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 Bitcoin Cash (“BCH”). We created this summary to help you understand the basics of BCH as well as some of the risks involved in trading it. While we tried to describe the key features of BCH here, this summary isn’t meant to tell you everything you’d want to know before investing in BCH. You should also do your own research on BCH to make sure you are comfortable investing in it.
Description of BCH
To understand why BCH was created, it helps to understand how bitcoin (“BTC”) transactions are processed. When you send BTC to someone else, the pending transaction is included in the blockchain. Transactions are packed together into blocks, which are then confirmed by BTC miners who verify transactions in exchange for the reward of new BTC being released. The block size of BTC is only one MB, a feature intended to, among other things, lower the threat of DDoS attacks and ensure decentralization is maintained.
At a time when BTC prices were rising rapidly, transaction fees and times had grown such that certain BTC community members became concerned that its use was becoming inefficient. These members proposed to make faster transaction speeds possible by scaling up the block size from one MB to eight MB. However, a consensus was not reached on this proposal. As a result, BCH was created as a result of a fork in BTC’s code (for more information on forks, please see the risk statement we publish on our website).
In addition to allowing faster transactions, the difference in block size between BTC and BCH results in BCH transaction fees being much cheaper than BTC transactions. Since its launch, BCH has seen average transaction fees that are only a fraction of what you would have to pay using BTC – at times lower than a cent. The faster transaction speeds and lower costs make BCH a more efficient payment method for small, regular transactions. These features also allow for more people to use BCH at the same time. Higher traffic volumes on BTC increase delays, whereas BCH can handle larger traffic surges.
There are also certain differences in the algorithms underlying BTC and BCH which differentiate the two crypto assets. For example, the forking of a crypto asset can result in something called a replay. Replays are transactions which are made on one blockchain and are then broadcast on the other blockchain. Replays can cause a large fluctuation in the price of a crypto asset. One of the features of BCH is its use of a different hash algorithm which prevents the occurrence of replays. Also, BCH implements an algorithm that attempts to ensure that the blockchain will function normally on a sudden increase or decrease in mining activity.
Despite these differences, BCH and BTC share many similarities. Both rely on underlying networks which have associated blockchains, utilize “private keys” and “wallets” to enable transfers and track ownership, facilitate the creation of new supply via “mining”, include software source code that governs the cryptographic operations that verify and secure transactions and allow participants in the network to modify the open-source software and persuade other users and miners to adopt the proposed modification. In addition, BCH and BTC can both be thought of as a means of exchange and/or a store of value.
Like other crypto assets, there are some general risks to investing in BCH. We identify many of these general risks in the risk statement we publish on our website. We also point out some risks that are specific to BCH below. While we tried to describe the key risks associated with BCH here and in our risk statement, these aren’t all of the risks associated with trading in BCH. You should also do your own research on BCH to make sure you are comfortable investing in it.
Increased Risk of Forking
Given BCH’s development history, it may be more likely than other crypto assets to experience a fork. As noted above, BCH is itself the result of a fork from the BTC network. In addition, the BCH network experienced a fork in 2018 which led to the creation of Bitcoin SV – another crypto asset (not available for trading on the Platform). For more information on the general risks associated with forks, please see the risk statement we publish on our website.
Decrease in Block Reward
A BCH halving is an event where the block reward for mining new BCH is halved, meaning that BCH miners will receive 50% less BCH for every transaction they verify. BCH halving occurs every 210,000 blocks, which equates to a halving occurring approximately once every 4 years. In 2020, a BCH halving occurred which reduced the amount of BCH miners receive from 12.5 BCH per block to 6.25 BCH per block. Some miners left the BCH network after this halving. Another halving event is scheduled to occur in 2024. If the BCH network lacks miners to develop the network, processing speeds may decrease and the network may be more vulnerable to security threats (such as a 51% attack).
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 BCH 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 BCH, including an opinion that BCH is not itself a security and/or derivative.