Crypto Asset Statement - Celestia (TIA)

Updated April 03, 2024 15:34

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 on the Platform is Celestia (“TIA”). We created this summary to help you understand the basics of TIA as well as some of the risks involved in trading it. While we tried to describe the key features of HBAR here, this summary isn’t meant to tell you everything you’d want to know before investing in TIA. You should also do your own research on TIA to make sure you are comfortable investing in it.

About TIA

TIA is the native token of Celestia. Celestia describes itself as a scale-out data availability-focused blockchain. It uses a core component of sharding technology to give itself the scalability that allows it to compete with other modern blockchains, expanding with the amount of users and allowing developers to launch their own blockchain on top of Celestia. Its main differentiator is its efficient solution to the data availability problem be empolying light nodes to sample chunks of each block to verify data. This allows the block size to increase without increasing the chain verification costs.1

Risks

Like other crypto assets, there are some general risks associated with investing in TIA. 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 TIA below. While we tried to describe the key risks associated with INJ here and in our risk statement, these aren’t all of the risks associated with trading in TIA. You should also do your own research on TIA to make sure you are comfortable investing in it.

Celestia relation to the Cosmos Network

Although Celestia is a layer-1 blockchain, it is heavily intertwined with the Cosmos Network. Celestia was developed using the Cosmos SDK, and it utilizes CosmWasm for its smart contract and dApp development on the network. CosmWasm was originally developed for the Cosmos ecosystem, but has evolved to be used with other IBC-compatipble networks.2 While native TIA and the Celestia blockchain are not reliant on the Cosmos network as an ERC20 token is reliant on the Ethereum network, there are still clear links between Celestia and Cosmos as explained above. This relation between the two networks could have the potential to impact market price of either asset based on news or movements in the other asset. Potential investors should be aware of the link between Celestia and Cosmos and consider this when evaluating TIA for investment.

Competition amongst other layer-1 blockchains

Celestia is one of many new layer-1 blockchains that aim to solve the problems of transaction cost, transaction throughput, scalability, and speed that exist with older blockchains. These new networks are in direct competition with each other for similar activity and often employ similar solutions to the same problems listed above.

Staking TIA

Celestia employs a delegated proof-of-stake (DPoS) system for securing its network, called CometBFT, which is a fork of the Tendermint Core. Tendermint is the standard consensus mechanism for networks built using the Cosmos SDK. This allows TIA holders to delegate their tokens to be staked with an approved validator, which builds that validator's reputation and relative size within the network of validators. As validators earn rewards for their activities in the blockchain, those who have delegated their TIA to those validators earn a share of those rewards proportional to the amount of TIA that the holder has staked with the validator.

Staking Rewards

Staking rewards are computed and distributed after each successful block. If a reward is accrued during a block, it will be issued immediately upon the completion of the block. 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 block, your share of TIA rewards is proportionate to the amount of TIA that you had staked when the block began.

Bitbuy's staking service is designed to automatically stake any rewards (“auto re-staking") that are earned by clients through the staking service. This means that when rewards are distributed to any client account, those rewards immediately enter that network’s bonding period. Once the bonding period is complete, the rewarded amount joins the pre-existing staked balance to earn rewards through the staking service. Currently, Bitbuy does not offer the ability for clients to opt out of the reward auto re-staking mechanism. However, if a client withdraws enough of their staked balance, causing the total staked amount to fall below the minimum stake amount for that asset, no rewards earned from then onwards will be automatically staked and instead will be credited to the client’s unstated holdings. Any assets that were in the bonding period when the staked amount fell below the minimum amount will enter the unbonding period immediately upon completing the bonding period, after which it will be added to that client’s unstaked holdings.

The estimated rewards percentage that appears throughout the Bitbuy app is a calculated annual percentage yield (APY) rate, which is derived from an APY rate that reported to us from our Staking partner, BitGo. The reported rate is then reduced by BitGo’s fee and Bitbuy's fee, leaving the estimated rewards percentage that is displayed to in the app. The displayed rate is approximately what you might earn by staking the asset, but is subject to fluctuations based on various factors for each network and is not guaranteed. Additionally, it’s important to note that past performance is not necessarily indicative of future performance with respect to rewards earned from staking any asset. Bitbuy evaluates the net rewards paid to clients against the calculated and displayed estimated rewards percentage on an ongoing basis, at least quarterly.

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 https://bitbuy.com/fees).

Bitbuy receives net rewards from its Custodian, BitGo. This means that BitGo’s fees of 9% of gross rewards are removed on-chain from the total amount earned by the validator before the net amount is distributed to CCML. CCML then takes the amount received, removes the fee as explained below, and distributes the remaining amount proportionally to each user that had assets staked for the entirety of the period in which the rewards were earned.

With respect to any rewards earned on your staked TIA: (i) Bitbuy’s custodian, BitGo, will be entitled to a fee (as described above) 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 up to 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.

Slashing

Validators miss out on TIA 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 Celestia validator is slashed, Bitbuy has no obligation to replace any lost TIA 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 TIA they had staked.

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.

Regulatory Information

Bitbuy is offering crypto contracts to purchase and sell in reliance on a prospectus exemption contained in the exemptive relief decision Re Bitbuy Technologies Inc. dated November 30th, 2023. 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 TIA, including an opinion that TIA is not itself a security and/or derivative.

References:

“How Celestia Works.” Celestia. 2024. https://docs.celestia.org/learn/how-celestia-works/overview
“Integrate Celestia for service providers”. Celestia. 2024. https://docs.celestia.org/developers/integrate-celestia