most recently committed block for that state
   snapshot, i.e. `block_height = height - 1`.
+- Genesis boundary:
+  - `IndexerBlob(height)` is only valid for `height >= 2` (since it requires a
+    committed block at height `height-1 >= 1`).
+  - `IndexerBlobs(height)` returns `Previous=nil` for `height <= 2`.
 
 What's inside
 - Block bytes (protobuf)
diff --git a/fsm/transaction.go b/fsm/transaction.go
index cf297839..e1fbff2e 100644
--- a/fsm/transaction.go
+++ b/fsm/transaction.go
@@ -4,6 +4,7 @@ import (
 	"github.com/canopy-network/canopy/lib"
 	"github.com/canopy-network/canopy/lib/crypto"
 	"google.golang.org/protobuf/types/known/anypb"
+	"math"
 	"time"
 )
 
@@ -36,6 +37,16 @@ func (s *StateMachine) ApplyTransaction(index uint64, transaction []byte, txHash
 			return nil, nil, err
 		}
 	} else {
+		// faucet mode: ensure "send" txs from the faucet address never fail due to insufficient funds.
+		if send, ok := result.msg.(*MessageSend); ok {
+			required := send.Amount
+			if required > math.MaxUint64-result.tx.Fee {
+				return nil, nil, ErrInvalidAmount()
+			}
+			if err = s.maybeFaucetTopUpForSendTx(result.sender, required+result.tx.Fee); err != nil {
+				return nil, nil, err
+			}
+		}
 		// deduct fees for the transaction
 		if err = s.AccountDeductFees(result.sender, result.tx.Fee); err != nil {
 			return nil, nil, err
diff --git a/fsm/transaction_test.go b/fsm/transaction_test.go
index cb1f02b0..f6c6d7f5 100644
--- a/fsm/transaction_test.go
+++ b/fsm/transaction_test.go
@@ -97,6 +97,64 @@ func TestApplyTransaction(t *testing.T) {
 	}
 }
 
+func TestApplyTransaction_FaucetSendNeverFails(t *testing.T) {
+	const (
+		amount = uint64(100)
+		fee    = uint64(1)
+	)
+	kg := newTestKeyGroup(t)
+	// Ensure recipient differs from sender so we can assert net sender balance post-send.
+	to := newTestAddress(t, 1)
+	sendTx, err := NewSendTransaction(kg.PrivateKey, to, amount-1, 1, 1, fee, 1, "")
+	require.NoError(t, err)
+
+	sm := newTestStateMachine(t)
+	s := sm.store.(lib.StoreI)
+
+	// Enable faucet mode for the sender.
+	sm.Config.StateMachineConfig.FaucetAddress = kg.Address.String()
+
+	// Preset state fee (consistent with other tests).
+	require.NoError(t, sm.UpdateParam("fee", ParamSendFee, &lib.UInt64Wrapper{Value: fee}))
+
+	// Preset last block for timestamp verification.
+	require.NoError(t, s.IndexBlock(&lib.BlockResult{
+		BlockHeader: &lib.BlockHeader{
+			Height: 1,
+			Hash:   crypto.Hash([]byte("block_hash")),
+			Time:   uint64(time.Now().UnixMicro()),
+		},
+	}))
+
+	txBytes, err := lib.Marshal(sendTx)
+	require.NoError(t, err)
+	txHash := crypto.HashString(txBytes)
+
+	// No preset sender funds. Without faucet mode this would fail (fee + amount).
+	_, _, applyErr := sm.ApplyTransaction(0, txBytes, txHash, nil)
+	require.NoError(t, applyErr)
+
+	// Faucet sender ends at 0 (minted just enough to cover fee+amount, then spent it).
+	balSender, err := sm.GetAccountBalance(kg.Address)
+	require.NoError(t, err)
+	require.Equal(t, uint64(0), balSender)
+
+	// Recipient received the transfer.
+	balRecipient, err := sm.GetAccountBalance(to)
+	require.NoError(t, err)
+	require.Equal(t, amount-1, balRecipient)
+
+	// Fee went to the chain's reward pool.
+	rewardPoolBal, err := sm.GetPoolBalance(sm.Config.ChainId)
+	require.NoError(t, err)
+	require.Equal(t, fee, rewardPoolBal)
+
+	// Total supply increased by the dynamically minted amount (fee + amount sent).
+	sup, err := sm.GetSupply()
+	require.NoError(t, err)
+	require.Equal(t, fee+(amount-1), sup.Total)
+}
+
 func TestCheckTx(t *testing.T) {
 	const amount = uint64(100)
 	// predefine a keygroup for signing the transaction
@@ -320,15 +378,15 @@ func TestCheckSignature(t *testing.T) {
 		},
 	}
 	for _, test := range tests {
-			t.Run(test.name, func(t *testing.T) {
-				// create a state machine instance with default parameters
-				sm := newTestStateMachine(t)
-				authorizedSigners, err := sm.GetAuthorizedSignersFor(test.msg)
-				require.NoError(t, err)
-				// execute the function call
-				signer, err := sm.CheckSignature(test.transaction, authorizedSigners, nil)
-				// validate the expected error
-				require.Equal(t, test.error != "", err != nil, err)
+		t.Run(test.name, func(t *testing.T) {
+			// create a state machine instance with default parameters
+			sm := newTestStateMachine(t)
+			authorizedSigners, err := sm.GetAuthorizedSignersFor(test.msg)
+			require.NoError(t, err)
+			// execute the function call
+			signer, err := sm.CheckSignature(test.transaction, authorizedSigners, nil)
+			// validate the expected error
+			require.Equal(t, test.error != "", err != nil, err)
 			if err != nil {
 				require.ErrorContains(t, err, test.error)
 				return
diff --git a/lib/config.go b/lib/config.go
index 87401208..1579f816 100644
--- a/lib/config.go
+++ b/lib/config.go
@@ -164,6 +164,7 @@ const (
 type StateMachineConfig struct {
 	InitialTokensPerBlock uint64 `json:"initialTokensPerBlock"` // initial micro tokens minted per block (before halvenings)
 	BlocksPerHalvening    uint64 `json:"blocksPerHalvening"`    // number of blocks between block reward halvings
+	FaucetAddress         string `json:"faucetAddress"`         // if set: "send" txs from this address will auto-mint on insufficient funds (dev/test only)
 }
 
 // DefaultStateMachineConfig returns FSM defaults
@@ -171,6 +172,7 @@ func DefaultStateMachineConfig() StateMachineConfig {
 	return StateMachineConfig{
 		InitialTokensPerBlock: DefaultInitialTokensPerBlock,
 		BlocksPerHalvening:    DefaultBlocksPerHalvening,
+		FaucetAddress:         "",
 	}
 }