Crypto Asset Statement: AVAX (Avalanche)
Last updated: May 15, 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 AVAX (Avalanche). This summary sets out certain key information about AVAX as well as some of the risks involved in trading it. While we tried to describe the key features of AVAX here, this summary doesn’t provide all relevant information on AVAX. 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 Avalanche (AVAX)
Avalanche is a layer-1 blockchain network (similar to Ethereum and Bitcoin) that has three broad use cases:
building application specific blockchains;
building and launching scalable decentralized applications;
building complex digital assets with custom rules, covenants and riders.
The Avalanche network infrastructure is built to enable modular blockchains that are scalable and interoperable with other entities on the Avalanche blockchain, and the project strives to build to an increasing degree of connection to Ethereum and the wider blockchain ecosystem. As an Ethereum-compatible layer-1 smart contract platform, Avalanche is capable of hosting a variety of Web3 protocols including decentralized exchanges, NFT marketplaces, borrowing and lending pools, DeFi farming platforms and virtual portfolio management solutions among others.
Avalanche utilizes Snowball, a Proof-of-Stake (PoS) consensus algorithm designed by Ava Labs, which requires users to stake AVAX to become transaction validators. Validators are required to stake at least 2,000 AVAX coins to participate in consensus. The Avalanche network can be adapted and amended by consensus of the network participants. Any entity operating a participating node is entitled to issue a proposal which will then be voted on by all participating nodes. Avalanche provides on-chain governance for critical parameters of the network where participants are able to vote on changes to the network and settle network upgrade decisions democratically, including factors such as the minimum staking amount and time, minting rate, transaction fees, and others.
What is AVAX?
AVAX is the native token of the Avalanche network and is used to secure the network, pay network fees and provides the basic unit of account between blockchains deployed on the Avalanche network. AVAX has a capped maximum supply of 720 million tokens. The rate at which the maximum cap is reached is subject to governance. In other words the rewards paid to validators can be adjusted by the network to either increase or decrease the rate of inflation.
Risks
This overview provides a summary of certain risks associated with AVAX. We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading AVAX, 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.
Dependence on Avalanche Developers. The future success of the Avalanche network is likely dependent on the ongoing participation in network development by Ava Labs and the Avalanche Foundation. If these entities cease their support for the network such actions may be detrimental to the project going forward.
Regulatory Risks. Ava Labs and the Avalanche Foundation has engaged in a number of private and public token sales over the last several years. It is unknown whether these activities were conducted in accordance with securities and other regulatory requirements in the jurisdictions where these sales occurred. Securities and other regulators have increased enforcement actions against cryptocurrency issuers over the last several years and all cryptocurrency issuers face a risk of enforcement action if token issuances were not completed in accordance with regulatory requirements. Any enforcement action could be expected to have a negative impact on the price of the token.
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 AVAX. We encourage all Catalyx users to perform their own due diligence to assess the risks associated with AVAX 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 AVAX or any of the other crypto contracts or crypto assets made available through the Platform, including an opinion that AVAX 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.