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 ATOM. We created this summary to help you understand the basics of ATOM as well as some of the risks involved in trading it. While we tried to describe the key features of ATOM here, this summary isn’t meant to tell you everything you’d want to know before investing in ATOM. You should also do your own research on ATOM to make sure you are comfortable investing in it.
Description of ATOM
The Cosmos Network is a decentralized network of independent parallel blockchains, each powered by Tendermint, a byzantine fault-tolerant (BFT) proof-of-stake consensus algorithm. These application-specific blockchains are generally built using the Cosmos SDK and communicate with each other via the Inter-Blockchain Communications (IBC) protocol, an interoperability protocol modelled after TCP/IP for secure data and value transfer. This is the approach towards Cosmos’ vision of becoming the ‘Internet of Blockchains.’
The Cosmos Hub is the primary blockchain protocol underlying a large number of blockchains built on the Cosmos Network. The Cosmos Hub is a proof-of-stake protocol. It serves as a hub for IBC packet routing among blockchains within the Cosmos Network. Cosmos aims to offer an ecosystem of connected blockchains. It also tries to reduce the complexity of the blockchain technology and ease for developers with help of a modular framework that demystifies decentralized apps. ATOM is the Cosmos Hub’s native token.
ATOM has three primary uses case:
- to pay the transaction fees for computational activity used on the Cosmos Hub
- to participate in and vote on the Cosmos Hub governance system proposals
- to help secure the Cosmos Hub network through staking
*Please not that at this time Bitbuy does not offer staking for ATOM and clients holding ATOMs in their account cannot participate in Cosmos Hub governance with the tokens held in a User Account.
Staking Rewards and Fees
Staking rewards are computed and distributed after each successful block. If a reward is accrued after during a block, it will be issued immediately upon the completion of the block. When rewards are received by Bitbuy, Bitbuy will provide statements to users indicating the amount of the rewards that the user is entitled to as well as the total rewards that were earned and any fees payable. For each block, your share of ATOM rewards is proportionate to the amount of ATOM that you had staked when the block began.
Each crypto asset for which Bitbuy provides staking services is subject to specific fees because of the unique nature of each blockchain network. These fees are calculated on a percentage basis in relation to the amount of rewards earned. Bitbuy’s service fee may be up to 30% of net rewards earned by a user (as more fully described in our fee schedule.
With respect to any rewards earned on your staked ATOM: (i) Bitbuy’s custodian, BitGo, will be entitled to a fee and may pay a portion of that fee to any third-party service provider it selects to act as validator; (ii) any remaining portion of the rewards (the “Net Rewards”) will be delivered to one of Bitbuy’s custodial wallets with BitGo; (iii) Bitbuy will be entitled to a fee of 30% in respect of the Net Rewards (the “Bitbuy Services Fees”); and (iv) after the Bitbuy Service Fee has been paid, your account will be credited with any remaining portion of the rewards, and, subject to any unbonding, lock-up or cooling-down period, you will be able to hold, sell or withdraw your rewards.
Currently, the third-party service provider we use is our custodian, BitGo. BitGo is regulated as a trust company under the Division of Banking in South Dakota. Pursuant to Bitbuy’s relationship with BitGo, BitGo may act as the validator in respect of staked crypto assets or may select a third-party service provider to act as the validator. BitGo currently has a contractual relationship with Figment, whereby Figment acts as validator for the crypto assets stored in Bitbuy’s custodial wallets with BitGo. Headquartered in Toronto, Figment is one of the world’s largest blockchain infrastructure and services providers.
Validators miss out on ATOM rewards if they fail to participate when called upon, and their existing stake can be destroyed if they behave dishonestly.
Bitbuy may, at its sole discretion, transfer reimbursements for slashing penalties it receives from BitGo to its users less any administrative costs or expenses Bitbuy incurs in reimbursing users. In the event a supported Cosmos validator is slashed, Bitbuy has no obligation to replace any lost ATOM or otherwise provide any compensation for any losses. Negative impacts of slashing will be allocated to all clients using the staking service in proportion to the amount of ATOM they had staked.
Like other crypto assets, there are some general risks associated with investing in ATOM. 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 ATOM below. While we tried to describe the key risks associated with ATOM here and in our risk statement, these aren’t all of the risks associated with trading in ATOM. You should also do your own research on ATOM to make sure you are comfortable investing in it.
Concentration of ATOM Holdings
Approximately 83% of ATOMs currently in circulation are held by 10 wallet address. As a result, these addresses control a significant number of votes that relate to the Cosmos Hub’s planning and decision making. A high concentration of ownership amongst a few wallets may adversely affect the price of ATOMs.
Dependence on Cosmos Developers
While many contributors to the Cosmos Hub are employed by companies in the industry, most of them are not directly compensated for helping to maintain the protocol. As a result, there are no contracts or guarantees that they will continue to contribute to the Cosmos Hub. However, Cosmos allows developers the choice to build autonomous application-specific blockchains that can be easily interconnected to the Cosmos Hub.
To the extent a competitor to Cosmos Hub gains popularity and greater market share, the use and price of ATOM could decrease and be negatively impacted, which may adversely affect its price. Similarly, Cosmos Hub and the price of ATOM could be negatively impacted by competition in the Cosmos ecosystem or the development of Cosmos SDK-based blockchains that do not interact with Cosmos Hub.
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 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 ATOM, including an opinion that ATOM is not itself a security and/or derivative.