Crypto Asset Statement: ETH (Ethereum)
Last updated: April 19, 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 Ether (ETH). This summary sets out certain key information about ETH as well as some of the risks involved in trading it. While we tried to describe the key features of ETH here, this summary doesn’t provide all relevant information on ETH. 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 Ethereum
Ethereum is a decentralized blockchain network designed for smart contracts and decentralized applications (dApps). It was created by Vitalik Buterin in 2013 to address the perceived limitations of Bitcoin's scripting language, particularly the absence of Turing completeness. As the first cryptocurrency asset to gain widespread adoption after Bitcoin, Ethereum is often referred to as blockchain 2.0 due to its advanced functionality and versatility. The platform operates as a global network of nodes that execute and manage smart contracts.
Similar to the Bitcoin network, the Ethereum Network maintains a decentralized, transparent, and immutable public ledger called a "blockchain" that documents all transactions. The open-source software code of the Ethereum Network comprises the protocol governing the generation of ETH and the cryptographic mechanisms that authenticate and secure ETH transactions. However, unlike the Bitcoin network, the Ethereum Network enables peer-to-peer contracts, also called smart contracts, as well as decentralized applications.
A major aspect of Ethereum is its smart contract capability, providing developers the ability to create dApps that run on the blockchain. These dApps have a broad range of potential applications, including financial transactions, voting systems, supply chain management, and social networks. The Ethereum network also allows developers to build their own digital asset on top of the network. A popular protocol for this process is the ERC-20 protocol which allows for the creation of fungible tokens. Many other crypto assets are ERC-20 tokens and run on the Ethereum network.
Ether is the Ethereum Network's native cryptocurrency, and can be utilized to cover transaction fees and computational services on the network, such as deploying smart contracts and executing dApps. Apart from serving as a transactional currency, ETH has diverse roles in the Ethereum network. One such use is as collateral to ensure loans or participation in decentralized finance (DeFi) applications. Additionally, staking ETH is an option for individuals to engage in the network's consensus process and obtain incentives for verifying transactions on the blockchain.
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 Platform.
Recent Changes to the Network. The Ethereum Network recently transferred from a proof-of-work mechanism for validating blockchain transactions to a proof of stake model. The change was made primarily to provide a more energy efficient way to validate transactions and add new blocks to the blockchain. This was a major change for the network, and while so far this change has not resulted in major changes to the price of ETH, the full impact of this change may not yet be apparent.
Risk of Forking. Ethereum has been subject to forks of the blockchain in the past. There is a possibility that such forks could occur again in the future, which may impact the value or sustainability of ETH.
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 ETH. We encourage all Catalyx users to perform their own due diligence to assess the risks associated with ETH 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 ETH or any of the other crypto contracts or crypto assets made available through the Platform, including an opinion that ETH 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.