Crypto Asset Statement: EOS (EOS)
Last updated: April 14, 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 EOS. This summary sets out certain key information about EOS as well as some of the risks involved in trading it. While we tried to describe the key features of EOS here, this summary doesn’t provide all relevant information on EOS. We encourage users to perform their own research in order to understand any crypto asset that they intend to trade on the Platform.
History & Characteristics of EOS
What is the EOS Network?
The EOS network is a layer 1 blockchain network that is one of several blockchains operating on the EOSIO software developed and released as open source software by Dan Larimer and Block.one in 2018. Similar to Ethereum the EOS network was designed to support the development and operation of decentralized applications and smart contracts with additional characteristics that make it flexible and easy to use. These features include support for common programming languages such as C++. In addition, the Delegated-Proof-of-Stake (DPoS) consensus mechanism used on the EOS network results in much faster transaction speeds compared to the ordinary Proof-of-Stake model used on many other blockchains. In April 2023 the EOS network launched an Ethereum Virtual Machine that allowed for interoperability between decentralized applications written in the native programming language of Ethereum.
The EOS network does not use data mining to create new tokens as is common in other blockchain networks such as Bitcoin. Instead, new tokens are created through an inflation mechanism built into the network software. These inflation tokens are distributed to block producers on the EOS network as compensation for securing and validating the network. More recently a portion of the inflation on the network has been allocated to the ENF Foundation which was created as a non-profit organization by network consensus in 2021 to support future growth and development of the network. The number of EOS Tokens that may be created and circulated over time is infinite.
EOS is the native cryptocurrency of the EOS network and serves a number of purposes. EOS is used as a method of exchange of value on the network by facilitating transactions on DeFi protocols, buying and selling NFTs, playing decentralized games, and other digital activities. In addition, EOS tokens serve as the governance tokens of the EOS network by allowing EOS token holders to vote on the election of network block producers. EOS can also be used to purchase or rent access to network bandwidth and storage capacity in order to perform operations on the network such as token transfers or the use of decentralized applications.
This overview provides a summary of certain risks associated with EOS. We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading EOS, 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 Platform.
Inflation in the EOS Protocol. Through its delegated-proof-of-stake (“DPoS”) consensus mechanism, the EOS rewards block producers with newly produced EOS tokens which are produced by inflation. As discussed above, a certain percentage of the EOS generated through inflation is now also allocated to the ENF Foundation to be used to promote network development. As a result, holders of EOS should anticipate that the token supply will continue to rise since it is neither set nor capped.
Potential Centralization. The twenty-one delegated block producers have considerable influence over the EOS network, increasing the possibility of centralization due to the use of the DPoS protocol. Every two minutes, a competitive voting mechanism is used to choose the delegated block producers, and entities vying to serve as block producers are continuously elected into and out of their delegate roles. The EOS blockchain system may become more centralized as a result of some entities being elected repeatedly as delegated block producers.
Dependence on ENF Foundation. The future success of the EOS network is likely somewhat dependent on the ongoing participation in network development by the ENF Foundation. If this entity ceases its support for the network such actions may be detrimental to the project going forward.
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 EOS. We encourage all Catalyx users to perform their own due diligence to assess the risks associated with EOS 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 EOS or any of the other crypto contracts or crypto assets made available through the Platform, including an opinion that EOS 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.