Crypto Asset Statement: MATIC (Polygon)
Last updated: March 17, 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 MATIC (Polygon). This summary sets out certain key information about MATIC as well as some of the risks involved in trading it. While we tried to describe the key features of MATIC here, this summary doesn’t provide all relevant information on MATIC. 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 MATIC
What is MATIC?
MATIC, the native token of the Polygon network, is an ERC-20 token running on the Ethereum blockchain. MATIC tokens are used for payment services on the Polygon networks and as a settlement currency between users who operate within the Polygon ecosystem. The transaction fees on Polygon sidechains are also paid in MATIC tokens. MATIC is also utilized as a governance token, which allows token holders to influence the project’s development by submitting and voting on proposals. Additionally, users may be able to stake their MATIC tokens to obtain staking rewards.
Polygon (formerly Matic Network) was launched in October 2017. Polygon was co-founded in India by Jaynti Kanani, Sandeep Nailwal and Anurag Arjun, two experienced blockchain developers and a business consultant. The Polygon network is a platform for Ethereum scaling and infrastructure development. Its core component is Polygon SDK, a modular, flexible framework that supports building multiple types of applications. Polygon is a Layer 2 scaling solution which means that it is built on top of an existing blockchain network, in this case Ethereum. The project seeks to stimulate mass adoption of cryptocurrencies by resolving the problems of scalability on the Ethereum network.
Polygon allows applications built on the Ethereum network to be operated faster at a fraction of the cost of operating directly on the Ethereum network. Polygon’s ability to allow applications developed on the Ethereum network to be scaled affordably has led to a strong adoption rate among blockchain ecosystem participants as demonstrated by its use by major brands like Draft Kings, the NFL, Liverpool Football Club, Dolce and Gabbana, Adidas, Prada, Adobe, Meta, and Stripe among others.
Polygon provides a wide variety of modules developers can use to easily deploy and configure their own custom blockchain. These include consensus and governance modules, as well as a variety of execution environments and virtual machine implementations. Blockchains launched in this way are configured to benefit from the MATIC proof-of-stake (PoS) sidechain, which uses a network of validators to dramatically speed up transactions and cut fees down to a minimum — while finalizing everything on the Ethereum mainchain.
This overview provides a summary of certain risks associated with MATIC. We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading MATIC, 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.
Malicious Attacks. Like other blockchain networks Polygon is subject to risk of attacks by hackers and other malicious parties. Polygon has suffered several such hacks in the past which has resulted in MATIC being stolen by hackers including a theft of approximately 800,000 MATIC in December, 2021. Polygon has acted swiftly in the past to address attacks to its network and limit the damage of such attacks.
Dependence on Polygon Developers. The future success of the Polygon network is likely dependent on the ongoing participation in network development by the founders and the Polygon 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 there are currently 587,547 individual holders of MATIC with the top 10 holders holding 67.62% of all MATIC and the top 100 holders holding 85.43% of all MATIC. Top holders include the founders, the Polygon Foundation and large crypto exchanges such as Binance, Kraken, Gemini, Bitfinex and Uniswap. 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 MATIC. We encourage all Catalyx users to perform their own due diligence to assess the risks associated with MATIC 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 MATIC or any of the other crypto contracts or crypto assets made available through the Platform, including an opinion that MATIC 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.