About this Summary
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 SUSHI. We created this summary to help you understand the basics of SUSHI as well as some of the risks involved in trading it. While we tried to describe the key features of SUSHI here, this summary isn’t meant to tell you everything you’d want to know before investing in SUSHI. You should also do your own research on SUSHI to make sure you are comfortable investing in it.
Description of SUSHI
SUSHI is a governance token for the SushiSwap protocol (“SushiSwap”), a suite of smart contracts that together create an automated market maker. SushiSwap’s creation in 2020 was fraught with controversy. SushiSwap was created by a pseudonymous individual or group called Chef Nomi with the help of pseudonymous co-founders sushiswap and 0xMaki. This group created SushiSwap by copying the open-source code underlying the Uniswap protocol. SushiSwap then attracted users from the Uniswap protocol by promising them SUSHI if they locked up funds in a specific liquidity pool on the Uniswap protocol, which funds were to be transferred to SushiSwap. However, Chef Nomi removed approximately $13 million worth of funds from the liquidity pool before the funds were moved. As a result of backlash received from the SushiSwap community, ChefNomi gave control of SushiSwap to Sam Bankman-Fried, the head of a cryptocurrencies derivative trading firm called Almeda Research, and also returned the funds to the liquidity pool. The funds were subsequently transferred to SushiSwap as originally intended.
As an automated market maker, SushiSwap is designed to allow the exchange of crypto assets. Automated market makers are a type of decentralized exchange. Decentralized exchanges can be contrasted with centralized exchanges (such as a stock exchange or a platform like Bitbuy), which generally use a central order book where buyers and sellers create orders organized by price level that are progressively filled as demand shifts. An automated market maker instead functions by replacing the buy and sell orders in an order book market with a “liquidity pool” of two assets, both valued relative to each other. As one asset is traded for the other, the relative prices of the two assets shift, and a new market rate for both is determined. As a result, a buyer or seller trades directly with the liquidity pool, rather than with specific orders placed by other participants on the exchange.
The liquidity pools comprising SushiSwap are smart contracts in which users of SushiSwap contribute crypto assets. These users, commonly known as “liquidity providers,” lock two assets into each liquidity pool. For example, SushiSwap’s AAVE/ETH liquidity pool consists of equal values of AAVE and ether deposits from liquidity providers. Users who trade against assets in the pool pay a fee that is then distributed to liquidity providers and holders of SUSHI.
As noted above, SUSHI is a governance token. Generally speaking, governance tokens are tokens that allow their holders to propose or vote on changes to a crypto asset network or protocol. SUSHI specifically allows its holders to help govern SushiSwap by voting on major structural changes and any instance in which SUSHI may be used to incentivize developers. In addition to this governance function, SUSHI holders who stake their SUSHI are able to receive a portion of the fees associated with trading activities undertaken on SushiSwap as a reward.
Like other crypto assets, there are some general risks associated with investing in SUSHI. 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 SUSHI below. While we tried to describe the key risks associated with SUSHI here and in our risk statement, these aren’t all of the risks associated with trading in SUSHI. You should also do your own research on SUSHI to make sure you are comfortable investing in it.
Price Dependence on SushiSwap
As the primary function of SUSHI is to provides its holders with governance rights in relation to SushiSwap and rewards derived from trading activities undertaken on SushiSwap, SUSHI’s value is linked to the success of SushiSwap more generally. In order to be successful, SushiSwap requires users both to provide liquidity to its liquidity pools and to trade with its liquidity pools. Should demand decline for SushiSwap, it is likely that the value of SUSHI will also decline.
Regulatory Risk of Decentralized Exchanges
The regulation of facilities for trading or exchanging crypto assets continues to evolve in North America and within foreign jurisdictions. Governmental authorities may implement new regulatory schemes or enforce existing regulatory requirements in a manner which could restrict the use of SushiSwap and otherwise impact the demand for and value of SUSHI.
Competition from Crypto Asset Trading Platforms and Other Decentralized Exchanges
SushiSwap faces competition from centralized crypto asset trading platforms and other decentralized exchanges. Decentralized exchanges are typically not as easy to use as centralized crypto asset trading platforms, and generally lack the speed and liquidity of centralized platforms. Over time, demand for SushiSwap may decline if centralized crypto asset trading platforms grow more dominant. On the other hand, demand for SushiSwap may decline in the face of competition from other decentralized exchanges, such as the UniSwap protocol. Should demand decline for SushiSwap, it is likely that the value of SUSHI will also decline.
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 SUSHI 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 SUSHI, including an opinion that SUSHI is not itself a security and/or derivative.