NO SECURITIES REGULATORY AUTHORITY IN CANADA OR ANY OTHER JURISDICTION HAS EXPRESSED AN OPINION ABOUT CRYPTO CONTRACTS OR ANY OF THE CRYPTO ASSETS MADE AVAILABLE THROUGH THE PLATFORM (as hereinafter defined), INCLUDING AN OPINION THAT THE CRYPTO ASSETS ARE NOT THEMSELVES SECURITIES AND/OR DERIVATIVES.
Coinberry is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decisionRe Coinberry LimiteddatedAugust 19th, 2021 [link]. The statutory rights of action for damages and the right of rescission insection 130.1 of theSecurities Act(Ontario) and similar legislation in the other provinces and territories of Canada would not apply in respect of a misrepresentation in this Crypto Asset Statement or the Statement of Crypto Asset and Crypto Contract Risks.
Together with the Statement of Crypto Asset and Crypto Contract Risks, the provisions of which are incorporated herein, this Crypto Asset Statement, lists certain specified risks associated with Gala. The risks identified in this Crypto Asset Statement and in the Statement of Crypto Asset and Crypto Contract Risks may not be all of the risks related to the Crypto Assets and Crypto Contracts and there may be other additional unknown risks, that may exist. As with any investment, the risks with cryptocurrencies are high and it is important that you understand the risks before you invest.
Gala Games is a play-to-earn game development company building a robust gaming ecosystem that leverages the power of blockchain technology to empower its users. The project exists on both Ethereum and the Binance Smart Chain but plans to migrate to its own native blockchain in the future. Players are able to truly own their in-game items in the form of NFT's which can be traded on secondary markets.
Coinberry has performed due diligence with respect to Gala to satisfy itself as to the viability of offering it on the Platform. Our due diligence included, but was not limited to, a review of the following:
- Liquidity of the market
- Total market capitalization
- Timeline since token inception
- Token available for custody with existing custodians
- The current developer ecosystem
- Whether Gala has been classified as a security or a derivative by any Canadian jurisdiction or the jurisdiction with which Gala has the most significant connection
Risks Associated with Investing in Gala
Underlying Value Risk
The introduction of non-fungible tokens (NFTs) into the Gala Games ecosystem was the first step into making gaming more decentralized as well as helping players take control over the ownership of their game items. NFTs can be collected, traded and sold, not just within their own game but throughout the entirety of the Gala Games ecosystem. However, just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is Gala priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. If these means of valuing Gala prove to be fundamentally flawed, then the market may undergo a repricing of Gala, which could have an adverse impact on its price.
Top Gala Holders Control a Significant Percentage of the Outstanding Gala
Certain addresses on the Gala blockchain networks hold a significant amount of the currently outstanding Crypto Assets. However, the top 10 holders have 53.18% possession of Gala tokens.
Regulation of Gala
The regulation of Gala continues to evolve in North America and within foreign jurisdictions, which may restrict the use of Gala or otherwise impact the demand for Gala.
Volatility of Gala
The risks of trading Gala are high due to the unexpected changes in market sentiments which can lead to sharp and sudden movements in prices. It is not uncommon for the value of Gala to quickly drop or rise thereby negatively or positively impacting your investment. However, Investors Observer gives Gala a moderate volatility rank of 52, placing it in the top 48% of cryptos on the market.
Loss of “Private Keys”
The loss or destruction of certain “private keys” (numerical codes required by Coinberry to access its Gala) could prevent Coinberry from accessing its Gala. Loss of these private keys may be irreversible and could result in the loss of all or substantially all of the crypto assets held in trust by Coinberry.
Your Holdings May Become Illiquid
You may not always be able to liquidate your Gala at a desired price. It may become difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in the marketplace, including on Gala trading platforms. Unexpected market illiquidity may cause major losses to the holders of Gala.
Coinberry does not currently support Gala transfers. Crypto transfers are currently limited to the following coins: BTC, ETH, LTC and XRP (Buy/Sell not supported, existing holdings can be transferred out).
Risks Associated with the Gala Network
Dependence on Gala Developers
While many contributors to Gala’s software 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 Gala’s software. However, Gala Games has built a platform that combines play-to-earn mechanics and non-fungible tokens (NFTs) with game developers who know how to make fun games. While games embrace the new technology of NFTs, which authenticate unique digital items, and the model of play-to-earn, where players can own and resell their items, the focus is on creating games that make gamers happy.
Significant Increase in Gala Interest Could Affect the Ability of the Gala Network to Accommodate Demand
One of the most contentious issues within the Gala community has been around how to scale the network as user demand continues to rise. The debate goes back to the earliest days of Gala. There are many possible solutions, and most of them boil down to different ideologies on how Gala should be used.
Competitors to Gala
To the extent a competitor to Gala gains popularity and greater market share, the use and price of Gala could be negatively impacted, which may adversely affect its price. Similarly, Gala and the price of Gala could be negatively impacted by competition from incumbents in the credit card and payments industries.
Significant Energy Consumption to run the Gala Network
Because of the significant computing power required to mine Gala, the network’s energy consumption may ultimately be deemed to be or indeed become unsustainable (barring improvements in efficiency which could be designed for the protocol). This could pose a risk to broader and sustained acceptance of the network as a peer-to-peer transactional platform.
Risks Associated with Gala Trading Platforms
Regulation of Gala Trading Platforms
Gala trading platforms are spot markets in which Gala can be exchanged for fiat currencies (CAD, USD, etc.). Coinberry seeks to ensure that the Gala trading platforms on which it transacts are reputable, stable, and operating in compliance with applicable laws.
Limited Operating History of Gala Trading Platforms
Gala trading platforms have a limited operating history. The potential for instability of Gala trading platforms and the closure or temporary shutdown of exchanges due to fraud, business failure, hackers, distributed denial of service attacks or malware or government-mandated regulation may reduce confidence in Gala, which may adversely affect its price.
Different Prices of Gala on the Gala Trading Platforms
Most platforms operate as isolated pools of liquidity, and so when demand spikes for a specific platform the market price for Gala on that platform can also spike, making it trade at a premium to other platforms. This tendency is common geographically, with Chinese platforms frequently trading at a premium to platforms in Europe or America.
Settlement of Transactions on the Gala Network
Upgrades by Gala to the Gala platform, a hard fork in the Gala platform, or a change in how transactions are confirmed on the Gala platform may have unintended, adverse effects on all blockchains using the ERC-20 standard, ERC-721 standard, or any other future Gala standard. Further, Gala Games is both a game developer and a game aggregator. In addition to the games developed by the Gala team, games developed by other teams may also be launched on Gala Games. In the future, Gala Games plan to create standardized crypto toolkits, NFT libraries, and wallets so that other game developers can have these functions integrated into their games and become part of the Gala Game ecosystem. As such, Gala was once noted as the “blockchain game centre”.
Please make sure to review the Statement of Crypto Asset and Crypto Contract Risks for additional discussion of general risks associated with the Crypto Contracts and Crypto Assets made available on Coinberry.
Last Updated May 3, 2022