Crypto Asset Statement

Bitcoin (BTC)

What is Bitcoin (BTC)?

Bitcoin is the origin of blockchain technology and the first cryptocurrency, introduced to the world in 2009 by an anonymous founder, Satoshi Nakamoto. Bitcoin’s White Paper, “Bitcoin: A Peer-to-Peer Electronic Cash System” still serves as inspiration for the crypto community. Fast forward to 2021 and Bitcoin still maintains its #1 crypto market ranking.

Bitcoin isn’t minted by a central bank; instead, its supply is dictated by “miners,” other computers in the network that create bitcoin by getting their computer to solve hard math puzzles. If you’ve got a powerful enough computer, you can “mine” for bitcoin.

Bitcoin is governed by a self-regulated community of developers. After Nakamoto put forward the idea for Bitcoin, a team of (non-anonymous) developers continued work on it and further its development. In 2011, the Bitcoin Foundation was started, headed by Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Schrem, and Peter Vessenes. Many still work on it today and as an open source project, anyone can jump in to work on the Bitcoin protocol.

Bitcoin used be worth almost nothing, but the last few years have seen high spikes and significant price volatility. At the end of July 2021, Bitcoin’s price was hovering around $40,000.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or BTC made available through the Platform, including an opinion that BTC is not itself a security and/or derivative.

Netcoins has performed a legal assessment of Bitcoin prior to making it available on the Netcoins’ Platform and has concluded that Bitcoin is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that Bitcoin is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw Bitcoin from trading on the Platform and stop any future trading of Crypto Rights Contracts based on Bitcoin, and clients holding Bitcoin may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws Bitcoin from trading on Platform, clients holding positions in Bitcoin will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in Bitcoin.

We evaluated Bitcoin based on publicly available information, including (but not limited to):

The creation, governance, usage and design of Bitcoin, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created Bitcoin;

The supply, demand, maturity, utility and liquidity of Bitcoin;

Material technical risks associated with Bitcoin, including any code defects, security breaches and other threats concerning the Bitcoin blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with Bitcoin, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Bitcoin.

Like all other crypto assets, there are some general risks to investing in Bitcoin, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of BTC have no recourse to its community or Netcoins if BTC declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading BTC. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Ethereum (ETH)

Last updated: March 18, 2024

What is Ethereum (ETH)?

Ethereum is the blockchain that cryptographically mines transactions of ether (or ETH), validates the ledger, and underpins most of the existing smart contract technology. Ether is its native crypto asset, but many other popular and valuable crypto assets are ERC-compliant tokens, which means they are created and hosted on the Ethereum blockchain, are stored and sent using Ethereum addresses and transactions, and are compliant with the protocol, but operate on applications built on top of the blockchain.

Ether and Bitcoin are similar in a lot of ways. Both, for instance, rely on a blockchain, a publicly accessible electronic ledger that permanently, and immutably records every transfer of the cryptocurrency units, and by doing so, provides the system with both self-policing and accountability.

The Merge / Upgrades

The Ethereum network transition from a proof-of-work (PoW) consensus algorithm to a proof-of-stake (PoS) algorithm is called Ethereum 2.0 or Eth2. This transition aims to solve some of the scalability and security issues that the Ethereum network has been facing with the PoW consensus algorithm.

The PoW consensus algorithm used by Ethereum requires miners to compete to solve complex mathematical problems to validate transactions and create new blocks. This process is energy-intensive and computationally expensive. As a result, the Ethereum network was slower than desired and cannot handle a large number of transactions.

The PoS consensus algorithm, on the other hand, does not require miners to solve complex mathematical problems. Instead, it uses a different approach where validators are selected to validate transactions and create new blocks based on the amount of cryptocurrency tokens they hold and are willing to "stake" or collateralize in the network. Validators are incentivized to act in the best interest of the network, as they could lose their staked tokens if they are found to be malicious or negligent in their role.

The Ethereum network transition to PoS brings several benefits, including increased scalability, reduced energy consumption, and improved security. With the transition to PoS, users can earn rewards by staking their ETH tokens and supporting the network, without the need for expensive mining equipment.

Bitcoin vs Ethereum

One of the biggest differences between Ethereum and Bitcoin is how they came to be. Bitcoin’s creation is a great mystery; it was created by a person or group of people going by “Satoshi Nakamoto” who have still yet to be publicly identified, and is so “decentralized” that it has no office you can visit.

Ethereum arrived on the scene with a known team of developers. Ethereum was first described in a 2013 white paper by Vitalik Buterin, a cryptocurrency expert well known for his work writing for Bitcoin Magazine. Ethereum transactions are processed more quickly using a different algorithm (ethash), and its code can transmit more information through its smart contract layer. This is the key differentiator and the piece that enables Ethereum to support complex development applications and executable contracts on top of its blockchain.

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian securities regulatory authority has expressed an opinion about any Crypto Rights Contract or ETH made available through the Platform, including an opinion that ETH is not itself a security and/or derivative.

Netcoins has performed a legal assessment of ETH prior to making it available on the Netcoins’ Platform and has concluded that ETH is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that ETH is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw ETH from trading on the Platform and stop any future trading of Crypto Rights Contracts based on ETH and clients holding ETH may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws ETH from trading on Platform, clients holding positions in ETH will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in ETH.

We evaluated Ethereum based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of Ethereum, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created Ethereum;

  • The supply, demand, maturity, utility and liquidity of Ethereum;

  • Material technical risks associated with Ethereum, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with Ethereum, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of ETH.

Like all other crypto assets, there are some general risks to investing in ETH, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Additional Staking Details and Risks

Staking ETH: How it works

Ethereum staking offers ETH holders the opportunity to lock up a certain amount of ETH as a way to participate in the validation of transactions and help secure the Network. To participate in staking, a user must deposit a minimum amount of 32 ETH into a smart contract on the Ethereum network. This deposit is locked until the user decides to stop staking. Once ETH is deposited, the user becomes a validator and can participate in the validation of transactions and creation of new blocks.

You can stake your ETH using Netcoins optional Staking Service. Through this service, Netcoins connects you to approved Staking Service Providers and Validators. Netcoins aggregates user staking requests which means we do not require an individual to meet the minimum network amount of 32 ETH. This makes staking ETH more accessible to everyone. For further explanation of staking and the associated risks, please refer to the Netcoins Risk Statement. Information specific to staking ETH are outlined below:

Validators:

Validators are participants in the Ethereum network who hold and stake a certain amount of ETH and are responsible for validating transactions and creating new blocks on the network. Validators must perform a variety of tasks, including processing transactions, verifying the correctness of the block and signing the block to confirm its validity.

Validators earn rewards in the form of ETH for their contribution to the network. The amount of rewards depends on several factors, including the amount of ETH staked, the number of validators on the network and the overall performance of the network.

Supported Validators:

Netcoins uses our qualified custodian, BitGo Trust Company (BitGo) as our third party staking service provider. BitGo is regulated as a trust company under the Division of Banking in South Dakota. BitGo has contractual relationships with a number of Validators. For the provision of Netcoins Staking Service, BitGo uses Figment as a validator for crypto assets stored in Netcoin’s designated staking custodial wallets. Figment is one of the world’s largest blockchain infrastructure and services providers.

Lock up periods: Bonding and Unbonding Periods

When you stake ETH, you are subject to the network bonding and unbonding periods (also referred to as ‘lock-up’, ‘warm-up’ or ‘cool-down’ periods). During this time, your ETH is considered locked on the network and cannot be sold or withdrawn. Bonding and unbonding periods fluctuate based on validator queues on the network. Netcoins provides users with average bonding and unbonding timelines based on information provided from our staking service providers as well as information made available publicly. Average bonding and unbonding duration can change at any time. You can find details of current estimated bonding and unbonding period here.

It is important that you understand the lock-up period and estimated timelines when making your decision to stake ETH. Given the volatility of Crypto Assets, the value of your staked Crypto Assets when they are available for you to sell or withdraw, and the value of any crypto Assets earned through staking, may be significantly less than the current value.

Network Inflation

The current network inflation rate is estimated to be ~0.52%

ETH Staking Rewards and Fees

Netcoins displays an estimated reward rate that is provided by our Staking Service Provider. This rate is displayed to users directly in the Netcoins App. It represents the Network reward rate, before applicable service fees. It is not indicative of future rewards or returns. There is no guarantee that you will receive any rewards on the staked Crypto Assets. Past rewards are not indicative of expected future rewards. Reward rates can change at any time as determined by the Network. Fees (both third party and Netcoins) can change at any time at the discretion of Netcoins and third party staking service providers. Breakdown of fee information can be found here.

Netcoins issues ETH rewards every 24 hours. Netcoins will calculate and distribute your share of ETH rewards based on the proportion of ETH you have staked relative to the total ETH staked on the platform at the start of that reward cycle (Staked ETH that has completed the bonding period). Third party fees and Netcoins fees are deducted from rewards prior to distribution. A breakdown of gross reward and fees can be found for each reward earned in the transaction details section of your Netcoins account. Since third party providers are responsible for reward distribution, it is possible there are errors or delays in Netcoins receiving rewards from service providers. You do not have rights to rewards until they are received by Netcoins from the staking service provider

Custody

Your ETH is staked from designated staking custodial wallets held with our custodian, BitGo.

Slashing

Validators face penalties for misbehavior, which could include being slashed or losing a portion of their staked ETH as a penalty. Validators can be slashed for a variety of reasons such as double-signing a block or failing to properly validate transactions or extended downtime.

Netcoins does not provide any guarantees against slashing or jailing losses. In certain circumstances, Netcoins works with service providers to recover slashing losses through the service provider’s insurance coverage. If any staked assets or rewards are recovered, Netcoins may, at its sole discretion, distribute reimbursements for slashing penalties it receives from service providers to impacted users based on their impact relative to total user impact/ loss less any administrative costs or expenses Netcoins incurs.

In the event Netcoins cannot recover lost assets from Service Providers, you may lose all or a portion of the client’s staked Crypto Assets if the validator does not perform as required by the network.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Netcoins Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Ethereum community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of ETH have no recourse to its community or Netcoins if ETH declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading ETH. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated October 6, 2023. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Litecoin (LTC)

What is Litecoin (LTC)?

The Litecoin blockchain is what is known as a “fork” of Bitcoin which is when a group of coders copies the source code of a blockchain, in this case Bitcoin, and uses it to launch an entirely separate blockchain, often with a few tweaks. In Litecoin’s case, it is designed to fulfil a similar purpose—to process payments on a decentralized, peer-to-peer network—but is quicker and better suited to small transactions.

Litecoin is the creation of Charlie Lee, a former Google employee who contributed to the Chrome OS. After Google, he headed the engineering department of Coinbase, one of the world’s largest cryptocurrency exchanges. Charlie was Coinbase’s fifth employee; the exchange went public in May 2021, and holds a market cap of $60 billion.

As of July 2021, Litecoin has a market cap of over $8.3 billion. Currently the 13th largest cryptocurrency by market cap, and the third-largest Bitcoin spinoff (discounting Dogecoin, a highly-volatile meme coin that is itself a spinoff of Litecoin).

Bitcoin vs Litecoin

Bitcoin and Litecoin are fairly similar. Both are based on blockchains and use cryptography to power a network of anonymous and transparent transactions.

One of the main differences between Litecoin and Bitcoin is that the Bitcoin blockchain takes 10 minutes to process a single block, while on Litecoin it takes just 2.5 minutes. Blockchains process transactions in batches, known as blocks. These blocks are “chained” together to form a wider, publicly available ledger. This means that everyone knows how much Litecoin everyone else owns.

Since Litecoin processes blocks quicker than Bitcoin, it is, theoretically, more useful for everyday purchases. For instance, buying a coffee could be processed relatively quickly via Litecoin, whereas it would take far longer for the Bitcoin blockchain to clear the transaction. Litecoin is also far cheaper. It can cost up to $70 to process a transaction on the Bitcoin blockchain; on Litecoin, transactions rarely cost more than $0.1.

Despite this advantage, Litecoin has not yet gained significant traction as a means of payment. Litecoin ran a short-lived mobile app called LitePay a few years ago, which functioned as a crypto competitor to Apple Pay. It didn’t pan out and was ultimately discontinued.

Litecoin is also significantly smaller than Bitcoin, both in market cap and coin price. Bitcoin continues to dominate the cryptocurrency market. Its domination over the market rarely falls below 50%. Litecoin, by comparison, commands under 1% of the cryptocurrency market cap.

Apart from that difference, Litecoin operates rather similarly to Bitcoin.

Just like Bitcoin, Litecoin is decentralized. No single entity maintains the Litecoin network by processing transactions or producing more Litecoin. This means that the token is divided between a potentially unlimited number of users, none of whom have ultimate control over the system.

And, just like Bitcoin, Litecoin is a peer-to-peer currency. It requires no central authority, such as a bank, to act as an intermediary between two parties. All that is needed for a transaction to take place is permission from the two users involved to transfer funds between wallets, plus miners to process said transaction. (A wallet is a hardware or software tool to store Litecoin. Intermediaries, such as cryptocurrency exchanges, do exist, but these aren’t strictly necessary).

The decentralization of the network, plus its peer-to-peer nature, makes Litecoin borderless. It’s possible to transfer Litecoin from one account to another without considering the nationality of those accounts or the identities of the account holders; Litecoin pays no heed to international sanctions or money-laundering regulations. Once transactions are processed, they are irreversible and can’t be scrubbed from the blockchain.

Risk statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or Litecoin made available through the Platform, including an opinion that Litecoin is not itself a security and/or derivative.

Netcoins has performed a legal assessment of Litecoin prior to making it available on the Netcoins’ Platform and has concluded that Litecoin is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that Litecoin is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw Litecoin from trading on the Platform and stop any future trading of Crypto Rights Contracts based on Litecoin, and clients holding Litecoin may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws Litecoin from trading on Platform, clients holding positions in Litecoin will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in Litecoin.

We evaluated Litecoin based on publicly available information, including (but not limited to):

· The creation, governance, usage and design of Litecoin, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created Litecoin;

· The supply, demand, maturity, utility and liquidity of Litecoin;

· Material technical risks associated with Litecoin, including any code defects, security breaches and other threats concerning Litecoin and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

· Legal and regulatory risks associated with Litecoin, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Litecoin.

Like all other crypto assets, there are some general risks to investing in Litecoin, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Litecoin community is not under any legal or regulatory obligation to disclose material information to the public regarding community activities. Holders of Litecoin have no recourse to the Litecoin community or Netcoins if the cryptocurrency declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading Litecoin. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Bitcoin Cash (BCH)

What is Bitcoin Cash (BCH)?

As the original cryptocurrency, Bitcoin, grew in popularity, some of its community members raised concerns with its scalability and transaction speed. Its “blocks” are only 1 MB in size and process only seven transactions per second (versus 1500+ transactions per second with traditional payment processors like VISA). This causes the network to clog up and become expensive to run (result: high gas fees).

A group of Bitcoin coders and community members proposed a solution: increase block size to 8 MB, making the chain 8x as capable of processing transactions, and re-aligning its capabilities to its mission of being an efficient payments option. But other Bitcoin members didn’t agree with this proposal and felt that the smaller block sizes enabled more decentralization since requiring less processing power means it’s easier for anyone to run a blockchain node from their computer.

Discussions within the Bitcoin community ensued, consensus was not reached, and in 2017 a group of Bitcoin coders “forked” the Bitcoin blockchain—that is, they split from the Bitcoin blockchain to forge a new path. The new chain, called Bitcoin Cash (BCH), seeks to optimize the technology that underpins the Bitcoin blockchain for payments (its original purpose) by increasing individual block sizes.

In 2018, there was a disagreement within the Bitcoin Cash community with respect to block sizes and other development choices, so another fork occurred. The new chain created from the fork is called Bitcoin SV for “Satoshi’s Vision,” on the belief that it better preserves the vision of Bitcoin’s creator, Satoshi Nakamoto. This new chain has not garnered as much support or market size and is not currently supported by Netcoins.

Bitcoin Cash isn’t as large as Bitcoin, but it’s still a major cryptocurrency, ranked #12 on CoinMarketCap as of July 2021.

Bitcoin vs Bitcoin Cash

Functionally, Bitcoin Cash is very similar to Bitcoin. Both are cryptocurrencies; under the hood, they are more alike than they are different. Both have similar current circulating supplies: about 18.5 million coins.

As described above, the main difference is the block size, which also means that transactions on the Bitcoin Cash blockchain are far cheaper than they are on the Bitcoin blockchain. Bitcoin Cash transactions usually cost less than a cent each, while Bitcoin transactions are frequently several dollars, in some cases more than $20 each when the network is busy. Given the lower cost and higher speed of BCH, it is possible that merchants that wish to accept cryptocurrencies as a form of payment may prefer Bitcoin Cash to Bitcoin.

Bitcoin is still the cryptocurrency with the largest market cap. Bitcoin’s popularity also brings another advantage: more decentralization. Bitcoin has a larger community with more miners so is more decentralized. Creating new blocks of the Bitcoin Cash blockchain requires less computational power than is required for the Bitcoin blockchain, which in theory makes the Bitcoin Cash blockchain less resilient.

Risk statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or BCH made available through the Platform, including an opinion that BCH is not itself a security and/or derivative.

Netcoins has performed a legal assessment of Bitcoin Cash prior to making it available on the Netcoins’ Platform and has concluded that Bitcoin Cash is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that Bitcoin Cash is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw Bitcoin Cash from trading on the Platform and stop any future trading of Crypto Rights Contracts based on Bitcoin Cash, and clients holding Bitcoin Cash may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws Bitcoin Cash from trading on Platform, clients holding positions in Bitcoin Cash will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in Bitcoin Cash.

We evaluated Bitcoin Cash based on publicly available information, including (but not limited to):

The creation, governance, usage and design of Bitcoin Cash, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created Bitcoin Cash;

The supply, demand, maturity, utility and liquidity of Bitcoin Cash;

Material technical risks associated with Bitcoin Cash, including any code defects, security breaches and other threats concerning Bitcoin Cash and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with Bitcoin Cash, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Bitcoin Cash.

Like all other crypto assets, there are some general risks to investing in Bitcoin Cash, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. In addition to these general risks, we note that Bitcoin Cash’s development history presents an increased risk of a blockchain fork event occurring again in the future. Further, the Bitcoin Cash community is not under any legal or regulatory obligation to disclose material information to the public regarding community activities. Holders of Bitcoin Cash have no recourse to the Bitcoin Cash community or Netcoins if the cryptocurrency declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading Bitcoin Cash. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


XRP

What is XRP?

Ripple Labs (Ripple) is the name of the company and network behind XRP. Ripple was founded as a peer-to-peer trust network that leveraged social media. Users within a network could bypass banks and make loans and open credit lines with each other. However, the network failed to take off.

In 2012, the XRP Ledger was first launched under the company name NewCoin (and subsequently renamed itself OpenCoin and later on as Ripple), with it creating a network to enable money transfers where large businesses and financial services firms acted as counterparts to transactions.

Unlike other crypto assets like Bitcoin and Etherium which are created through a “mining” process, the founders of Ripple started XRP by coding the cryptocurrency into existence and then gifting 80 billion XRP to the company. The majority of XRP is in escrow.

The U.S. Securities and Exchange Commission has taken the position that XRP is a security and not a currency, and has brought legal proceedings against Ripple for selling XRP without complying with securities laws. As such, the status of Ripple (and XRP) remains uncertain.

Bitcoin vs XRP

Unlike Bitcoin, which operates on a public blockchain ledger that supports a digital currency used to facilitate payments for goods and services, XRP is the native cryptocurrency for products developed by Ripple.

The Bitcoin network is based on the blockchain concept, a public ledger of verified transactions and record keeping. Miners verify transactions on an ongoing basis and add them to the Bitcoin blockchain. In exchange for their time and the computing power necessary to validate the ledger in this way, miners are rewarded with BTC upon successfully validating transactions.

The Ripple network uses XRP for payment settlement, asset exchange and remittance systems that work similarly to SWIFT (Society for Worldwide Interbank Financial Telecommunications), a service for international money and security transfers used by a network of banks and financial intermediaries. XRP is pre-mined and uses a less complicated method of mining as compared to Bitcoin.

Other differences between Bitcoin and XRP, include: (i) the fact that XPR transactions are cheaper (have low cost) and faster (within seconds) than Bitcoin; every time that a transaction is performed on the Ripple network, a small amount of XRP is charged to the user; (ii) there are more XRP in the market than Bitcoin – about 1 billion XRP were pre-mined at launch and have been released gradually into the market by its main investors (as compared to the 21 million Bitcoin in existence); and (iii) XRP’s circulation mechanisms are subject to smart contract that controls its release as compared to Bitcoin, are released and added tot eh network as and when miners find them. Currently, the number of XRP in circulation is approximately over 50 billion.

Risk statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or XRP made available through the Platform, including an opinion that XRP is not itself a security and/or derivative.

Netcoins has performed a legal assessment of XRP prior to making it available on the Netcoins’ Platform and has concluded that XRP is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that XRP is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw XRP from trading on the Platform and stop any future trading of Crypto Rights Contracts based on XRP, and clients holding XRP may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws XRP from trading on Platform, clients holding positions in XRP will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in XRP.

We evaluated XRP based on publicly available information, including (but not limited to):

The creation, governance, usage and design of XRP, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created XRP;

The supply, demand, maturity, utility and liquidity of XRP;

Material technical risks associated with XRP, including any code defects, security breaches and other threats concerning XRP and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with XRP, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of XRP.

Like all other crypto assets, there are some general risks to investing in XRP, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. In addition to these general risks, we note that Ripple’s ongoing legal proceedings brought by the U.S. Securities and Exchange Commission present uncertainty for Ripple and XRP. Further, the XRP community is not under any legal or regulatory obligation to disclose material information to the public regarding community activities. Holders of XRP have no recourse to the XRP community or Netcoins if the cryptocurrency declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading XRP. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


USD Coin (USDC)

What is USD Coin (USDC)?

Circle is an ERC-20 token built on the Ethereum (ETH) blockchain. USDC’s primary purpose was as a payments vehicle facilitating payment and remittance transactions globally. Unlike USDT, USDC is fully collateralized and centralized. Online at circle.com and listed on a number of reputable and well known platforms and exchanges globally, USDC represents a significant market opportunity for Netcoins.

USDC is a centralized crypto asset that is not fully “regulated” per se in the way that a bank or a fiat currency is. Users should be aware that USDC is not directly supported or governed by any form of deposit insurance and is subject to the same risks and regulatory immaturity as other crypto assets. Further, given the stable coin/payments focused nature of USDC it may be favored by parties using it for payment processing or remittance in relation to illicit or unsupported operations.

Users are encouraged to research any counterparty they intend to send funds to in full before executing any transactions and to contact Customer Success with any questions.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or USDC made available through the Platform, including an opinion that USDC is not itself a security and/or derivative.

Netcoins has performed a legal assessment of USDC prior to making it available on the Netcoins’ Platform and has concluded that USDC is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that USDC is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw USDC from trading on the Platform and stop any future trading of Crypto Rights Contracts based on USDC, and clients holding USDC may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws USDC from trading on Platform, clients holding positions in USDC will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in USDC.

We evaluated USDC based on publicly available information, including (but not limited to):

The creation, governance, usage and design of USDC, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created USDC;

The supply, demand, maturity, utility and liquidity of USDC;

Material technical risks associated with USDC, including any code defects, security breaches and other threats concerning the USDC/ERC-20 blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with USDC, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of USDC.

Like all other crypto assets, there are some general risks to investing in USDC, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the ERC-20 blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the USDC blockchain, the expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of USDC may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the USDC community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of USDC have no recourse to its community or Netcoins if USDC declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading BTC. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Lumen (XLM)

What is XLM?

Stellar is an open source network for value transfer between interested parties and disparate currencies. Assets of all classes and types may be traded using Lumen (XLM) the token issued and redeemed on the Stellar network. Anchors act as nodes and act as on and off ramps for the Stellar network facilitating the transfer of value within the network. Stellar is relatively mature in the crypto network, having launched in 2014.

Founded in 2014 as Stellar Development Foundation with roughly 50 billion XLM in existence, XLM is the token corresponding to the non-profit foundation and backing asset and funds transfer conducted over the network. XLM differs from some other cryptocurrencies and tokens in that it is not mined and is relatively centralized by the Foundation

Users are encouraged to research any counterparty they intend to send funds to in full before executing any transactions and to contact Customer Success with any questions.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or XLM made available through the Platform, including an opinion that XLM is not itself a security and/or derivative.

Netcoins has performed a legal assessment of XLM prior to making it available on the Netcoins’ Platform and has concluded that XLM is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that XLM is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw XLM from trading on the Platform and stop any future trading of Crypto Rights Contracts based on XLM, and clients holding XLM may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws XLM from trading on Platform, clients holding positions in XLM will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in XLM.

We evaluated XLM based on publicly available information, including (but not limited to):

The creation, governance, usage and design of XLM, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created XLM;

The supply, demand, maturity, utility and liquidity of XLM;

Material technical risks associated with XLM, including any code defects, security breaches and other threats concerning the network (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with XLM, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of XLM.

Like all other crypto assets, there are some general risks to investing in XLM, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the ERC-20 blockchain and other blockchains and networks, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the XLM network, the expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of XLM may be derived primarily from its usage and attendant global remittance traffic the value of ether relies far more on its real world applications and uses.. XLM is primarily intended as a transactional currency and as such it’s value corresponds to the volume and frequency of transactions. Accordingly, the long term value of XLM may be linked to global economies which are beyond the scope and control of Netcoins.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the XLM community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of XLM have no recourse to its community or Netcoins if XLM declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading XLM. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Algorand (ALGO)

What is Algorand (ALGO)?

ALGO is a cryptocurrency that, like many others, seeks to be secure, decentralized and fast, delivering a positive user experience and attracting the development of payment and other applications. Algorand includes smart contract features, among others, and is managed in some facets by the Algorand Foundation or Algorand Inc.

Algorand isn’t minted by a central bank and it has a finite supply. Founded by MIT professor Silvio Micali, Algorand is increasingly used and popular among users. ALGO, and the membership/position of any user on the Algorand committee is governed by proof of stake. The phases of the Algorand consensus algorithm are complex and may be beyond the scope of a novice user.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. As ALGO is a relatively young crypto asset user caution is encouraged.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or ALGO made available through the Platform, including an opinion that ALGO is not itself a security and/or derivative.

Netcoins has performed an assessment of ALGO prior to making it available on the Netcoins’ Platform and has concluded that ALGO may not be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that ALGO is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw ALGO from trading on the Platform and stop any future trading of Crypto Rights Contracts based on ALGO, and clients holding ALGO may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws ALGO from trading on Platform, clients holding positions in ALGO will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in ALGO.

We evaluated ALGO based on publicly available information, including (but not limited to):

The creation, governance, usage and design of ALGO, including the security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created ALGO;

The supply, demand, maturity, utility and liquidity of ALGO;

Material technical risks associated with ALGO, including any code defects, security breaches and other threats concerning the Algorand blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with ALGO, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Bitcoin.

Like all other crypto assets, there are some general risks to investing in ALGO, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the ALGO blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the ALGO blockchain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ALGO relies far more on its underlying blockchain technology. The Algorand blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. ALGO, which is the primary currency of the Algorand blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Algorand blockchain.

Forking risk

Most blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price. This risk applies to other currencies, especially younger ones like ALGO.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of ALGO have no recourse to its community or Netcoins if ALGO declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading ALGO. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


EOS.IO (EOS)

What is EOS.IO (EOS)?

EOS is an open source blockchain specifically targeting developers and other platforms touting fast speeds, verifiable and sound protocols, and lower costs than other blockchains. EOS has had an interesting history to date and is a longer standing crypto/blockchain than most.

Founded in 2017, EOS.IO and the token EOS, with a market cap of over four billion at the time of this memo, is more mature than more recently founded and launched currencies. The Cayman foundation block.one released the initial white paper and raised over $4 billion in the ICO, at that time a record for ICOs. EOSwas part of an SEC action which resulted in a penalty of $24 million but no restitution or cease trading orders.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or EOS made available through the Platform, including an opinion that EOS is not itself a security and/or derivative.

Netcoins has performed an assessment of EOS prior to making it available on the Netcoins’ Platform and has concluded that EOS is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that EOS is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw EOS from trading on the Platform and stop any future trading of Crypto Rights Contracts based on EOS, and clients holding EOS may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws EOS from trading on Platform, clients holding positions in EOS will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in EOS.

We evaluated EOS based on publicly available information, including (but not limited to):

The creation, governance, usage and design of EOS, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created EOS;

The supply, demand, maturity, utility and liquidity of EOS;

Material technical risks associated with EOS, including any code defects, security breaches and other threats concerning the EOS blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with EOS, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of EOS.

Like all other crypto assets, there are some general risks to investing in Bitcoin, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the EOS blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of EOS have no recourse to its community or Netcoins if EOS declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading EOS. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Avalanche (AVAX)

What is Avalanche (AVAX)?

Avalanche (AVAX) has been positioned as a competitor to Ethereum and boasts fast transaction processing speeds and low environmental impact among other features. Avalanche uses it’s own distinct blockchain and operates multiple chains for multiple aspects of the platform. The aspects include the AVAX token, the application/smart contract focused chain, and a blockchain for managing the networks and subnets utilized by the network.

AVAX isn’t minted by a central bank and is not mined either. AVAX operates on a proof of stake model rather than proof of work. AVAX, and it’s supply, is more centralized than other currencies such as BTC and ETH.

Avalanche is mainly governed by AVA Labs and the users of the platform that are developing applications on it. AVAX has seen considerable growth and volatility with multiple use cases, press releases, and other public attention driving attention and adoption in the market.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or AVAX made available through the Platform, including an opinion that AVAX is not itself a security and/or derivative.

Netcoins has performed a legal assessment of AVAX prior to making it available on the Netcoins’ Platform and has concluded that AVAX is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that AVAX is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw AVAX from trading on the Platform and stop any future trading of Crypto Rights Contracts based on AVAX, and clients holding AVAX may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws AVAX from trading on Platform, clients holding positions in AVAX will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in AVAX.

We evaluated AVAX based on publicly available information, including (but not limited to):

The creation, governance, usage and design of AVAX, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created Bitcoin;

The supply, demand, maturity, utility and liquidity of AVAX;

Material technical risks associated with AVAX, including any code defects, security breaches and other threats concerning the AVAX blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with AVAX, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Bitcoin.

Like all other crypto assets, there are some general risks to investing in AVAX, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the AVAX blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the AVAX blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

These risks are controlled with AVAX having significantly less concentration and a much higher safety threshold however they remain present.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of AVAX may have no recourse to its community or Netcoins if AVAX declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading AVAX. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Dogecoin (DOGE)

Last updated: August 31, 2023

What is Dogecoin (DOGE)?

Dogecoin was created by Jackson Palmer, a product manager at Adobe, in 2013. He created it as a way to tease at the seriousness of Bitcoin and the rest of the crypto community. That said, Dogecoin is considered to be a “meme coin,” or a cryptocurrency inspired by sarcastic memes and internet jokes.

DOGE is the native coin to the Dogecoin blockchain. Its appeal is its low price, which is provided by its unlimited supply. As a result, it's not typically considered a store of value like Bitcoin is. Instead, it's mainly used to tip content creators on Twitter and Reddit.

The Doge community is made up of loyal supporters, including entrepreneur Elon Musk, and philanthropic individuals. In January 2018, DOGE reached a $2 billion market cap. Three years later, in January 2021, it reached over $9 billion market cap - an impressive feat for a lighthearted coin.

Dogecoin uses the underlying technology of the Litecoin blockchain. New DOGE are produced in the same way Bitcoin is produced - through mining. This is the process of solving very difficult puzzles in order to confirm transactions and release coins into the economy. However, Dogecoin uses up less energy than Bitcoin does.

Despite starting out as a joke, it's garnered some serious attention over the years and has grown to be one of the biggest cryptocurrencies by market cap. It would not be surprising if the community continued to pour more talent and resources to protect the position of this meme coin in the crypto space.

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or DOGE made available through the Platform, including an opinion that DOGE is not itself a security and/or derivative.

Netcoins has performed a legal assessment of DOGE prior to making it available on the Netcoins’ Platform and has concluded that DOGE is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that DOGE is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw DOGE from trading on the Platform and stop any future trading of Crypto Rights Contracts based on DOGE and clients holding DOGE may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws DOGE from trading on Platform, clients holding positions in DOGE will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in DOGE.

We evaluated DOGE based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of DOGE, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created DOGE;

  • The supply, demand, maturity, utility and liquidity of DOGE;

  • Material technical risks associated with DOGE, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with DOGE, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of DOGE.

Like all other crypto assets, there are some general risks to investing in DOGE, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the DOGE community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of DOGE have no recourse to its community or Netcoins if DOGE declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading DOGE. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Fantom (FTM)

Last updated: August 31, 2023

What is Fantom (FTM)?

The Fantom Foundation was created by Dr. Ahn Byung Ik (a South Korean computer scientist) and launched in 2018. The Fantom network was created as an alternative to Ethereum. The goal? To solve the problems smart-contract platforms like Ethereum face, especially around slow processing speed.

In many ways, Fantom is unique from other projects.

For starters, it does not use a blockchain per se. Instead it uses a Directed Acyclic Graph (DAG). In a DAG there are many computers that are constantly communicating with each other to agree on what information should be stored in the ledger.

Fantom also uses a unique Proof-of-Stake model called “Lachesis.” By using both DAG and Lachesis, transactions are confirmed quickly and asynchronously. In this way, Fantom can process 4,500 transactions per second, which makes it one of the fastest blockchains out there.

Finally, Fantom is considered to be EVM (Ethereum Virtual Machine) compatible, meaning that whatever is built on the Ethereum network can also be pretty much copied/pasted into the Fantom network. This helps Fantom play in the Decentralized Finance (DeFi) space relatively well.

Despite having competition from Ethereum, Cardano and Solana, Fantom has seen major success since its launch thanks to its big focus on smart contracts, efficiency and speed.

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or FTM made available through the Platform, including an opinion that FTM is not itself a security and/or derivative.

Netcoins has performed a legal assessment of FTM prior to making it available on the Netcoins’ Platform and has concluded that FTM is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that FTM is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw FTM from trading on the Platform and stop any future trading of Crypto Rights Contracts based on FTM and clients holding FTM may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws FTM from trading on Platform, clients holding positions in FTM will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in FTM.

We evaluated FTM based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of FTM, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created FTM;

  • The supply, demand, maturity, utility and liquidity of FTM;

  • Material technical risks associated with FTM, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with FTM, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of FTM.

Like all other crypto assets, there are some general risks to investing in FTM, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the FTM community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of FTM have no recourse to its community or Netcoins if FTM declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading FTM. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Decentraland (MANA)

Last updated: August 31, 2023

What is Decentraland (MANA)?

Decentraland is a 3D virtual world platform founded in 2015 by Esteban Ordano. It's essentially an online game where users can build imaginary worlds powered by the Ethereum blockchain.

Decentraland has two native tokens called LAND and MANA. As its name suggests, LAND tokens are used to buy virtual land (called “parcels”) and other digital properties. MANA are used to buy avatars, land names, wearables, collectibles and so much more.

The maximum supply cap for MANA is not yet known.

In this 3D world, each parcel measures 16m x 16m (or 256 square meters) and lives within a specific coordinate in the Metaverse ensuring scarcity and value. Users can buy parcels, build upon it (by adding trees, lakes or houses for example), and even monetize from it.

Inside Decentraland, users can travel, gather, attend events and more. Although it has become a phenomenon in the crypto world, there are still more exciting features lined up in their roadmap, like the ability to advertise in bulletin boards. This could open up a new revenue stream for advertisers.

Decentraland wants to have its own economy, where users can rent, advertise, transact and more. The currency for this ever growing, virtual economy will be MANA.

As the world gets intrinsically more digital, Decentraland will not only revolutionize the world of gaming but also open up new ways to gain wealth for individuals and businesses alike.

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or MANA made available through the Platform, including an opinion that MANA is not itself a security and/or derivative.

Netcoins has performed a legal assessment of MANA prior to making it available on the Netcoins’ Platform and has concluded that MANA is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that MANA is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw MANA from trading on the Platform and stop any future trading of Crypto Rights Contracts based on MANA and clients holding MANA may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws MANA from trading on Platform, clients holding positions in MANA will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in MANA.

We evaluated MANA based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of MANA, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created MANA;

  • The supply, demand, maturity, utility and liquidity of MANA;

  • Material technical risks associated with MANA, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with MANA, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of MANA.

Like all other crypto assets, there are some general risks to investing in MANA, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the MANA community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of MANA have no recourse to its community or Netcoins if MANA declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading MANA. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Polygon (MATIC)

Last updated: August 31, 2023

What is Polygon (MATIC)?

Polygon was created in 2017 by Ethereum developers Jaynti Kanani, Sandeep Nailwal, Anurag Arjun and Mihailo Bjelic. It was initially called the “Matic” network but it was rebranded to the “Polygon” network in 2021.

Although it rebranded it still calls its native cryptocurrency MATIC. There is a maximum supply of 10,000,000,000 MATIC coins that will exist, which can be used as payment between participants using the network.

The Polygon network is unique because it makes Ethereum a multi-chain network.

Put another way, Polygon allows Ethereum to connect to other blockchains (or sidechains) to make Ethereum more scalable. In doing so, Polygon contributes significantly to the growing world of Ethereum and decentralized finance (DeFi).

Although Polygon helps networks connect together, it still very much allows each network to retain its uniqueness, value and ultimately self-sovereignty. That's because it wants to create a world where different blockchains can communicate and exchange information rather than compete with each other.

People buy MATIC for various reasons. Mainly because it scales the Ethereum network, processes faster transactions while reducing costs when creating a host of decentralized applications (dapps). For these reasons, they believe the future of DeFi looks bright.

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or MATIC made available through the Platform, including an opinion that MATIC is not itself a security and/or derivative.

Netcoins has performed a legal assessment of MATIC prior to making it available on the Netcoins’ Platform and has concluded that MATIC is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that MATIC is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw MATIC from trading on the Platform and stop any future trading of Crypto Rights Contracts based on MATIC and clients holding MATIC may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws MATIC from trading on Platform, clients holding positions in MATIC will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in MANA.

We evaluated MATIC based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of MANA, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created MANA;

  • The supply, demand, maturity, utility and liquidity of MANA;

  • Material technical risks associated with MANA, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with MANA, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of MANA.

Like all other crypto assets, there are some general risks to investing in MANA, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the MATIC community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of MATIC have no recourse to its community or Netcoins if MATIC declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading MANA. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Shiba Inu (SHIB)

Last updated: August 31, 2023

What is Shiba Inu (SHIB)?

Shiba Inu was created in August 2020 by an anonymous person or group of people called Ryoshi. It's considered to be a meme coin, or a cryptocurrency inspired by sarcastic memes and internet jokes (like Dogecoin).

However, the creators and supporters of Shiba Inu often refer to it as “the Dogecoin killer.”

Its native coin is SHIB and its maximum supply is not known. Having said that, SHIB started with a supply of one quadrillion (or 100 trillion) coins. Ryoshi locked half of those tokens in Uniswap (a decentralized exchange) and the other half was sent to Vitalik Buterin, the co-founder of Ethereum (because Ryoshi believed they would be safe with Buterin).

But in May 2021, Buterin burned around 90% of his coins and donated the rest to help with COVID-19 relief projects in India.

Unlike Dogecoin which uses the underlying technology of the Litecoin blockchain, Shiba Inu runs on top of the Ethereum network. The reason being that Ryoshi thought the Ethereum network was already secure, robust and could be a great way to keep Shiba Inu decentralized.

It's worth noting that the price of SHIB is affected by market news and market sentiment and not by an inherent value. Despite being a meme coin, SHIB has appeared to be the top 10 cryptocurrencies by market cap and even surpassed Dogecoin's value at times.

As long as people believe SHIB has value, it will continue to have value. It could even pique the interest of institutional investors down the road should investors continue to rally behind this coin.

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or SHIB made available through the Platform, including an opinion that SHIB is not itself a security and/or derivative.

Netcoins has performed a legal assessment of SHIB prior to making it available on the Netcoins’ Platform and has concluded that SHIB is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that SHIB is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw SHIB from trading on the Platform and stop any future trading of Crypto Rights Contracts based on SHIB and clients holding SHIB may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws SHIB from trading on Platform, clients holding positions in SHIB will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in SHIB.

We evaluated SHIB based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of SHIB, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created SHIB;

  • The supply, demand, maturity, utility and liquidity of SHIB;

  • Material technical risks associated with SHIB, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with SHIB, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of SHIB.

Like all other crypto assets, there are some general risks to investing in SHIB, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the SHIB community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of SHIB have no recourse to its community or Netcoins if SHIB declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading SHIB. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


ApeCoin (APE)

What is Basic ApeCoin (APE)?

ApeCoin launched on March 17, 2022. Also known as APE, is the ERC-20 utility and governance token of the ApeCoin DAO. Although it's owned by the DAO, APE is associated with the Bored Ape Yacht Club (BAYC), a collection of 10,000 NFTs created by Yuga Labs.

APE embraces the fun and importance of innovation in the crypto space by incubating and developing unique platforms.

APE's main goal is to empower the creation and expansion of web3 communities through four mechanisms:

Governance - Since APE is a governance token, APE holders can vote to alter the protocol that determines the token's parameters.

Access - APE holders get access to exclusive events, merchandise, games, etc.

Incentivization - third-party developers who own APE have the option to include APE avatars in their games, apps, and services.

As a unit of account - APE holders can use APE as a cryptocurrency without any centralized intermediaries.

As of March 2022, APE's price is $12.98 USD with a trading volume of $1,591,264,811 USD. The current market cap as per CoinMarketCap is $3,601,091,724 USD. It has a circulating supply of 277,500,000 APE coins and a maximum supply of 1,000,000,000 APE coins.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or APE made available through the Platform, including an opinion that APE is not itself a security and/or derivative.

Netcoins has performed a legal assessment of APE prior to making it available on the Netcoins' Platform and has concluded that APE is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that APE is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw APE from trading on the Platform and stop any future trading of Crypto Rights Contracts based on APE, and clients holding APE may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws APE from trading on Platform, clients holding positions in APE will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in APE.

We evaluated APE based on publicly available information, including (but not limited to):

The creation, governance, usage and design of APE, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created APE;

The supply, demand, maturity, utility and liquidity of APE;

Material technical risks associated with APE, including any code defects, security breaches and other threats concerning the APE blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with APE, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of APE.

Like all other crypto assets, there are some general risks to investing in APE, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of APE may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of APE have no recourse to its community or Netcoins if APE declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading APE. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Curve DAO (CRV)

What is Curve (CRV)?

CRV is a decentralized autonomous organization (DAO) governance token in which holders are able to vote on changes made to the CRV protocol plus take part in network governance decisions. The token was introduced in 2020, and founded by Michael Egorov who is also the CEO. As of 2021, there is a supply of 3.03 billion CRV tokens with a gradual release of CRV into circulation. When first created 30% of CRV was allocated to investors, 3% to Curve employees and 5% to a community reserve.

Those who hold CRV that choose to participate in network governance have the option to “lock up” (up to four years) their holdings and generate a new token called “veCRV”. This token provides holders the opportunity to vote or submit their own proposal for consideration. The longer assets are locked in, the more stakers are rewarded in veCRV (increasing their voting power) and the more return they can earn on their provided liquidity.

CRV is a decentralized finance (DeFi) protocol that provides an easy way to trade fixed-price tokens, or stablecoins, without suffering slippage and losing money. It comes with its own token along with various rewards for participation. CRV is compatible with several other popular protocols, such as Compound and Yearn.finance, which provide lucrative yield. Further, CRV has also spawned a fork called Swerve.

As of 2022, roughly 86% of CRVs $3 billion token supply is locked in different types of DeFi protocols. The resulting competition over declining liquidity has spawned an entire ecosystem and spurred what experts call the “Curve Wars”. CRV is 94.46% below the all time high of CA$76.55. The current circulating supply is 442,913,530.802 CRV. Current market cap value as of February 2022 is $1.45 billion.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or CRV made available through the Platform, including an opinion that CRV is not itself a security and/or derivative.

Netcoins has performed a legal assessment of CRV prior to making it available on the Netcoins' Platform and has concluded that CRV is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that CRV is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw CRV from trading on the Platform and stop any future trading of Crypto Rights Contracts based on CRV, and clients holding CRV may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws CRV from trading on Platform, clients holding positions in CRV will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in CRV.

We evaluated CRV based on publicly available information, including (but not limited to):

The creation, governance, usage and design of CRV, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created CRV;

The supply, demand, maturity, utility and liquidity of CRV;

Material technical risks associated with CRV, including any code defects, security breaches and other threats concerning the CRV blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with CRV, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of CRV.

Like all other crypto assets, there are some general risks to investing in CRV, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of CRV may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of CRV have no recourse to its community or Netcoins if CRV declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading CRV. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Enjin Coin (ENJ)

What is Enjin (ENJ)?

ENJ is a for-profit company built as a community gaming platform which was created in 2009 by Maxim Blagov and Witek Radomski. In 2017, ENJ launched an initial coin offering, raising about $18.9 million by selling ENJ tokens to build its new blockchain.

ENJ gives game developers, content creators and gaming communities the required crypto-backed value and tools for implementing and managing virtual goods. Additionally, ENJ partners with game developers and popular game servers of 20,000 players or higher to distribute ENJ Coins as part of bundles, in-game tournament prizes or subscription bonuses.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or ENJ made available through the Platform, including an opinion that ENJ is not itself a security and/or derivative.

Netcoins has performed a legal assessment of ENJ prior to making it available on the Netcoins' Platform and has concluded that ENJ is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that ENJ is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw ENJ from trading on the Platform and stop any future trading of Crypto Rights Contracts based on ENJ, and clients holding ENJ may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws ENJ from trading on Platform, clients holding positions in ENJ will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in ENJ.

We evaluated ENJ based on publicly available information, including (but not limited to):

The creation, governance, usage and design of ENJ, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created ENJ;

The supply, demand, maturity, utility and liquidity of ENJ;

Material technical risks associated with ENJ, including any code defects, security breaches and other threats concerning the ENJ blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with ENJ, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of ENJ.

Like all other crypto assets, there are some general risks to investing in ENJ, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of ENJ may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of ENJ have no recourse to its community or Netcoins if ENJ declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading ENJ. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Chainlink (LINK)

What is Chainlink (LINK)?

LINK is the product of a blockchain technology startup called SmartContract, which was founded in 2014. LINK itself started with a whitepaper, published by Steve Ellis, Ari Juels, and Sergey Nazarov in September of 2017.

Further, LINK is an Ethereum token that powers the Chainlink decentralized oracle network. This network allows smart contracts on Ethereum to securely connect to external data sources, APIs, and payment systems. LINK was designed to incentivize a global network of computers to provide accurate data to LINK's oracles.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or LINK made available through the Platform, including an opinion that LINK is not itself a security and/or derivative.

Netcoins has performed a legal assessment of LINK prior to making it available on the Netcoins' Platform and has concluded that LINK is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that LINK is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw LINK from trading on the Platform and stop any future trading of Crypto Rights Contracts based on LINK, and clients holding LINK may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws LINK from trading on Platform, clients holding positions in LINK will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in LINK.

We evaluated LINK based on publicly available information, including (but not limited to):

The creation, governance, usage and design of LINK, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created LINK;

The supply, demand, maturity, utility and liquidity of LINK;

Material technical risks associated with LINK, including any code defects, security breaches and other threats concerning the LINK blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with LINK, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of LINK.

Like all other crypto assets, there are some general risks to investing in LINK, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of LINK may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of LINK have no recourse to its community or Netcoins if LINK declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading LINK. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


SushiSwap (SUSHI)

What is Sushiswap (SUSHI)?

SUSHI launched in September 2020 as a fork of Uniswap as a type of decentralized exchange (DEX) called an automated market maker (AMM). This means there is no central authority managing the trades like in traditional cryptocurrency exchanges. Instead, smart contracts are used to allow users to trade cryptocurrency tokens.

SUSHI on the Ethereum blockchain, and is Ethereum's most popular decentralized exchange, by a team of anonymous coders. It was created by the pseudonymous Chef Nomi, who is no longer affiliated with the project. Following SUSHI's launch, Chef Nomi cashed out $14 million in tokens from the token's development fund but later returned the money. Since then, 0xMaxi, who was Chef Nomi's second in command, spearheaded the development of the project.

SUSHI has built out its core offering of a decentralized exchange into lending markets, yield farms, and staking pools. To do that, it's partnered with other large decentralized finance protocols, including Yearn Finance, CREAM Finance, and Aave.

SUSHI also offers SUSHI play, which was implemented to encourage individuals to deposit Uniswap LP tokens in SushiSwap smart contacts by offering people extra SUSHI governance tokens. Another aspect of SUSHI, is Kashi, which is a so-called BentoBox app. In the future, SUSHI plans to add more of these in the future, and each BentoBox will be a way to use dapps gas efficiently, and gain extra yield.

As of March 2022, SUSHI's market cap is $368,031,045 USD, with a trading volume of $113,699,794 USD. It's current circulating supply is 127,244,443 SUSHI coins and has a maximum supply of 250,000,000 SUSHI coins.

Other products under the SUSHI ecosystem include the following:

SushiSwap Exchange

Kashi Lending

Sushi Yield Farms

SushiBar Staking (xSUSHI)

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or SUSHI made available through the Platform, including an opinion that SUSHI is not itself a security and/or derivative.

Netcoins has performed a legal assessment of SUSHI prior to making it available on the Netcoins' Platform and has concluded that SUSHI is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that SUSHI is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw SUSHI from trading on the Platform and stop any future trading of Crypto Rights Contracts based on SUSHI, and clients holding SUSHI may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws SUSHI from trading on Platform, clients holding positions in SUSHI will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in SUSHI.

We evaluated SUSHI based on publicly available information, including (but not limited to):

The creation, governance, usage and design of SUSHI, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created SUSHI;

The supply, demand, maturity, utility and liquidity of SUSHI;

Material technical risks associated with SUSHI, including any code defects, security breaches and other threats concerning the SUSHI blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with SUSHI, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of SUSHI.

Like all other crypto assets, there are some general risks to investing in SUSHI, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of SUSHI may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of SUSHI have no recourse to its community or Netcoins if SUSHI declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading SUSHI. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


yearn.finance (YFI)

What is Yearn.finance (YFI)?

YFI was created in 2020 by Andre Cronje, who has an extensive career in crypto cryptocurrency as well as holding positions at smart contract ecosystem Fantom and CryptoBriefing, a resource dedicated to initial coin offerings (ICOs) and crypto media.

The creators of the token stated that YFI has 0 financial value, and its value lies in the fact that YFI is scarce, and to buy a token is a USD 23,000.00 (as of February 2022) investment into a single voting right for its governance protocol. As such holding a YFI token entitles the holder to a real, practical change that improve YFI.

Yearn.finance was previously known as “iearn.finance”, in which money would be put in its smart contracts, and where YFI would then use its algorithm to automatically invest in DeFi protocols to maximize yields and generate interest. YFI is an aggregator service for DeFi investors, which uses automation to allow investors to maximize profits from yield farming. Its overall goal is to simplify the DeFi space for investors who are not very knowledgeable in the tech field and are not serious traders. As such, its target market are investors who do not have the time to study DeFi, or those who wish to optimize their returns.

YFI is an ERC-20 token which means that it runs on and is backed by the Ethereum blockchain. Its current CoinMarketCap ranking for YFI is #92, with a market cap of $891,314,323 USD as of February 2022. It has a circulating supply of 36,638 YFI coins and a maximum supply of 36,666 YFI coins.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or YFI made available through the Platform, including an opinion that YFI is not itself a security and/or derivative.

Netcoins has performed a legal assessment of YFI prior to making it available on the Netcoins' Platform and has concluded that YFI is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that YFI is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw YFI from trading on the Platform and stop any future trading of Crypto Rights Contracts based on YFI, and clients holding YFI may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws YFI from trading on Platform, clients holding positions in YFI will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in YFI.

We evaluated YFI based on publicly available information, including (but not limited to):

The creation, governance, usage and design of YFI, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created YFI;

The supply, demand, maturity, utility and liquidity of YFI;

Material technical risks associated with YFI, including any code defects, security breaches and other threats concerning the YFI blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with YFI, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of YFI.

Like all other crypto assets, there are some general risks to investing in YFI, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of YFI may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of YFI have no recourse to its community or Netcoins if YFI declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading YFI. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Aave (AAVE)

What is Aave (AAVE)?

AAVE was founded by Stani Kulechov. Although it was initially launched as “ETHLend” in 2017, it rebranded to AAVE (the Finnish word for “ghost”) in 2018. Today AAVE is known as a decentralized lending system allowing people to lend and borrow about 20 cryptocurrencies while earning interest.

How it works is that a participant deposits crypto assets into a liquidity pool (or a pool of cryptocurrencies) and earn interest for doing so. Borrowers can then withdraw cryptocurrencies from these pools when they wish to take out a loan.

One of the main advantages of AAVE is that you can take out “flash loans”, or loans that do not require any collateral. Flash loans are new in the world of decentralized finance (DeFi) and can take place almost immediately.

However, there’s a catch because borrowers must pay the loans back within the same transaction. In this way the risk is reduced for both AAVE and the borrower. If the loan is not paid back within that timeframe, the loan is cancelled.

Another advantage is that borrowers can switch between fixed and variable interest rates, giving them more flexibility and control into the loans they take out.

AAVE tokens are ERC-20 tokens (meaning they’re built on top of Ethereum) and were designed to be deflationary. There is a maximum supply of 16,000,000 AAVE coins.

AAVE is seeking to revolutionize the finance industry. More specifically, it’s innovating on the outdated lending industry without needing a third-party intermediary or high fees to be involved.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or AAVE made available through the Platform, including an opinion that AAVE is not itself a security and/or derivative.

Netcoins has performed a legal assessment of AAVE prior to making it available on the Netcoins’ Platform and has concluded that AAVE is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion AAVE change in the future. In the event that Netcoins or Canadian securities regulators determine that AAVE is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw AAVE from trading on the Platform and stop any future trading of Crypto Rights Contracts based on AAVE, and clients holding AAVE may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws AAVE from trading on Platform, clients holding positions in AAVE will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in AAVE.

We evaluated AAVE based on publicly available information, including (but not limited to):

The creation, governance, usage and design of AAVE, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created AAVE;

The supply, demand, maturity, utility and liquidity of AAVE;

Material technical risks associated with AAVE, including any code defects, security breaches and other threats concerning the AAVE blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with AAVE, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of AAVE.

Like all other crypto assets, there are some general risks to investing in AAVE, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of AAVE may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of AAVE have no recourse to its community or Netcoins if AAVE declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading AAVE. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Axie Infinity (AXS)

What is Axie Infinity (AXS)?

Axie Infinity is a blockchain-based trading and battling game created by Sky Mavis in 2018. It allows players to collect, breed, raise, battle and trade these token-based creatures known as Axies. In a way, it's similar to games like Pokémon and Tamagotchi.

AXS are known as Axie Infinity Shards, which are used to participate in votes to determine how funds in the treasury should be spent and how the developers could improve on the user experience.

Each Axie is a non-fungible token (NFT) with different attributes and strengths that can be entered into 3v3 battles. You gain experience points from these battles so players are incentivized to level up their Axie's stats, breed them together, and create a new offspring that can be sold on the Axie marketplace.

Axie Infinity is a play-to-earn game, meaning the more you play, battle, and breed your Axies, the more you can earn and trade it for hard cash. As the game grows as one of the top play-to-earn games on the market, the value of AXS will likely grow with it.

Around March 2022, AXS had a circulating supply of 60,907,500 AXS coins and a maximum supply of 270,000,000 AXS coins.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or AXS made available through the Platform, including an opinion that AXS is not itself a security and/or derivative.

Netcoins has performed a legal assessment of AXS prior to making it available on the Netcoins' Platform and has concluded that AXS is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that AXS is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw AXS from trading on the Platform and stop any future trading of Crypto Rights Contracts based on AXS, and clients holding AXS may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws AXS from trading on Platform, clients holding positions in AXS will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in AXS.

We evaluated AXS based on publicly available information, including (but not limited to):

The creation, governance, usage and design of AXS, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created AXS;

The supply, demand, maturity, utility and liquidity of AXS;

Material technical risks associated with AXS, including any code defects, security breaches and other threats concerning the AXS blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with AXS, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of AXS.

Like all other crypto assets, there are some general risks to investing in AXS, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of AXS may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of AXS have no recourse to its community or Netcoins if AXS declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading AXS. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Basic Attention Token (BAT)

What is Basic Attention Token (BAT)?

The Basic Attention Token (BAT) was created by the co-founder of Mozilla FireFox, Brendan Eich, who wanted to improve the security, fairness, and efficiency of digital advertising through the use of blockchain technology.

With BAT and the Brave internet browser, their goal is to take crypto to the next one billion users. They also aim to solve inefficiencies and privacy violations in the current digital ad industry.

This union is important as the Brave browser has 54 million monthly active users, meanwhile, BAT is used to track media consumers' time and attention on websites when using the Brave web browser. The objective is for readers to experience fewer ads that are more well-tailored to their interests while not giving up their data privacy rights.

Users of the Brave browser can be rewarded with BAT for their participation on the platform and at the same time, have a more rewarding online experience.

As of March 2022, BAT had a circulating supply of 1,496,902,651 BAT coins and a maximum supply of 1,500,000,000 BAT coins.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or BAT made available through the Platform, including an opinion that BAT is not itself a security and/or derivative.

Netcoins has performed a legal assessment of BAT prior to making it available on the Netcoins' Platform and has concluded that BAT is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that BAT is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw BAT from trading on the Platform and stop any future trading of Crypto Rights Contracts based on BAT, and clients holding BAT may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws BAT from trading on Platform, clients holding positions in BAT will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in BAT.

We evaluated BAT based on publicly available information, including (but not limited to):

The creation, governance, usage and design of BAT, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created BAT;

The supply, demand, maturity, utility and liquidity of BAT;

Material technical risks associated with BAT, including any code defects, security breaches and other threats concerning the BAT blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with BAT, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of BAT.

Like all other crypto assets, there are some general risks to investing in BAT, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of BAT may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of BAT have no recourse to its community or Netcoins if BAT declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading BAT. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Chiliz (CHZ)

What is Chiliz (CHZ)?

Chiliz (CHZ) is a cryptocurrency that was designed to help fans engage with their favourite sports teams. It was founded in 2017 by Alexandre Dreyfus but launched in October 2018.

Chiliz's goal is to actively engage sports fans. It operates “Socios”, a blockchain-based sports entertainment platform. Through Socios, Chiliz has partnered with sports organizations like FC Barcelona, Aston Martin Cognizant Formula1 and more.

Sports teams that partner with Chiliz can create customized experiences for their fans, offer exclusive benefits and allow fans to help make decisions about the team (for example, deciding what colour the team's jersey should be).

For fans to buy fan tokens in Socios they'd first need to get their hands on CHZ (which is essentially Socio's internal currency). Once they've bought CHZ can they buy fan tokens.

CHZ is an ERC-20 token (meaning it runs on top of the Ethereum blockchain). It is also a BEP-2 token (meaning it's comparatible with Binance Smart Chain). It has a maximum supply of 8,888,888,888 CHZ coins.

Chiliz has created a unique way for fans to engage with their favourite sports brands. It has empowered fans to have a stake within their beloved teams while also helping sporting organizations create new revenue streams.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or CHZ made available through the Platform, including an opinion that CHZ is not itself a security and/or derivative.

Netcoins has performed a legal assessment of CHZ prior to making it available on the Netcoins' Platform and has concluded that CHZ is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion CHZ change in the future. In the event that Netcoins or Canadian securities regulators determine that CHZ is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw CHZ from trading on the Platform and stop any future trading of Crypto Rights Contracts based on CHZ, and clients holding CHZ may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws CHZ from trading on Platform, clients holding positions in CHZ will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in CHZ.

We evaluated CHZ based on publicly available information, including (but not limited to):

The creation, governance, usage and design of CHZ, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created CHZ;

The supply, demand, maturity, utility and liquidity of CHZ;

Material technical risks associated with CHZ, including any code defects, security breaches and other threats concerning the CHZ blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with CHZ, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of CHZ.

Like all other crypto assets, there are some general risks to investing in CHZ, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of CHZ may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of CHZ have no recourse to its community or Netcoins if CHZ declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading CHZ. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


The Graph (GRT)

What is The Graph (GRT)?

The Graph was cofounded by Yaniv Tal, Brandon Ramirez and Jannis Pohlmann. They were frustrated by the lack of tools and resources available within the Ethereum ecosystem because this was making it difficult to build decentralized applications (DApps).

Although it was created in 2017, it wasn't until 2020 when The Graph was launched as an indexing protocol for querying blockchain data. To better explain what this means, we'll start by highlighting the existing problems in collecting data from the blockchain space.

If you want to find an answer or a data point in the blockchain, you have to start with the first transactions in the genesis block and work your way through all the transactions ever made across all the blocks. This process is quite time-consuming.

The Graph queries different blockchain data by using its unique querying language called GraphQL, which allows you to specify which fields you're looking at and the search criteria you're hoping to apply; effectively helping you to index data at a much faster pace.

DApps can query data from one or multiple subgraphs (or open APIs) and get a better view of data. They can even access data from the most popular and on-demand protocols such as UniSwap, Compound, Decentraland and more.

The Graph token (GRT) is used to reward participants for indexing and curating data. There is a fixed supply 10,057,044,431 GRT tokens.

Thanks to The Graph, developers can continue to build DApps that can perform well as a result of querying data and pushing the scale of innovation that takes place in the decentralized finance space.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or GRT made available through the Platform, including an opinion that GRT is not itself a security and/or derivative.

Netcoins has performed a legal assessment of GRT prior to making it available on the Netcoins' Platform and has concluded that GRT is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion GRT change in the future. In the event that Netcoins or Canadian securities regulators determine that GRT is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw GRT from trading on the Platform and stop any future trading of Crypto Rights Contracts based on GRT, and clients holding GRT may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws GRT from trading on Platform, clients holding positions in GRT will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in GRT.

We evaluated GRT based on publicly available information, including (but not limited to):

The creation, governance, usage and design of GRT, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created GRT;

The supply, demand, maturity, utility and liquidity of GRT;

Material technical risks associated with GRT, including any code defects, security breaches and other threats concerning the GRT blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with GRT, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of GRT.

Like all other crypto assets, there are some general risks to investing in GRT, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of GRT may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of GRT have no recourse to its community or Netcoins if GRT declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading GRT. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Maker (MKR)

What is Maker (MKR)?

Launched in 2017, Maker was created by Rune Christensen, a Danish entrepreneur. Maker is a project that operates the stablecoin, DAI. A stablecoin is a cryptocurrency whose value is pegged to fiat currencies, like the U.S. Dollar in this case.

MKR is an ERC-20 token, which means it runs on top of the Ethereum blockchain. There is a maximum supply of 1,005,577 MKR coins.

Interestingly enough, the Maker ecosystem was one of the earliest projects to be released in the decentralized finance (DeFi) space. MakerDao (a decentralized autonomous organization) was the first entity within this ecosystem.

Maker (MKR) can be thought of as governance token for MakerDAO and the Maker Protocol (a software platform running the rules for this ecosystem). By using MKR tokens, participants get voting rights on decisions and updates on the development of the Maker Protocol. The more MKR tokens a user has the more voting power they have as a result.

By holding MKR tokens, users can participate in the management of the Maker ecosystem and one of the most successful stablecoins on the market. As the market for stablecoins grows, so may the value of the MKR token.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or MKR made available through the Platform, including an opinion that MKR is not itself a security and/or derivative.

Netcoins has performed a legal assessment of MKR prior to making it available on the Netcoins' Platform and has concluded that MKR is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion MKR change in the future. In the event that Netcoins or Canadian securities regulators determine that MKR is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw MKR from trading on the Platform and stop any future trading of Crypto Rights Contracts based on MKR, and clients holding MKR may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws MKR from trading on Platform, clients holding positions in MKR will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in MKR.

We evaluated MKR based on publicly available information, including (but not limited to):

The creation, governance, usage and design of MKR, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created MKR;

The supply, demand, maturity, utility and liquidity of MKR;

Material technical risks associated with MKR, including any code defects, security breaches and other threats concerning the MKR blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with MKR, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of MKR.

Like all other crypto assets, there are some general risks to investing in MKR, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of MKR may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of MKR have no recourse to its community or Netcoins if MKR declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading MKR. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


The Sandbox (SAND)

The Sandbox is a play-to-earn blockchain game that was launched in 2011 by Pixowl. However, it started out as a mobile gaming platform that would compete with Minecraft. Upon launching the co-founders, Arthur Madrid and Sebastien Borget, saw that The Sandbox became an instant success. Then in 2018, they thought it was time to explore the metaverse. By 2020, the new Sandbox project was released, which became one of the most successful and fastest-growing games in the crypto world.

The goal of The Sandbox is to allow players to build virtual worlds. Players can create their own avatars, buy and trade on the Sandbox Marketplace. In this virtual world SAND is the native token of The Sandbox.

Given it’s built on top of the Ethereum blockchain, SAND is an ERC_20 token. It is also a utility token, meaning users can use SAND to transact. It is also a governance token, meaning that players can vote and suggest changes to the platform as well. And finally, players can also stake SAND within the game to earn rewards.

As the world of gaming explores the metaverse, cryptocurrencies like SAND will grow in popularity. After all, players will need these tokens to play, create and earn in the metaverse. And as demand grows, so will the price of a SAND coin.

As of March 2022, SAND had a circulating supply of 1,139,993,229 SAND coins and a maximum supply of 3,000,000,000.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or SAND made available through the Platform, including an opinion that SAND is not itself a security and/or derivative.

Netcoins has performed a legal assessment of SAND prior to making it available on the Netcoins’ Platform and has concluded that SAND is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that SAND is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw SAND from trading on the Platform and stop any future trading of Crypto Rights Contracts based on SAND, and clients holding SAND may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws SAND from trading on Platform, clients holding positions in SAND will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in SAND.

We evaluated SAND based on publicly available information, including (but not limited to):

The creation, governance, usage and design of SAND, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created SAND;

The supply, demand, maturity, utility and liquidity of SAND;

Material technical risks associated with SAND, including any code defects, security breaches and other threats concerning the SAND blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with SAND, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of SAND.

Like all other crypto assets, there are some general risks to investing in SAND, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of SAND may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of SAND have no recourse to its community or Netcoins if SAND declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading SAND. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Uniswap (UNI)

What is Uniswap (UNI)?

Uniswap is a decentralized exchange (DEX). It was actually one of the first decentralized finance (DeFi) applications to gain success on the Ethereum blockchain in 2018. Since its successful launch, there has been a rise of other decentralized exchanges like Curve and Sushiswap. Yet, Uniswap still remains one of the most popular DEX's out there.

Uniswap doesn't use order books like traditional, centralized exchanges do. Instead, it uses an automated market maker (AMM) model, which essentially allows users to supply Ethereum tokens to Uniswaps' liquidity pools. Then an equation (x * y = k) sets the market prices (based on its supply and demand).

At first, Uniswap launched its UNI governance token to anyone that used the protocol before September 1 of 2021. It did so through an airdrop (when free tokens were released to its communities in order to increase adoption). With UNI, you can vote on the decisions and functionality that can get made on Uniswap.

UNISWAP is playing an important role in the decentralized finance space. As Ethereum continues to grow and evolve, we'll likely see the continued success of Uniswap and its native token, UNI.

As of March 2022, it had a circulating supply of 688,948,392 UNI coins and a maximum supply of 1,000,000,000 UNI coins. The total supply of UNI tokens will be released over the span of four years (until 2024). Then, an ongoing annual inflation rate of 2% will be added moving forward.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins' Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or UNI made available through the Platform, including an opinion that UNI is not itself a security and/or derivative.

Netcoins has performed a legal assessment of UNI prior to making it available on the Netcoins' Platform and has concluded that UNI is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that UNI is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw UNI from trading on the Platform and stop any future trading of Crypto Rights Contracts based on UNI, and clients holding UNI may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws UNI from trading on Platform, clients holding positions in UNI will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in UNI.

We evaluated UNI based on publicly available information, including (but not limited to):

The creation, governance, usage and design of UNI, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created UNI;

The supply, demand, maturity, utility and liquidity of UNI;

Material technical risks associated with UNI, including any code defects, security breaches and other threats concerning the UNI blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with UNI, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of UNI.

Like all other crypto assets, there are some general risks to investing in UNI, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of UNI may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users' personal information and/or resulted in the theft of users' digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins' digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins' third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins' Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of UNI have no recourse to its community or Netcoins if UNI declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading UNI. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Tezos (XTZ)

What is Tezos (XTZ)?

Tezos was launched in 2014 by Arthur and Kathleen Breitman (husband and wife) through Dynamic Ledger Solutions, a startup they founded to develop Tezos.

The Tezos blockchain is broken up into two parts:

The Shell - the code that is based on user voting; and

The Protocol - the code responsible for sending proposals to the shell for review.

Tezos uses a variation on classic proof-of-stake consensus called Liquid Proof-of-stake (LPoS). Similar to PoS, LPoS is an algorithm used by computers to secure the network, validate transactions, and distribute newly created XTZ.

To participate in governance, you need 8,000XTZ to stake XTZ in a process called “baking”. Users can delegate their tokens to other bakers, and earn more XTZ rewards as well.

Tezos allows anyone who owns XTZ to vote on possible changes to its rules with the software automatically updating to ensure the changes were made. In this way, token holders can determine what the future of Tezos should be.

Around early April 2022 XTZ had a circulating supply of 889,835,843 XTZ coins, however the maximum supply is unknown.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or XTZ made available through the Platform, including an opinion that XTZ is not itself a security and/or derivative.

Netcoins has performed a legal assessment of XTZ prior to making it available on the Netcoins’ Platform and has concluded that XTZ is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that XTZ is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw XTZ from trading on the Platform and stop any future trading of Crypto Rights Contracts based on XTZ, and clients holding XTZ may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws XTZ from trading on Platform, clients holding positions in XTZ will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in XTZ.

We evaluated XTZ based on publicly available information, including (but not limited to):

The creation, governance, usage and design of XTZ, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created XTZ;

The supply, demand, maturity, utility and liquidity of XTZ;

Material technical risks associated with XTZ, including any code defects, security breaches and other threats concerning the XTZ blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with XTZ, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of XTZ.

Like all other crypto assets, there are some general risks to investing in XTZ, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of XTZ may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of XTZ have no recourse to its community or Netcoins if XTZ declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading XTZ. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Cardano (ADA)

What is Cardano (ADA)?

Cardano began in 2015 as a research project by one of the co-founders of Ethereum, Charles Hoskinson. However, it wasn’t until 2017 that the Cardano blockchain was launched to the world. Its native coin is called ADA and has a maximum supply of 45,000,000,000 ADA coins. Since launching, it has quickly become one of the biggest cryptocurrencies by market cap.

There are several reasons why Cardano is unique from other blockchains in the crypto space. For starters, it’s a blockchain and smart contract platform that uses peer-review research, meaning all features and updates are approved by academics before they’re committed to code. Secondly, it calls itself “the first third-generation” public blockchain. As such, it seeks to solve the issues that plague Bitcoin (first-generation) and Ethereum (second-generation), which are mainly around energy consumption, scalability, and interoperability.

Cardano wants to be the most environmentally friendly blockchain too. Being a greener cryptocurrency meant ADA performed well when Bitcoin was getting backlash for being energy-intensive. The reason for this is that the Cardano blockchain uses a Proof-of-Stake (PoS) consensus model. Rather than using a lot of computational energy (like Bitcoin mining does), Cardano owners offer up their coins as collateral to validate blocks. This process consumes much less energy while incentivizing ADA holders to protect the network.

Many in the Cardano community believe that the scientific approach is the future of blockchains. In applying this rigorous method, it will inspire trust in individuals and businesses alike.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or ADA made available through the Platform, including an opinion that ADA is not itself a security and/or derivative.

Netcoins has performed a legal assessment of ADA prior to making it available on the Netcoins’ Platform and has concluded that ADA is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that ADA is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw ADA from trading on the Platform and stop any future trading of Crypto Rights Contracts based on ADA, and clients holding ADA may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws ADA from trading on Platform, clients holding positions in ADA will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in ADA.

We evaluated ADA based on publicly available information, including (but not limited to):

The creation, governance, usage and design of ADA, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created ADA;

The supply, demand, maturity, utility and liquidity of ADA;

Material technical risks associated with ADA, including any code defects, security breaches and other threats concerning the ADA blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with ADA, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of ADA.

Like all other crypto assets, there are some general risks to investing in ADA, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of ADA may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of ADA have no recourse to its community or Netcoins if ADA declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading ADA. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Polkadot (DOT)

What is Polkadot (DOT)?

Polkadot was created by Ethereum co-founder, Gavin Wood. It was launched in May 2020 and immediately gained the support of developers and investors alike. Its native coin is called DOT and it’s maximum supply cap is not yet known. However, since being introduced to the world DOT has become one of the most successful cryptocurrencies by market cap.

While most blockchains operate in silos – either competing to improve upon existing issues (like speed) or focusing on solving a specific problem in the ecosystem – Polkadot takes a more collaborative approach. Polkadot seeks to unite all other blockchains. For example, it wants to connect Bitcoin, Ethereum, Solana and more blockchains together in order to solve the interoperability issue the space is experiencing.

Polkadot uses “relay chains” and “parachains.” Its blockchain is the relay chain and the different blockchains (like Bitcoin’s) are the parachains. To better understand this, think of a bicycle wheel. The wheel’s hub would be Polkadot’s relay chain and the spokes would be the parachains. In this way, Polkadot can process many transactions on the various chains simultaneously. This helps to improve scalability, adaptability and adoption.

Although many blockchains connect to Polkadot, they can still innovate, update their code and launch dapps on their own. However, all consensus is achieved inside the relay chain. The relay chain uses Proof-of-Stake, the process whereby coin holders offer up their coins as collateral to validate blocks. It’s here where all the information gets synced up and verified. As Polkadot becomes more sophisticated, the world of crypto will become more interconnected. We’ll likely see the value of DOT rise in the future.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or DOT made available through the Platform, including an opinion that DOT is not itself a security and/or derivative.

Netcoins has performed a legal assessment of DOT prior to making it available on the Netcoins’ Platform and has concluded that DOT is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that DOT is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw DOT from trading on the Platform and stop any future trading of Crypto Rights Contracts based on DOT, and clients holding DOT may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws DOT from trading on Platform, clients holding positions in DOT will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in DOT.

We evaluated DOT based on publicly available information, including (but not limited to):

The creation, governance, usage and design of DOT, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created DOT;

The supply, demand, maturity, utility and liquidity of DOT;

Material technical risks associated with DOT, including any code defects, security breaches and other threats concerning the DOT blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with DOT, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of DOT.

Like all other crypto assets, there are some general risks to investing in DOT, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of DOT may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of DOT have no recourse to its community or Netcoins if DOT declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading DOT. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Gala Games (GALA)

What is Gala Games (GALA)?

Gala Games was founded by Eric Schiermeyer, the co-founder of Zynga Games (which created Farmville). Launched in 2019, it seeks to revolutionize the gaming industry with blockchain technology.

Gala Games is a play-to-earn gaming platform that gives players control over the games that get built. They have released two games – Town Star and VOX – and plan to release more in the future.

Gale Games players can own non-fungible tokens (NFTs) and influence the governance of games. Players can use GALA - the game’s native token - to buy in-game goods. They can also be rewarded GALA, loan, stake or sell their GALA tokens in exchange for real money.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or GALA made available through the Platform, including an opinion that GALA is not itself a security and/or derivative.

Netcoins has performed a legal assessment of GALA prior to making it available on the Netcoins’ Platform and has concluded that GALA is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion GALA change in the future. In the event that Netcoins or Canadian securities regulators determine that GALA is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw GALA from trading on the Platform and stop any future trading of Crypto Rights Contracts based on GALA, and clients holding GALA may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws GALA from trading on Platform, clients holding positions in GALA will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in GALA.

We evaluated GALA based on publicly available information, including (but not limited to):

The creation, governance, usage and design of GALA, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created GALA;

The supply, demand, maturity, utility and liquidity of GALA;

Material technical risks associated with GALA, including any code defects, security breaches and other threats concerning the GALA blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with GALA, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of GALA.

Like all other crypto assets, there are some general risks to investing in GALA, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of GALA may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of GALA have no recourse to its community or Netcoins if GALA declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading GALA. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Solana (SOL)

Last Updated: March 26, 2024

What is Solana (SOL)?

Solana is a blockchain run by the Solana Foundation despite being founded in 2017 by Anatoly Yakovenko.

Its native coin is also called Solana but uses the ticker SOL. It will have a maximum supply cap of 489 million SOL tokens. Today, SOL is one of the biggest cryptocurrencies by market cap. What makes Solana special is that it builds upon existing and new technologies to improve on the next generation of decentralized applications (known as dApps). dApps are applications (like mobile apps) that run on blockchains and therefore do not need a middle-person in order to operate. Speed is important to the success of these dApps. Though Ethereum is best known for dApps, it runs them at an arguably slow pace. Oftentimes its slow pace can be a bottleneck to innovation and adoption.

On the other hand, Solana thrives on speed. It claims the blockchain can process around 50,000 transactions per second, which would mean it’s the fastest blockchain. It can also process a block at 400 to 800 milliseconds with an average transaction fee of 0.000005 SOL. Not only is it processing transactions faster, but it’s doing so at a fraction of the cost.

Apart from speed, Solana is unique in that it uses a hybrid consensus model. It uses both Proof-of-Stake (PoS) and Proof-of-History (PoH). PoS is the process whereby coin holders offer up their coins as collateral to validate blocks whereas PoH is the process of recording transactions and the time that has passed between them. By merging these two models, Solana can benefit from trust, accuracy and bigger scalability. In theory, this should help expedite its adoption. Speed, scalability and lower fees surely positions Solana to compete and potentially outperform Ethereum in the realm of dApps. Only time will tell.

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or SOL made available through the Platform, including an opinion that SOL is not itself a security and/or derivative.

Netcoins has performed a legal assessment of SOL prior to making it available on the Netcoins’ Platform and has concluded that SOL is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that SOL is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw SOL from trading on the Platform and stop any future trading of Crypto Rights Contracts based on SOL, and clients holding SOL may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws SOL from trading on Platform, clients holding positions in SOL will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in SOL.

We evaluated SOL based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of SOL, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created SOL;

  • The supply, demand, maturity, utility and liquidity of SOL;

  • Material technical risks associated with SOL, including any code defects, security breaches and other threats concerning the SOL blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with SOL, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of SOL.

Like all other crypto assets, there are some general risks to investing in SOL, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of SOL may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price. Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Additional Staking Details and Risks

Staking SOL: How it works

Solana staking offers SOL holders the opportunity to lock up a certain amount of SOL as a way to participate in the validation of transactions and help secure the Network. To participate in staking, a user must deposit a minimum amount of SOL into a smart contract on the Solana network. This deposit is locked until the user decides to stop staking. Once SOL is deposited, the user becomes a validator and can participate in the validation of transactions and creation of new blocks. You can stake your SOL using Netcoins optional Staking Service. Through this service, Netcoins connects you to approved Staking Service Providers and Validators. Netcoins aggregates all user staking and unstaking requests. For further explanation of staking and the associated risks, please refer to the Netcoins Risk Statement. Information specific to staking SOL are outlined below.

Validators:

Validators are participants in the Solana network who hold and stake a certain amount of SOL and are responsible for validating transactions and creating new blocks on the network. Validators must perform a variety of tasks, including processing transactions, verifying the correctness of the block and signing the block to confirm its validity.

Validators earn rewards in the form of SOL for their contribution to the network. The amount of rewards depends on several factors, including the amount of SOL staked, the number of validators on the network and the overall performance of the network.

Supported Validators:

Netcoins uses our qualified custodian, BitGo Trust Company (BitGo) as our third party staking service provider. BitGo is regulated as a trust company under the Division of Banking in South Dakota. BitGo has contractual relationships with a number of Validators. For the provision of Netcoins Staking Service, BitGo uses Figment as a validator for crypto assets stored in Netcoins designated staking custodial wallets. Figment is one of the world’s largest blockchain infrastructure and services providers.

Lock up periods: Bonding and Unbonding Periods

When you stake SOL, you are subject to the network bonding and unbonding periods (also referred to as ‘lock-up’, ‘warm-up’ or ‘cool-down’ periods). During this time, your SOL is considered locked on the network and cannot be sold or withdrawn. Bonding and unbonding periods for Solana staking is defined by the protocol and is generally one epoch, which can range from hours to days. Netcoins provides users with average bonding and unbonding timelines based on information provided from our staking service providers as well as information made available publicly. Average bonding and unbonding duration can change at any time. In addition to the bonding and unbonding periods stipulated by the network, all staking and unstaking requests may also be subject to processing time which exists due to Netcoins operational timelines associated with running the service. You can find details of current estimated bonding, unbonding and processing timehere.

It is important that you understand the lock-up period and estimated timelines when making your decision to stake SOL. Given the volatility of Crypto Assets, the value of your staked Crypto Assets when they are available for you to sell or withdraw, and the value of any crypto Assets earned through staking, may be significantly less than the current value.

Network Inflation

Solana has an initial inflation rate of 8% per year. The dis-inflation rate, which is the rate by which the inflation rate decreases year over year is -15%. Solana has a long-term inflation rate of 1.5%. Please refer to the inflation schedule produced by the Solana network for the latest and most up to date information.

SOL Staking Rewards and Fees

Netcoins displays an estimated reward rate that is provided by our Staking Service Provider. This rate is displayed to users directly in the Netcoins App. It represents the Network reward rate, before applicable service fees. It is not indicative of future rewards or returns. There is no guarantee that you will receive any rewards on the staked Crypto Assets. Past rewards are not indicative of expected future rewards. Reward rates can change at any time as determined by the Network. Fees (both third party and Netcoins) can change at any time at the discretion of Netcoins and third party staking service providers. Breakdown of fee information can be found here.

Netcoins issues SOL rewards every 3 days. Netcoins will calculate and distribute your share of SOL rewards based on the proportion of SOL you have staked relative to the total SOL staked on the platform at the start of that reward cycle. SOL staking rewards are automatically staked by the Solana protocol. If you un-stake SOL, you will not be earning rewards for the amount that you have unstaked during its unbonding period. Third party fees and Netcoins fees are deducted from rewards prior to distribution. A breakdown of gross reward and fees can be found for each reward earned in the transaction details section of your Netcoins account. Since third party providers are responsible for reward distribution, it is possible there are errors or delays in Netcoins receiving rewards from service providers. You do not have rights to rewards until they are received by Netcoins from the staking service provider.

Custody

Your SOL is staked from designated staking custodial wallets held with our custodian, BitGo.

Slashing

Validators face penalties for misbehavior, which could include being slashed or losing a portion of their staked SOL as a penalty. Validators can be slashed for a variety of reasons such as double-signing a block or failing to properly validate transactions or extended downtime. Netcoins does not provide any guarantees against slashing or jailing losses. In certain circumstances, Netcoins works with service providers to recover slashing losses through the service provider’s insurance coverage. If any staked assets or rewards are recovered, Netcoins may, at its sole discretion, distribute reimbursements for slashing penalties it receives from service providers to impacted users based on their impact relative to total user impact/ loss less any administrative costs or expenses Netcoins incurs.

In the event Netcoins cannot recover lost assets from Service Providers, you may lose all or a portion of the client’s staked Crypto Assets if the validator does not perform as required by the network.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Netcoins Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Solana community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of SOL have no recourse to its community or Netcoins if SOL declines in value for any reason. We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading or staking SOL. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated October 6, 2023. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Cosmos (ATOM)

Last Updated: March 26, 2024

What is Cosmos (ATOM)?

Developers Jae Kwon and Ethan Buchman co-founded the Cosmos network in 2014. The Interchain Foundation held a two week initial coin offering of the ATOM token in 2017, at the time raising over $17 million. Tendermint Inc. raised $9 million to continue development of the project through a Series A funding round in 2019.

Cosmos is described as “Blockchain 3.0” because one of its biggest goals is ensuring that its infrastructure is straightforward to use. Scalability is another priority, which means more transactions can be processed a second than more old-fashioned blockchains like Bitcoin and Ethereum. Thus, Cosmos is able to cope with demand.

The token of the Cosmos Hub is called ATOM. ATOM has a specific total supply of 260,906,513. The tokens are not mined, but are instead earned through staking. Further, there is currently no limit on the supply of new ATOM tokens that can be created. Rather, Cosmos adjusts the amount of tokens created based on the number of ATOM being staked.

It is worth noting that the ATOM token distribution is as follows - about 80% allocated to investors, and the remaining 20% split between two companies: All In Bits and the Interchain Foundation. The Cosmos Hub was one of the first blockchains to be launched in the Cosmos Network, which is a network of many independent blockchains called zones. The zones are powered by Tendermint Byzantine Fault-Tolerance (“BFT”), which provides a high-performance, consistent, secure Practical Byzantine Fault Tolerance like (“PBFT”) consensus engine, where strict fork-accountability guarantees hold over the behaviour of malicious actors. The Tendermint BFT consensus algorithm is well suited for scaling public proof-of-stake blockchains.

The Cosmos Network is a project that is supported by the Interchain Foundation, which is a Swiss non-profit with a mandate to research, develop, and promote open, decentralized, network technologies like Cosmos SDK (a modular development framework that allows developers to easily build application-specific blockchains - zones). It is part of the Cosmos ecosystem which announced the release of the Interchain Accounts upgrade on Feb. 17, 2022. Launched in April 2021, the Inter-Blockchain Communications (IBC) protocol is the Cosmos standard for blockchain interoperability. It allows an individual blockchain to control an account on a separate chain. Any blockchain that integrates IBC can freely share information and assets with other IBC blockchains, giving people more choice about how they use blockchain technology.

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or ATOM made available through the Platform, including an opinion that ATOM is not itself a security and/or derivative.

Netcoins has performed an assessment of ATOM prior to making it available on the Netcoins’ Platform and has concluded that ATOM is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that ATOM is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw ATOM from trading on the Platform and stop any future trading of Crypto Rights Contracts based on ATOM, and clients holding ATOM may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws ATOM from trading on Platform, clients holding positions in ATOM will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in ATOM.

We evaluated ATOM based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of ATOM, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created ATOM;

  • The supply, demand, maturity, utility and liquidity of ATOM;

  • Material technical risks associated with ATOM, including any code defects, security breaches and other threats concerning the ATOM blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with ATOM, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of ATOM.

Like all other crypto assets, there are some general risks to investing in ATOM, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price. Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Additional Staking Details and Risks

Staking ATOM: How it works

ATOM staking offers ATOM holders the opportunity to lock up a certain amount of ATOM as a way to participate in the validation of transactions and help secure the Network. To participate in staking, a user must deposit a minimum amount of ATOM into a smart contract on the Cosmos network. This deposit is locked until the user decides to stop staking. Once ATOM is deposited, the user becomes a validator and can participate in the validation of transactions and creation of new blocks.

You can stake your ATOM using Netcoins optional Staking Service. Through this service, Netcoins connects you to approved Staking Service Providers and Validators. Netcoins aggregates all user staking and unstaking requests. For further explanation of staking and the associated risks, please refer to the Netcoins Risk Statement. Information specific to staking ATOM are outlined below:

Validators:

Validators are participants in the Cosmos network who hold and stake a certain amount of ATOM and are responsible for validating transactions and creating new blocks on the network. Validators must perform a variety of tasks, including processing transactions, verifying the correctness of the block and signing the block to confirm its validity.

Validators earn rewards in the form of ATOM for their contribution to the network. The amount of rewards depends on several factors, including the amount of ATOM staked, the number of validators on the network and the overall performance of the network.

Supported Validators:

Netcoins uses our qualified custodian, BitGo Trust Company (BitGo) as our third party staking service provider. BitGo is regulated as a trust company under the Division of Banking in South Dakota. BitGo has contractual relationships with a number of Validators. For the provision of Netcoins Staking Service, BitGo uses Figment as a validator for crypto assets stored in Netcoins designated staking custodial wallets. Figment is one of the world’s largest blockchain infrastructure and services providers.

Lock up periods: Bonding and Unbonding Periods

When you stake ATOM, you are subject to the bonding and unbonding periods (also referred to as ‘lock-up’, ‘warm-up’ or ‘cool-down’ periods). During this time, your ATOM is considered locked on the network and cannot be sold or withdrawn. There is no network bonding period for ATOM. ATOM has a network unbonding period of 21 days. Netcoins provides users with average bonding and unbonding timelines based on information provided from our staking service providers as well as information made available publicly. Average bonding and unbonding duration can change at any time.In addition to the bonding and unbonding periods stipulated by the network, all staking and unstaking requests may also be subject to processing time which exists due to Netcoins operational timelines associated with running the service. You can find details of current estimated bonding, unbonding and processing time here.

It is important that you understand the lock-up period and estimated timelines when making your decision to stake ATOM. Given the volatility of Crypto Assets, the value of your staked Crypto Assets when they are available for you to sell or withdraw, and the value of any crypto Assets earned through staking, may be significantly less than the current value.

Network Inflation

ATOM has an initial inflation rate that sits between 7% to 20%. The inflation rate varies and is subject to change at any time. Please refer to the inflation schedule produced by the Cosmos network for the latest and most up to date information.

ATOM Staking Rewards and Fees

Netcoins displays an estimated reward rate that is provided by our Staking Service Provider. This rate is displayed to users directly in the Netcoins App. It represents the Network reward rate, before applicable service fees. It is not indicative of future rewards or returns. There is no guarantee that you will receive any rewards on the staked Crypto Assets. Past rewards are not indicative of expected future rewards. Reward rates can change at any time as determined by the Network. Fees (both third party and Netcoins) can change at any time at the discretion of Netcoins and third party staking service providers. Breakdown of fee information can be found here.

Netcoins issues ATOM rewards every 24 hours. Netcoins will calculate and distribute your share of ATOM rewards based on the proportion of ATOM you have staked relative to the total ATOM staked on the platform at the start of that reward cycle. ATOM staking rewards are claimed and automatically re-staked by Netcoins on your behalf regularly; these rewards go through the standard bonding period before earning further rewards. If you un-stake ATOM, you will not be earning rewards for the amount that you have unstaked during its unbonding period. Third party fees and Netcoins fees are deducted from rewards prior to distribution. A breakdown of gross reward and Netcoins fees can be found for each reward earned in the transaction details section of your Netcoins account. Since third party providers are responsible for reward distribution, it is possible there are errors or delays in Netcoins receiving rewards from service providers. You do not have rights to rewards until they are received by Netcoins from the staking service provider.

Custody

Your ATOM is staked from designated staking custodial wallets held with our custodian, BitGo.

Slashing

Validators face penalties for misbehavior, which could include being slashed or losing a portion of their staked ATOM as a penalty. Validators can be slashed for a variety of reasons such as double-signing a block or failing to properly validate transactions or extended downtime. Netcoins does not provide any guarantees against slashing or jailing losses. In certain circumstances, Netcoins works with service providers to recover slashing losses through the service provider’s insurance coverage. If any staked assets or rewards are recovered, Netcoins may, at its sole discretion, distribute reimbursements for slashing penalties it receives from service providers to impacted users based on their impact relative to total user impact/ loss less any administrative costs or expenses Netcoins incurs.

In the event Netcoins cannot recover lost assets from Service Providers, you may lose all or a portion of the client’s staked Crypto Assets if the validator does not perform as required by the network.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Netcoins Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Cosmos community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of ATOM have no recourse to its community or Netcoins if ATOM declines in value for any reason. We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading or staking ATOM. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated October 6, 2023. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Near Protocol (NEAR)

What is Near Protocol (NEAR)?

The NEAR Protocol was founded by Erik Trautman (entrepreneur), Illia Polosukhin (industry expert) and Alexander Skidanov (computer scientist) in 2018.

The NEAR Protocol is essentially a decentralized application (DApp) platform designed to compete with Ethereum, Polkadot and EOS. Its main focus is to create a user and developer-friendly platform that makes it easy, quick and affordable to build DApps. An example of its easy usability is the fact they display human-readable names instead of cryptographic wallet addresses.

NEAR is the native token for the Near Protocol, which can be used to pay transaction fees, used as collateral for storing data on the blockchain, or staked (verifying transactions) by token holders. NEAR has a maximum supply of 1,000,000,000 NEAR coins.

With its unique features and easy-to-use platform, NEAR may play an important role in the future of Web3.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or NEAR made available through the Platform, including an opinion that NEAR is not itself a security and/or derivative.

Netcoins has performed a legal assessment of NEAR prior to making it available on the Netcoins’ Platform and has concluded that NEAR is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion NEAR change in the future. In the event that Netcoins or Canadian securities regulators determine that NEAR is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw NEAR from trading on the Platform and stop any future trading of Crypto Rights Contracts based on NEAR, and clients holding NEAR may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws NEAR from trading on Platform, clients holding positions in NEAR will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in NEAR.

We evaluated NEAR based on publicly available information, including (but not limited to):

The creation, governance, usage and design of NEAR, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created NEAR;

The supply, demand, maturity, utility and liquidity of NEAR;

Material technical risks associated with NEAR, including any code defects, security breaches and other threats concerning the NEAR blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with NEAR, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of NEAR.

Like all other crypto assets, there are some general risks to investing in NEAR, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of NEAR may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of NEAR have no recourse to its community or Netcoins if NEAR declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading NEAR. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


Quant Network (QNT)

What is the Quant Network (QNT)?

Quant Network was created in June 2018 by cybersecurity expert Gilbert Verdianis. Quant is a blockchain platform looking to connect blockchains around the world. Through its open API gateway called Overledger, Quant Networks aims to facilitate the creation of decentralized applications with multi-chain compatibility, thereby creating a world where the blockchain ecosystem is united. QNT is the native token of the Quant network, used to pay fees on the platform and power the network through its proof-of-stake consensus protocol.

The goal of Quant is simple, to create a world where blockchains can easily communicate with one another. To accomplish this, Quant created the Overledger API gateway, which serves as a simple solution for blockchains and enterprise platforms looking to leverage the possibilities of interoperability through a solution that does not require any additional infrastructure.

Risk Statement

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or QNT made available through the Platform, including an opinion that QNT is not itself a security and/or derivative.

Netcoins has performed a legal assessment of QNT prior to making it available on the Netcoins’ Platform and has concluded that QNT is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion QNT change in the future. In the event that Netcoins or Canadian securities regulators determine that QNT is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw QNT from trading on the Platform and stop any future trading of Crypto Rights Contracts based on QNT, and clients holding QNT may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws QNT from trading on Platform, clients holding positions in QNT will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in QNT.

We evaluated QNT based on publicly available information, including (but not limited to):

The creation, governance, usage and design of QNT, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created QNT;

The supply, demand, maturity, utility and liquidity of QNT;

Material technical risks associated with QNT, including any code defects, security breaches and other threats concerning the QNT blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

Legal and regulatory risks associated with QNT, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of QNT.

Like all other crypto assets, there are some general risks to investing in QNT, including:

Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of QNT may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the Bitcoin community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of QNT have no recourse to its community or Netcoins if QNT declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading QNT. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.

Last updated: August 31, 2023


1inch (1INCH)

Last updated: August 31, 2023

What is 1inch (1INCH)?

1inch is a decentralized exchange aggregator and automated market maker (AMM) protocol on the Ethereum blockchain. The project aims to provide users with the best possible prices for swapping tokens across various decentralized exchanges (DEXs) without the need for manual research or execution. The 1inch token, with the symbol "1INCH," plays a crucial role within the 1inch ecosystem.

Key features and functions of the 1inch token:

  • Governance: 1INCH is a governance token. As such, holders have the right to participate in the governance of the 1inch network. This allows them to propose and vote on protocol upgrades, changes, and other key decisions.

  • Liquidity Mining: The 1inch token has been used in liquidity mining programs, where users can earn rewards for providing liquidity to certain token pairs on the 1inch DEX aggregator or AMM pools.

  • Protocol Fees: Some of the protocol fees collected from users' transactions on 1inch are distributed to 1INCH token holders, incentivizing them to hold and participate in the network.

  • Staking: Users can stake their 1INCH tokens to participate in staking pools, which also allows them to earn additional rewards.

Founder and Ownership

The 1inch token was created by Sergej Kunz and Anton Bukov, who co-founded the 1inch decentralized exchange aggregator and automated market maker protocol. The two developers are prominent figures in the decentralized finance space and have been actively involved in the development and promotion of the 1inch project.

Sergej Kunz and Anton Bukov founded 1inch in 2019 with the aim of providing users with the best possible prices for swapping tokens across multiple decentralized exchanges. 

The 1inch platform aggregates liquidity from various DEXs, enabling users to access deeper liquidity and better rates for their token swaps.

Since 1inch is a decentralized protocol, the ownership of the 1inch token  is distributed among various token holders. Thus, the ownership of the token is not tied to any specific individual or entity. Instead, it is held by individuals, traders, liquidity providers, developers, and other participants in the 1inch ecosystem.

Its ownership is determined by the addresses that hold the token in their respective Ethereum wallets. 

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or 1INCH made available through the Platform, including an opinion that 1INCH is not itself a security and/or derivative.

Netcoins has performed a legal assessment of 1INCH prior to making it available on the Netcoins’ Platform and has concluded that 1INCH is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that 1INCH is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw 1INCH from trading on the Platform and stop any future trading of Crypto Rights Contracts based on 1INCH and clients holding 1INCH may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws 1INCH from trading on Platform, clients holding positions in 1INCH will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in 1INCH.

We evaluated 1INCH based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of 1INCH, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created 1INCH;

  • The supply, demand, maturity, utility and liquidity of 1INCH;

  • Material technical risks associated with 1INCH, including any code defects, security breaches and other threats concerning the Ethereum blockchain, Binance Smart Chain, and the Polygon Network (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with 1INCH, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of 1INCH.

Like all other crypto assets, there are some general risks to investing in 1INCH, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the 1INCH community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of 1INCH have no recourse to its community or Netcoins if 1INCH declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading 1INCH. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


dYdX (DYDX)

Last updated: August 31, 2023

What is dYdX (DYDX)?

The founder of dYdX is Antonio Juliano. He founded dYdX on March 1, 2017 with the vision of creating a decentralized exchange and DeFi platform that offers advanced trading and financial tools.

Antonio Juliano has been actively involved in the development and growth of dYdX, leading the team and contributing to the project's success. His background includes experience as a software engineer and previously working at Coinbase, a well-known cryptocurrency exchange.

dYdX is a decentralized exchange (“DEX”) and decentralized finance (“DeFi”) protocol that operates on the Ethereum blockchain. It aims to provide advanced trading and financial tools for cryptocurrency traders. While dYdX is primarily known for its spot trading functionality, it also supports margin trading, lending, and borrowing.

At the heart of the dYdX ecosystem is the native governance and utility token called dYdX Token. DYDX serves multiple purposes within the protocol, including:

  • Governance: DYDX token holders have the right to participate in the decision-making process regarding the development and evolution of the dYdX platform. This includes voting on proposals related to protocol upgrades, fee structures, and other governance matters.

  • Fee Discounts: Users who hold DYDX tokens receive fee discounts on trading and borrowing transactions performed on the dYdX platform. The fee structure is designed to incentivize token holders to actively participate in the ecosystem.

  • Staking Rewards: DYDX token holders can stake their tokens in the dYdX governance contract to earn additional rewards. These rewards are distributed to incentivize long-term token ownership and participation in the protocol.

  • Liquidity Mining: dYdX periodically conducts liquidity mining programs to encourage users to provide liquidity to specific trading pairs on the platform. Participants in these programs can earn DYDX tokens as incentives.

The dYdX protocol emphasizes security and transparency. It utilizes smart contracts on the Ethereum blockchain to automate and execute trades, lending, borrowing, and other financial activities. Users retain control of their funds throughout the process, as the protocol operates in a non-custodial manner.

The initial development of dYdX was led by a team of founders and developers, but the protocol itself is designed to be decentralized and community-driven. The team behind dYdX launched the project and developed the initial version of the protocol, but they do not have ownership control over the protocol.

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or DYDX made available through the Platform, including an opinion that DYDX is not itself a security and/or derivative.

Netcoins has performed a legal assessment of DYDX prior to making it available on the Netcoins’ Platform and has concluded that DYDX is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that DYDX is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw DYDX from trading on the Platform and stop any future trading of Crypto Rights Contracts based on DYDX and clients holding DYDX may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws DYDX from trading on Platform, clients holding positions in DYDX will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in DYDX.

We evaluated DYDX based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of DYDX, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created DYDX;

  • The supply, demand, maturity, utility and liquidity of DYDX;

  • Material technical risks associated with DYDX, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with DYDX, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of DYDX.

Like all other crypto assets, there are some general risks to investing in DYDX, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the DYDX community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of DYDX have no recourse to its community or Netcoins if DYDX declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading DYDX. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Loopring (LRC)

Last updated: August 31, 2023

What is Loopring (LRC)?

LRC (Loopring) is a Shanghai, China based decentralized exchange, which was founded on August 1, 2017 by software engineer, Daniel Wang (who is also the CEO of the Loopring Foundation). 

It was created to address the challenges and limitations of traditional centralized exchanges by introducing a decentralized exchange protocol.

LRC is an Ethereum-based token that serves as the native cryptocurrency of the Loopring protocol. Loopring is a decentralized exchange protocol that aims to provide a scalable and secure solution for trading digital assets without relying on a centralized intermediary. LRC plays a crucial role within the Loopring ecosystem, facilitating various functions and incentivizing participants.

LRC has several utilities within the Loopring protocol. It can be used for paying transaction fees, participating in the protocol's governance, and staking to earn rewards.

LRC holders can use their tokens to pay for trading fees on the Loopring DEX. By using LRC for fee payments, users can enjoy reduced fees and discounts.

LRC token holders can participate in the decision-making process of the Loopring protocol. They can propose and vote on proposals related to protocol upgrades, fee structures, and other important governance matters.

Holders also have the opportunity to stake their tokens and earn rewards for securing the network. By staking LRC, participants contribute to the protocol's security and can receive incentives in the form of additional LRC tokens.

LRC is traded on various cryptocurrency exchanges, and its value is determined by market supply and demand dynamics. 

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or LRC made available through the Platform, including an opinion that LRC is not itself a security and/or derivative.

Netcoins has performed a legal assessment of LRC prior to making it available on the Netcoins’ Platform and has concluded that LRC is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that LRC is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw LRC from trading on the Platform and stop any future trading of Crypto Rights Contracts based on LRC and clients holding LRC may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws LRC from trading on Platform, clients holding positions in LRC will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in LRC.

We evaluated LRC based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of LRC, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created LRC;

  • The supply, demand, maturity, utility and liquidity of LRC;

  • Material technical risks associated with LRC, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with LRC, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of LRC.

Like all other crypto assets, there are some general risks to investing in LRC, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the LRC community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of LRC have no recourse to its community or Netcoins if LRC declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading LRC. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Pax Gold (PAXG)

Last updated: August 31, 2023

What is Pax Gold (PAXG)?

Founded in 2012 by Charles Cascarilla and Rich Teo, Paxos specializes in the building of infrastructure for the exchange of cryptocurrency. 

In 2018, Paxos released Paxos Standard (PAX), a crypto asset backed 1:1 with a reserve of U.S. dollars stored by Paxos in U.S. bank accounts. Paxos Gold was then launched in 2019.  

One token represents one fine troy ounce of a London Good Delivery gold bar, stored in professional vaults in London. Anyone who owns PAX Gold owns the underlying gold which is held under the custody of Paxos Trust Company. 

It aims to combine the benefits of blockchain technology with the intrinsic value of gold. The value of PAXG therefore also tracks with the real-time market price of gold.  

PAXG is built as an Ethereum-based token following the ERC-20 protocol, making it compatible with all Ethereum wallets that accept ERC-20 tokens. All transactions operate according to the rules of the smart contract on the Ethereum blockchain. Due to this smart contract, transactions eliminate human error and the system operates only as programmed.  

Like any Ethereum-based token, PAX Gold is available 24/7 to facilitate settlement against various assets. Unlike traditional gold, which is only available to settle trades during banking business hours, PAX Gold can move anywhere, anytime. 

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or PAXG made available through the Platform, including an opinion that PAXG is not itself a security and/or derivative.

Netcoins has performed a legal assessment of PAXG prior to making it available on the Netcoins’ Platform and has concluded that PAXG is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that PAXG is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw PAXG from trading on the Platform and stop any future trading of Crypto Rights Contracts based on PAXG and clients holding PAXG may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws PAXG from trading on Platform, clients holding positions in PAXG will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in PAXG.

We evaluated PAXG based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of PAXG, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created PAXG;

  • The supply, demand, maturity, utility and liquidity of PAXG;

  • Material technical risks associated with PAXG, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with PAXG, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of PAXG.

Like all other crypto assets, there are some general risks to investing in PAXG, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the PAXG community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of PAXG have no recourse to its community or Netcoins if PAXG declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading PAXG. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Render (RNDR)

Last updated: August 31, 2023

What is Render (RNDR)?

The RNDR network idea was initially formed in 2009 by Jules Urbach, the CEO of its parent company, the Los Angeles Tech company OTOY Inc. OTOY Inc was founded in 2008 and specializes in Graphics Processing Unit (“GPU”)-based software solutions.

RNDR is an ERC-20 compatible utility token used to pay for animation, motion graphics and VFX rendering on the distributed RNDR Network.

The Initial Coin offer (“ICO”) was from October  6, 2017 to October 12, 2017. During the process, a total of 4650922 RNDR were sold at $0.25 USD per token. 

RNDR aims to make the process of rendering and streaming intricate virtual works easier for all users. It will allow complex GPU-based render jobs to be distributed and processed on a peer-to-peer network, making the transactional process of rendering and streaming 3D environments, models, and objects much simpler for end users. 

The final product launch was April 2020. 

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or RNDR made available through the Platform, including an opinion that RNDR is not itself a security and/or derivative.

Netcoins has performed a legal assessment of RNDR prior to making it available on the Netcoins’ Platform and has concluded that RNDR is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that RNDR is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw RNDR from trading on the Platform and stop any future trading of Crypto Rights Contracts based on RNDR and clients holding RNDR may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws RNDR from trading on Platform, clients holding positions in RNDR will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in RNDR.

We evaluated RNDR based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of RNDR, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created RNDR;

  • The supply, demand, maturity, utility and liquidity of RNDR;

  • Material technical risks associated with RNDR, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with RNDR, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of RNDR.

Like all other crypto assets, there are some general risks to investing in RNDR, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the RNDR community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of RNDR have no recourse to its community or Netcoins if RNDR declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading RNDR. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Zcash (ZEC)

Last updated: August 31, 2023

What is Zcash(ZEC)?

Zcash was invented by a group of scientists and brought to life by Electric Coin Co. and Zooko Wilcox (current CEO), a computer security specialist in 2013. Together, they aimed to solve Bitcoin’s problem - privacy. Their original solution was Zerocoin, a proposed privacy extension to Bitcoin, but a standalone protocol was created instead - Zcash. The Zerocoin Electric Coin Company (now Electric Coin Co.) was formed in 2015 to create the protocol, and privacy coin, Zcash, was launched in October 2016. 

The Zcash Foundation was formed in 2017 to further support Zcash, and in 2020, the Zcash Major Grants organization launched to help fund additional developers and community projects.

The Zcash protocol is a set of rules that govern the Zcash blockchain network. Within that system, ZEC (pronounced zek) is the coin. 

You can use your phone to privately pay someone in Zcash, send money overseas, buy groceries, or send donations. Third-party apps like Flexa SPEDN can also be used to pay with Zcash at Lowe’s, Nordstrom, Baskin Robbins, and more. Services like Moon allow you to use Zcash online anywhere Visa is accepted.

Zcash’s main advantage lies in its optional anonymity, which allows for a level of privacy unattainable with pseudonymous cryptocurrencies.

It uses the zk-SNARK zero-knowledge proof technology that allows nodes on the network to verify transactions without revealing any sensitive information about those transactions.

ZEC transactions can be sent in two ways: transparent and shielded. 

  • Transparent transactions work similar to Bitcoin. They are sent between public addresses and are recorded on an immutable public ledger (the blockchain). All essential information about these transactions is available online for anyone to see, including the sending and receiving addresses and the amount sent.

  • Shielded ZEC transactions, leverage the technology of zero-knowledge succinct non-interactive arguments of knowledge, or zk-SNARKs, in order to enable completely anonymous transactions to be sent over a public immutable blockchain. The fact that the transaction has happened is recorded on the ledger, but the sending and receiving addresses and the amount sent is not revealed to the public.

Halo for ZCash

The Halo proving system eliminates protocol reliance on so-called “trusted setups” and provides a catalyst for Zcash user confidence and scalability while making the protocol more attractive, faster, and less expensive for others to build on. 

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority has expressed an opinion about any Crypto Rights Contract or ZEC made available through the Platform, including an opinion that ZEC is not itself a security and/or derivative.

Netcoins has performed a legal assessment of ZEC prior to making it available on the Netcoins’ Platform and has concluded that ZEC is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that ZEC is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw ZEC from trading on the Platform and stop any future trading of Crypto Rights Contracts based on ZEC and clients holding ZEC may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws ZEC from trading on Platform, clients holding positions in ZEC will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in ZEC.

We evaluated ZEC based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of ZEC, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created ZEC;

  • The supply, demand, maturity, utility and liquidity of ZEC;

  • Material technical risks associated with ZEC, including any code defects, security breaches and other threats concerning the Bitcoin blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with ZEC, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of ZEC.

Like all other crypto assets, there are some general risks to investing in ZEC, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the ZEC community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of ZEC have no recourse to its community or Netcoins if ZEC declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading ZEC. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.


Tether (USDT)

Last updated: August 31, 2023

What is Tether (USDT)?

Tether is an asset backed stablecoin on the Ethereum blockchain as an ERC20 token that is pegged at 1-to-1 ratio matching the USD fiat currency (1 USD₮ = 1 USD) and are backed by Tether’s reserves. This offers traders, merchants and funds a low volatility solution when exiting positions in the market.

Tether works to alter the conventional financial system through a more modern approach to money. More specifically, Tether gives customers the ability to transact with traditional currencies across the blockchain, without the inherent volatility and complexity typically associated with a digital currency. As the first blockchain-enabled platform to facilitate the digital use of traditional currencies, Tether has democratized cross-border transactions across the blockchain.

With more than $60 billion worth of tokens in circulation, Tether has more deposits than that of many U.S. banks.

Founder and Ownership

Tether was initially founded by a group of Bitcoin enthusiasts - Brock Pierce, Craig Sellars, and Reeve Collins, in 2014. It was launched as RealCoin in July of 2014 and was rebranded as Tether in November 2014. In February 2015, it began being traded. 

Risk Statement

General (Crypto Rights Contract):

Before entering into an agreement (a Crypto Rights Contract) with Netcoins Inc. (Netcoins) to buy or sell any crypto assets through the Netcoins’ Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No Canadian or American securities regulatory authority  has expressed an opinion about any Crypto Rights Contract or USDT made available through the Platform, including an opinion that USDT is not itself a security and/or derivative.

Netcoins has performed a legal assessment of USDT prior to making it available on the Netcoins’ Platform and has concluded that USDT is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future. In the event that Netcoins or Canadian securities regulators determine that USDT is a security and/or a derivative, Netcoins may be required to halt, suspend or withdraw USDT from trading on the Platform and stop any future trading of Crypto Rights Contracts based on USDT and clients holding USDT may be required to liquidate their positions, potentially at a significant loss. In the event that Netcoins halts, suspends or withdraws USDT from trading on Platform, clients holding positions in USDT will be notified via the Platform or other electronic means and advised of the options available to them and any applicable periods to sell or withdraw their positions in USDT.

We evaluated USDT based on publicly available information, including (but not limited to):

  • The creation, governance, usage and design of USDT, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created USDT;

  • The supply, demand, maturity, utility and liquidity of USDT;

  • Material technical risks associated with USDT, including any code defects, security breaches and other threats concerning the Ethereum blockchain, Binance Smart Chain, and the Polygon Network (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and

  • Legal and regulatory risks associated with USDT, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of USDT.

Like all other crypto assets, there are some general risks to investing in USDT, including:

(1) Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Netcoins believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scalability and security of public blockchains like Bitcoin and Ether. For example, in respect of the Ether blockchain, developers have recently transitioned from hash-based mining consensus mechanism of proof-of-work to a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scalability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain.

(2) Volatility risk

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Netcoins uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Netcoins are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Netcoins will always execute a purchase or sale at the best price available at the time among its liquidity providers.

(3) Demand risk

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto assets as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ether blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ether blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ether blockchain.

(4) Forking risk

Both the Bitcoin and Ether blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ether blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Netcoins may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

(5) Cryptography risk

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ether blockchains have demonstrated resilience and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Rights Contracts purchased and sold through Netcoins.

(6) Regulatory risk

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

(7) Concentration risk

Certain addresses on the Bitcoin and Ether blockchain networks hold a significant amount of the currently outstanding Bitcoin and ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

(8) Electronic trading risk

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Netcoins maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Netcoins does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

(9) Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Netcoins to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Netcoins to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Netcoins’ digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Netcoins’ third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Netcoins has established risk management systems designed to reduce the risks associated with cyber security.

Closing

Each of the risks described above and other general risks relating to the purchase of crypto assets through Netcoins’ Platform are described in more detail in the Risk Statement presented to you at the time when you open your account with us and is available to you within your documents setting in the Netcoins App. Further, the USDT community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of USDT have no recourse to its community or Netcoins if USDT declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading USDT. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Netcoins is offering Crypto Rights Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re: Netcoins Inc. dated September 29, 2021. Please be aware that the statutory rights of action for damages and the right of rescission, in relation to a misrepresentation, in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Crypto Asset Statement.