About this Statement
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 through the Platform is LRC. We created this summary to help you understand the basics of LRC as well as some of the risks involved in acquiring it. While we tried to describe the key features of LRC here, this summary isn’t meant to tell you everything you’d want to know before acquiring it. You should also do your own research on LRC to make sure you are comfortable acquiring it.
About NEAR Protocol
NEAR is the native token of the Near Protocol, which is a layer-1 proof-of-stake blockchain network. NEAR’s technology leverages sharding, a fundamental aspect of Ethereum’s upgrading plans, to facilitate its high transaction throughput and scalability. It has been architected to be developer and user friendly, which intends to accelerate the dApp development process and minimize resistance to new user onboarding. It’s mainnet launched in April 2020, with on-chain governance activated in October 2020.
Staking Rewards and Fees
Staking rewards are computed and distributed after each successful epoch. If a reward is accrued after during an epoch, it will be issued immediately upon the completion of the epoch. When rewards are received by Bitbuy, Bitbuy will provide statements to users indicating the amount of the rewards that the user is entitled to as well as the total rewards that were earned and any fees payable. For each epoch, your share of NEAR rewards is proportionate to the amount of NEAR that you had staked when the epoch began.
Staking Fees
Each crypto asset for which Bitbuy provides staking services is subject to specific fees because of the unique nature of each blockchain network. These fees are calculated on a percentage basis in relation to the amount of rewards earned. Bitbuy’s service fee may be up to 30% of net rewards earned by a user (as more fully described in our fee schedule.
With respect to any rewards earned on your staked NEAR: (i) Bitbuy’s custodian, BitGo, will be entitled to a fee and may pay a portion of that fee to any third-party service provider it selects to act as validator; (ii) any remaining portion of the rewards (the “Net Rewards”) will be delivered to one of Bitbuy’s custodial wallets with BitGo; (iii) Bitbuy will be entitled to a fee of 30% in respect of the Net Rewards (the “Bitbuy Services Fees”); and (iv) after the Bitbuy Service Fee has been paid, your account will be credited with any remaining portion of the rewards, and, subject to any unbonding, lock-up or cooling-down period, you will be able to hold, sell or withdraw your rewards.
Supported Validators
Currently, the third-party service provider we use is our custodian, BitGo. BitGo is regulated as a trust company under the Division of Banking in South Dakota. Pursuant to Bitbuy’s relationship with BitGo, BitGo may act as the validator in respect of staked crypto assets or may select a third-party service provider to act as the validator. BitGo currently has a contractual relationship with Figment, whereby Figment acts as validator for the crypto assets stored in Bitbuy’s custodial wallets with BitGo. Headquartered in Toronto, Figment is one of the world’s largest blockchain infrastructure and services providers.
Epochs
Each epoch, which is the period of time during which validators earn rewards, lasts approximately twelve hours.
Slashing
Validators miss out on NEAR rewards if they fail to participate when called upon, and their existing stake can be destroyed if they behave dishonestly.
Bitbuy may, at its sole discretion, transfer reimbursements for slashing penalties it receives from BitGo to its users less any administrative costs or expenses Bitbuy incurs in reimbursing users. In the event a supported NEAR validator is slashed, Bitbuy has no obligation to replace any lost NEAR or otherwise provide any compensation for any losses. Negative impacts of slashing will be allocated to all clients using the staking service in proportion to the amount of NEAR they had staked.
Risks
As with all assets, investing in NEAR Protocol is not without some general risks. Many of these risks are identified and explained in our Risk Statement. In addition to the general risks, we outline some risks that are specific to NEAR Protocol below. While we make an effort to identify every source of risk, we encourage you to do your own research and ensure you are comfortable investing in NEAR Protocol.
NEAR token distribution to insiders
Of the entire initial supply of NEAR tokens, over 47% was distributed to what might be considered insiders. The core contributors received 14%, backers received 16.7%, small backers received 6.1%, and the NEAR Foundation received 10% of the entire initial supply.¹ Investors should consider this concentrated distribution when evaluating NEAR.
Network breach that may have exposed wallet keys in 2022
In August 2022, the NEAR Foundation revealed that they discovered a security breach and patched the vulnerability two months prior. Their revelation came immediately after Solana, a competing layer 1 network, experienced a wallet hack. NEAR’s vulnerability arose from their wallet recovery system, which may have allowed a third party to access seed phrases. Specifically, leveraging the email recovery process would inadvertently expose the seed phrase to NEAR’s third party analytics platform. NEAR reported that the rectified the vulnerability immediately and identified all parties that may have had access to the information.² However, it is important that prospective investors understand the situation and NEAR’s communication of it, when evaluating NEAR.
Bitbuy’s Due Diligence for Digital Assets
To be made available for trading on Bitbuy’s platform, a digital asset must pass the following due diligence reviews:
- Bitbuy Securities Law Assessment
- Bitbuy Digital Asset Security Audit
- New Digital Asset Business Case
Bitbuy undertakes these three levels of due diligence in order to determine whether the digital asset is compliant with our legal and regulatory obligations, is secure, and has historical data supporting a beneficial business case. Bitbuy’s New Product Committee must provide final approval for a new digital asset to be made available on the platform.
References:
- NEAR Foundation. “NEAR Token Supply and Distribution.” October 16, 2020. https://near.org/blog/near-token-supply-and-distribution/
- Andrew Hayward. “Near Protocol Discloses Wallet Breach That May Have Exposed Private Keys.” Decrypt. August 5, 2022. https://decrypt.co/106819/near-protocol-wallet-breach-exposed-private-keys
Regulatory Information
Bitbuy is offering crypto contracts to purchase and sell LRC in reliance on a prospectus exemption contained in the exemptive relief decision Re Bitbuy Technologies Inc. dated November 30, 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 LRC, including an opinion that LRC is not itself a security and/or derivative.