Bitbuy Technologies Inc. (“Bitbuy” or “we”) believes that our users should understand the crypto assets that they are able to trade using our crypto trading platform (the “Platform”). One of the crypto assets we offer on the Platform is ARB. We created this summary to help you understand the basics of ARB as well as some of the risks involved in trading it. While we tried to describe the key features of ARB here, this summary isn’t meant to tell you everything you’d want to know before investing in ARB. You should also do your own research on ARB to make sure you are comfortable investing in it.
Description of Arbitrum
The Arbitrum protocol was launched in August 2021. It is an Ethereum Layer-2 scaling solution founded by Offchain Labs. Arbitrum is now a suite of technologies including the Arbitrum Nitro technology stack and Arbitrum Nova. Arbitrum Nitro runs a fork of Geth (an execution-layer client that defines the Ethereum state transition function and handles network-layer logic), and WASM as its underlying virtual machine for fraud proofs. Arbitrum Nova is the first Arbitrum AnyTrust Protocol, a protocol that manages data availability with a permission set of parties. This protocol reduces transaction fees by introducing an additional trust assumption for data availability. As an Ethereum Layer-2 scaling solution, Arbitrum chains are EVM compatible and rely on Ethereum for settlement and fraud proofs. Arbitrum is commonly referred to as an “optimistic rollup.”
Optimistic rollups are Layer-2 protocols designed to extend the throughput of the Ethereum network. They process transactions off-chain (outside of the Ethereum network), which improves processing speeds for transactions. Optimistic rollups derive their security by publishing transaction data on-chain (on the Ethereum network). Any transaction data posted to the Ethereum network is settled with ETH.
Optimistic rollups bundle multiple transactions and settle them together off-chain. Costs for end-users are reduced by spreading associated transaction costs across the bundle. A sequencer (entity that batches transactions for a rollup) is relied upon to bundle the transactions and feed the transaction data to the Ethereum network. Like a validator, sequencers process transactions, produce rollup blocks, and submit rollup transactions to the Layer-1 network (like Ethereum). When optimistic rollups post transaction data on-chain, they rely on specialized proofs, referred to as fraud proofs, to detect incorrect transactions.
Optimistic rollups post transaction data to Layer 1 networks without verifying correctness at the outset. Once the rollup bundle’s transaction data is posted to Ethereum, for a prescribed period of time (called a “challenge period”) anyone can challenge the transaction data posted by computing a fraud proof. If the fraud proof is successful, the rollup re-executes the transactions and updates the rollup’s state accordingly. The sequencer responsible for including an incorrectly executed transaction in a block will receive a penalty in the event of a successful fraud proof. If a rollup’s posted transaction data remains unchallenged after the challenge period ends, it is deemed valid and accepted on the Ethereum network. Under this model, one honest node is required to advance the chain correctly.
Description of ARB Token
While Arbitrum has become one of the most popular Ethereum scaling solutions in recent years, ARB (Arbitrum) tokens first came into public circulation through a public “airdrop” on March 23, 2023 to individuals that previously interacted with the Arbitrum mainnet. In connection with the airdrop, the Arbitrum Foundation and associated Arbitrum DAO were announced, with the plan for governance and management of the Arbitrum DAO to be conducted through those bodies. Holders of ARB tokens will be allowed to vote on proposals submitted to the DAO. The goal of launching the Arbitrum Foundation and Arbitrum DAO is to decentralize control of the development and direction of the Arbitrum ecosystem.
*Please not that at this time Bitbuy does not offer staking for ARB and clients holding ARB in their account cannot participate in Arbitrum DAO governance with the tokens held in a User Account.
Like other crypto assets, there are some general risks associated with investing in ARB. We describe many of these general risks in the risk statement we publish on our website, including risks relating to: (i) volatility; (ii) access, loss or theft, (iii) control of processing power; (iv) settlement of transactions on crypto asset networks; (v) momentum pricing; (vi) private keys; (vii) internet disruptions; (viii) faulty code; (ix) network development and support; (x) regulatory risk; (xi) network forks; (xii) air drops; (xiii) voting rights; (xiv) cybersecurity incidents and other systems and technology problems; and (xv) unforeseeable risks. We also point out some risks that are specific to ARB below. While we tried to describe the key risks associated with ARB here and in our risk statement, these aren’t all of the risks associated with trading in ARB. You should also do your own research on ARB to make sure you are comfortable investing in it.
To the extent that competing optimistic rollup technologies (like Optimism) or other Layer-2 scaling solutions gain popularity and greater market share, the use and price of ARB could decrease and be negatively impacted, which may adversely affect its price. Similarly, Arbitrum and the price of ARB could be negatively impacted by competition in the Arbitrum ecosystem or the development of Arbitrum based networks that do not interact with the Arbitrum DAO.
How Bitbuy Decides to List Crypto Assets
Bitbuy reviews crypto assets before making them available for trading on the Platform. In making our decision to list a new crypto asset, we consider publicly-available information about the crypto asset, including (among other things) its creation, design, governance, usage, supply, demand, maturity, utility, liquidity, material technical risks and legal and regulatory risks.
To date, we have only made crypto assets available for trading on the Platform which have significant supply, demand and liquidity. In our experience, crypto assets with these qualities tend to also satisfy the other criteria we evaluate as part of our review. That being said, our review process is fulsome and flexible, and we don’t prioritize any one factor over another. You should review the risk statement published on our website for more information about our procedures for determining whether to make a crypto asset available for trading on the Platform.
Bitbuy is offering crypto contracts to purchase and sell ARB in reliance on a prospectus exemption contained in the exemptive relief decision Re Bitbuy Technologies Inc. dated November 30th, 2021. The statutory rights of action for damages and the right of rescission in section 130.1 of the Securities Act (Ontario) and similar legislation in the other provinces and territories of Canada would not apply in respect of a misrepresentation in this Statement.
No Canadian securities regulatory authority has expressed an opinion about ARB, including an opinion that ARB is not itself a security and/or derivative.