Crypto Asset Statement: BTC (Bitcoin)
Last updated: April 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 Bitcoin (BTC). This summary sets out certain key information about BTC as well as some of the risks involved in trading it. While we tried to describe the key features of BTC here, this summary doesn’t provide all relevant information on BTC. 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 BTC
Bitcoin is a cryptocurrency created by an unknown person or group of people using the name Satoshi Nakamoto in 2008. It is considered to be the first decentralized crypto asset. Bitcoin appeared in 2009 after its software implementation was made available as open-source code. Without a central bank or single administrator, Bitcoin is a decentralised digital currency that can be sent directly between users on the peer-to-peer Bitcoin network. Network nodes use cryptography to verify transactions and store them in a publicly distributed ledger known as a blockchain.
Being the first and most prevalent cryptocurrency in history, Bitcoin is practically synonymous with the industry. It is the highest valued cryptocurrency, and its users' collective authority underpins its governance. Every Bitcoin transaction is recorded on the blockchain, as well as every Bitcoin address linked to a certain amount of Bitcoin. Bitcoin's network is governed by free competition and voluntary consensus among its users rather than a single central authority. Participants tweak the open-source software and convince other Bitcoin users and miners to embrace the suggested update to settle disputes in the Bitcoin Network.
Those utilizing Bitcoin for purchasing goods and services perceive it as a medium of exchange, albeit the number of businesses accepting Bitcoin as payment is relatively limited. Conversely, investors and speculators perceive Bitcoin as a store of value.
This overview provides a summary of certain risks associated with BTC. We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading BTC, 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.
Concentration of Bitcoin Miners. Bitcoin miners are responsible for validating transactions and creating new blocks on the Bitcoin network. In exchange for performing these services miners are compensated in Bitcoin that is ‘unlocked’ by adding blocks to the network and by transaction fees paid by network users. While the premise of Bitcoin was to provide decentralized ownership at times in the past the concentration of miners was raised as a possible threat to the network. High concentration of mining power (hashrate) in the hands of relatively few entities increases the risk to the network of 51% attacks.
Significant Energy Consumption. The Bitcoin network's energy consumption, which is substantial due to the considerable computing power needed for Bitcoin mining, could be considered unsustainable in the long run leading to regulatory actions taken to limit Bitcoin mining. Any such actions could have a negative affect on the value of BTC.
Bitcoin Halving and Transaction Fees. Bitcoin halving refers to the reduction of block rewards by 50% for miners verifying new bitcoin transactions. This event takes place every 210,000 blocks or approximately every 4 years. The most recent halving occurred on May 11, 2020, lowering the block reward from 12.5 to 6.25 Bitcoin. As block rewards continue to diminish, mining incentives will increasingly rely on transaction verification fees to encourage miners to contribute computing power to the blockchain. However, if these fees become excessive, this could negatively affect the value of BTC.
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 BTC. We encourage all Catalyx users to perform their own due diligence to assess the risks associated with BTC 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 BTC or any of the other crypto contracts or crypto assets made available through the Platform, including an opinion that BTC 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.