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 the Uniswap token (“UNI”). We created this summary to help you understand the basics of UNI as well as some of the risks involved in trading it. While we tried to describe the key features of UNI here, this summary isn’t meant to tell you everything you’d want to know before investing in UNI. You should also do your own research on UNI to make sure you are comfortable investing in it.
Description of UNI
UNI is a governance token for the Uniswap protocol (the “Uniswap Protocol”), a suite of smart contracts that together create an automated market maker on the Ethereum network. The Uniswap Protocol was created by Hayden Adams and was launched in 2018.
As an automated market maker, the Uniswap Protocol is designed to allow the exchange of tokens on the Ethereum network. 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 the Uniswap Protocol are smart contracts in which users of the Uniswap Protocol contribute ERC-20 Tokens. These users, commonly known as “liquidity providers,” lock two assets into each liquidity pool. For example, Uniswap’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 all liquidity providers proportionally based on their contribution to the pool.
As noted above, UNI 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. UNI specifically allows its holders to help govern the Uniswap Protocol by voting on development proposals. Additionally, users who hold at least 1% of the total UNI in circulation are able to make development proposals themselves.
Like other crypto assets, there are some general risks associated with investing in UNI. 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 UNI below. While we tried to describe the key risks associated with UNI here and in our risk statement, these aren’t all of the risks associated with trading in UNI. You should also do your own research on UNI to make sure you are comfortable investing in it.
Price Dependence on Uniswap Protocol
As UNI is primarily a utility token insofar as it provides its holders with governance rights in relation to the Uniswap Protocol, UNI’s value is linked to the success of the Uniswap Protocol. In order to be successful, the Uniswap Protocol requires users both to provide liquidity to its liquidity pools and to trade with its liquidity pools. Should demand decline for the Uniswap Protocol, it is likely that the value of UNI will also decline.
Regulatory Risk of Decentralized Exchanges
The regulation of crypto assets and 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 the Uniswap Protocol and otherwise impact the demand for and value of UNI.
Competition from Crypto Asset Trading Platforms and Other Decentralized Exchanges
The Uniswap Protocol 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 the Uniswap Protocol may decline if centralized crypto asset trading platforms grow more dominant. In addition, demand for the Uniswap Protocol may decline in the face of competition from other decentralized exchanges, such as the Sushiswap protocol. Should demand decline for the Uniswap Protocol, it is likely that the value of UNI 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 UNI 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 UNI, including an opinion that UNI is not itself a security and/or derivative.