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 the Curve DAO token (“CRV”). We created this summary to help you understand the basics of CRV as well as some of the risks involved in acquiring it. While we tried to describe the key features of CRV 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 CRV to make sure you are comfortable acquiring it.
Description of CRV
CRV is the governance token of a decentralized autonomous organization known as the “Curve DAO”. Curve, which is governed by the Curve DAO, is a decentralized exchange platform that uses automated market makers to manage its liquidity. Curve is based on a whitepaper authored by Michael Egorov in November 2019. Like other emerging decentralized finance protocols, the Curve network is built on the Ethereum network. Curve is designed to facilitate low-fee trades between similar Ethereum-based tokens, primarily stablecoins like USDC and Dai.
As a decentralized exchange that employs automated market makers, Curve operates in the same area as Uniswap and SushiSwap. 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 or more assets, each valued relative to each other. As one asset is traded for the other, the relative prices of the assets shift, and a new market rate for each 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.
What sets Curve apart from Uniswap and SushiSwap, however, is its focus on stablecoins (and other crypto assets with similar values). A stablecoin is a cryptocurrency that is pegged to an underlying asset, such as a national currency or gold. Stablecoins generally use an existing blockchain (like the Ethereum network) to tokenize another asset that is typically less volatile. Apart from providing exposure to the asset underlying the stablecoin, the utility value of a stablecoin is that it allows for participants in the crypto asset markets to transfer their holdings in and out of unpegged coins and tokens into an asset that reflects the value of a fiat currency without necessitating a full conversion back to fiat currency. Avoiding full conversions back to fiat currency is desirable because crypto asset-to-stablecoin transactions can generally be achieved more quickly and with lower fees than crypto asset-to-fiat transactions.
By focusing on trading pairs involving stablecoins and by charging users a fee or paying them a bonus when they trade with a liquidity pool, Curve allows for trades to occur with low fees and minimal variation in price. At a high level, Curve works by way of its bonding curve feature which is designed to allow large amounts of stablecoins to be traded with less variation in their relative price. Curve has also adopted a lending pool feature whereby users are incentivized, by a return on their tokens and a proportion of the fee from trades, to lock up cryptocurrencies so they can be traded by others through integrations with lending platforms like Compound or Yearn. Users who deposit their tokens to certain liquidity pools are also rewarded in CRV.
As noted above, CRV is the governance token for the Curve DAO. CRV holders who stake their tokens are able to vote on updates to Curve or, if they have staked enough CRV, make update proposals themselves. These updates may relate to, among other things, the characteristics of fees, liquidity pools and rewards on Curve.
Like other crypto assets, there are some general risks associated with acquiring CRV. 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 CRV below. While we tried to describe the key risks associated with CRV here and in our risk statement, these aren’t all of the risks associated with trading in CRV. You should also do your own research on CRV to make sure you are comfortable acquiring it.
Price Dependence on Curve
As the primary function of CRV is to provide its holders with governance rights in relation to Curve, CRV’s value is linked to the success of Curve more generally. In order to be successful, Curve requires users both to provide liquidity to its liquidity pools and to trade with its liquidity pools. Should demand decline for Curve, it is likely that the value of CRV 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 Curve and otherwise impact the demand for and value of CRV.
Competition from Crypto Asset Trading Platforms and Other Decentralized Exchanges
Curve 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 Curve may decline if centralized crypto asset trading platforms grow more dominant. On the other hand, demand for Curve may decline in the face of competition from other decentralized exchanges, such as Uniswap or SushiSwap. Should demand decline for Curve, it is likely that the value of CRV 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 CRV 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 CRV, including an opinion that CRV is not itself a security and/or derivative.