Crypto Asset Statement: ETC (Ethereum Classic)
Last updated: March 29, 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 ETC (Ethereum Classic). This summary sets out certain key information about ETC as well as some of the risks involved in trading it. While we tried to describe the key features of ETC here, this summary doesn’t provide all relevant information on ETC. 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 ETC
What is ETC?
ETC is the native crypto token for the Ethereum Classic blockchain. ETC has two use cases (i) it can be used to pay gas fees for transactions completed on the Ethereum Classic blockchain such as operating smart contracts and apps and (ii) it can be used as a store of value similar to Bitcoin. The maximum number of ETC that can be created is capped at 210,700,000 tokens. There were approximately 140 million ETC in circulation at the time this statement was written. Additional ETC are created by miners completing blocks on the network similar to the way new Bitcoins are generated.
About Ethereum Classic
Ethereum Classic is the result of a hard fork of the Ethereum blockchain network which was caused by an ideological rift in the Ethereum community in 2016. The catalyst for the fork was a significant hack caused by a security vulnerability in a decentralized application operating on the Ethereum network that resulted in the theft of millions of dollars’ worth of Ether (ETH). The hard fork of the Ethereum network was essentially implemented to reverse the hack from Ethereum’s ledger in order to return the ETH stolen through the hack to its previous owners.
At the time of the hack Ethereum ecosystem participants did not unanimously agree that a hard fork was the correct response to the hack. The result of this disagreement resulted in those ecosystem participants that agreed to the hard fork to form the current Ethereum network, while those participants who did not agree to the fork continued to build on and use the original Ethereum network. The original network subsequently became known as Ethereum Classic. The reasoning behind those choosing to stay with the original network was that the blockchain should be preserved as an immutable ledger; in their view the hard fork corrupted this principle.
The Ethereum Classic protocol is a duplicate of the original Ethereum protocol. Both Ethereum Classic and Ethereum are smart contract platforms that allow users to build decentralized applications on their respective blockchains, and they remain similar from a general functional perspective. As a proof of work blockchain Ethereum Classic operates on a consensus mechanism. This means that new ETC tokens are created and transactions are validated through mining. Miners operating on the Ethereum Classic blockchain earn rewards in the form of ETC tokens in exchange for their work. Unlike Ethereum which recently adopted a proof of stake mechanism there are no plans in the Ethereum Classic ecosystem to deviate from the proof of work model.
Risks
This overview provides a summary of certain risks associated with ETH. We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading ETH, 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.
51% Attacks. As a proof of work blockchain network, Ethereum Classic is subject to the risk of 51% attacks. A 51% attack occurs when miners who collectively control 51% of the network’s mining hash rate take actions to prevent the network from operating as designed including: preventing new transactions from being confirmed, halting payments between users and reversing transactions which could allow them to double spend tokens on the network. The Ethereum Classic network has been subject to successful 51% attacks in the past. In response to these attacks certain updates and changes were implemented on the network aimed at making future attacks more difficult.
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 ETC. We encourage all Catalyx users to perform their own due diligence to assess the risks associated with ETC 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.
Regulatory Information
No securities regulatory authority in Canada has expressed an opinion about ETC or any of the other crypto contracts or crypto assets made available through the Platform, including an opinion that ETC 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.