LUNA trading has been suspended due to recent market events, and the shutdown of the LUNA blockchain, now known as LUNA Classic (LUNC).
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 LUNA (“LUNA”). We created this summary to help you understand the basics of LUNA as well as some of the risks involved in acquiring it. While we tried to describe the key features of LUNA 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 LUNA to make sure you are comfortable acquiring it.
Description of LUNA
LUNA is the governance token for the Terra protocol (the “Terra Protocol”). The Terra Protocol was created in January 2018 by co-founders Daniel Shin and Do Kwon. The Terra Protocol is a payments network on the blockchain that hosts a variety of stablecoins, each pegged to different fiat currencies. The Terra Protocol also has an associated development platform that allows developers to build their own protocols and decentralized applications on top of the Terra Protocol. A company named Terraform Labs manages the research and development of the Terra Protocol. The Terra Community Trust, which holds the intellectual property underlying the Terra Protocol, are intended to act on the direction of LUNA holders, which have the ability to make and vote on proposals related to the protocol.
There are two separate and distinct tokens that represent the Terra Protocol ecosystem, which include, stablecoins (known as “Terra”) and LUNA. A stablecoin is a cryptocurrency whose value is pegged to value of a fiat currency or other asset (such as gold). Each stablecoin native to the Terra Protocol is pegged to international currencies such as USD, EUR, CNY, JPY, GBP, KRW and the IMF SDR. Users of the Terra Protocol can spend, save, trade or exchange stablecoins on the Terra Protocol. LUNA, on the other hand, provides holders with staking rewards and governance power. In order to receive rewards from transaction fees, LUNA holders may delegate their tokens to validators who record and verify transactions on the blockchain. Users of the Terra Protocol who stake their LUNA can participate in making changes to the ecosystem by submitting, voting and implementing proposals.
To maintain the price of Terra, the Terra Protocol adds to or subtracts from Terra’s supply. Users burn (i.e., permanently destroy) Luna to mint (i.e., create new) Terra and burn Terra to mint Luna. When the price of Terra is high relative to its peg, supply is too small and demand is too high. The protocol incentivizes users to burn Luna and mint Terra. Users mint more Terra from burned Luna until Terra reaches its target price. The amount of Luna gets smaller in this process, increasing the price of Luna. In contrast, when the price of Terra is too low relative to its peg, the protocol incentives users to burn Terra and mint Luna. The decrease in Terra’s supply causes scarcity and causes the price of Terra increases. More Luna is minted from burned Terra until Terra reaches its target price. The amount of Luna increases and lowers in price.
The U.S. Securities and Exchange Commission is currently investigating Terraform Labs PTE, Ltd. (“Terraform”) and its chief executive officer, Do Kown, in connection with the alleged sale of unregistered securities. This investigation relates to the Mirror protocol, a blockchain protocol which allows the sale of synthetic assets. Although this investigation does not relate to the Terra Protocol, findings adverse to Terraform and Do Kwon could negatively affect the price of LUNA.
Like other crypto assets, there are some general risks associated with acquiring LUNA. 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. While we tried to describe the key risks associated with LUNA here and in our risk statement, these aren’t all of the risks associated with trading in LUNA. You should also do your own research on LUNA to make sure you are comfortable acquiring it.
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 LUNA 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 LUNA, including an opinion that LUNA is not itself a security and/or derivative.