Crypto Asset Statement: DOT (Polkadot)
Last updated: April 3, 2023
About this Statement
CatalX CTS (“Catalyx” or “we”) strives to provide our users with information to assist in understanding crypto assets that are offered for trading on the Catalyx platform (the “Platform”). One of the crypto assets we offer on the Platform is DOT (Polkadot). This summary sets out certain key information about Polkadot and DOT as well as some of the risks involved in trading DOT. While we tried to describe the key features of DOT here, this summary doesn’t provide all relevant information on DOT. We encourage users to perform their own research in order to understand any crypto asset that they intend to trade on the Platform.
Polkadot is a decentralized blockchain platform created to facilitate blockchain interoperability. It includes a core network, called a relay chain, which hosts data structures, such as blockchains, so they can easily exchange information and engage in transactions with one another while benefitting from pooled security. The data structures existing on the relay chain are called parallelized chains or “parachains”.
The security of the parachains on the relay chain is typically pooled by all the parachains and controlled by the Polkadot network, which validates transactions and supports the parachains in achieving consensus via the relay chain. However, independent chains that have their own validators, such as Bitcoin and Ethereum, may be linked to Polkadot via “bridges” in such a way that they benefit from Polkadot’s interoperability while avoiding the shared security and consensus system.
Development of Polkadot began in 2016 when the Web3 Foundation, a Swiss non-profit organization, commissioned the development of the network by Parity Technologies. Robert Habermeier, Gavin Wood and Peter Czaban are the co-founders and core developers of Polkadot. The Web3 Foundation supports the development and maintenance of the Polkadot platform and ecosystem (along with other Web3 technologies).
What is DOT?
DOT is the native crypto currency used on Polkadot. DOT has three main functions on the Polkadot network: governance, staking and bonding. All holders of DOT are entitled to participate in the decentralized governance of the Polkadot network by staking their DOT when voting on referenda regarding the network. DOT holders also elect council members, who represent passive stakeholders within the governance system. Holders of DOT can actively participate in the network in a variety of roles, which involve staking and other activities. For example, validators add new blocks to the relay chain by staking their DOT. Additionally, part of the process for adding new parachains to the Polkadot network involves leasing a spot on the relay chain and bonding DOT for the duration of the lease.
This overview provides a summary of certain risks associated with DOT. We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading DOT, and in addition, does not take into account an individual’s particular situation or risk tolerance. Purchasers are encouraged to conduct their own research prior to trading any crypto asset on the Platform. Catalyx users should read the Risk Disclosure Statement for additional discussion of general risks associated with crypto assets made available through the Catalyx platform.
Dependence on Developers. The future success of the Polkadot is likely somewhat dependent on the ongoing participation in network development by developers and the Web3 Foundation. If these entities cease their support for the network such actions may be detrimental to the project going forward.
Concentration Risk. Research shows that as of the date of publication, the top 10 DOT holders are holding 30.28% of all DOT and the top 100 holders holding 72.34% of all DOT. This large concentration of ownership provides a small number of entities with effective control over decision making for the Polygon network.
Please note that these risks and the associated summaries or overviews provided for each in the Risk Disclosure Statement are not intended to be an exhaustive discussion pertaining to all such risks and, in addition, there may be other risks that come with exposure to DOT. We encourage all Catalyx users to perform their own due diligence to assess the risks associated with DOT and to determine whether this level of risk is acceptable to them.
How Catalyx determines which Crypto Assets to List
Catalyx has established robust policies and procedures to review each crypto asset offered for trading on the Platform. Among other information, we review available public information relating to the crypto asset on the following topics prior to making a determination on whether a crypto asset will be listed:
The history and characteristics of the crypto asset including whether the crypto asset was launched by ICO;
Analysis of the founders or inventors of the crypto asset/related network and a review of their ongoing involvement with crypto asset/network;
How the crypto asset functions including a review of its utility or purpose;
The market liquidity for the crypto asset;
The current and proposed governance of the ecosystem on which crypto asset operates with a focus on the level of decentralization of such ecosystem; and
The position taken by any regulator with respect to the crypto asset including any enforcement action taken against the crypto asset, the related network, or the founders.
In addition to the above we also conduct an analysis of factors weighing in favor or against the crypto asset being deemed to be a security based on Canadian securities laws.
No securities regulatory authority in Canada has expressed an opinion about DOT or any of the other crypto contracts or crypto assets made available through the Platform, including an opinion that DOT itself is not a security and/or derivative. Changes to applicable law may adversely affect the use, transfer, exchange, or value of any crypto contracts or crypto assets you hold on the Platform.
Certain statutory rights under securities legislation in Canada do not apply in respect of this Crypto Asset Statement.