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 decision Re Coinberry Limited dated August 19, 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 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 Enjin Coin. 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.
Enjin provides a suite of tools based on a web interface that supports Ethereum digital assets in the form of ERC-1155 tokens. Enjin also operates a virtual goods marketplace for digital assets on Ethereum. In 2018, 2018, Enjin officially launched its Enjin Platform on the Ethereum main net is also compatible with the Kovan Testnet. The Enjin Platform is a platform as a service that allows other game developers to issue fungible and non-fungible assets as in-game Ethereum tokens. That same year, Enjin proposed a new ERC token standard – ERC-1155 – which was approved in 2019 and is now implemented in its current software.
Coinberry has performed due diligence with respect to Enjin Coin 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 Enjin Coin has been classified as a security or a derivative by any Canadian jurisdiction or the jurisdiction with which Enjin Coin has the most significant connection
Risks Associated with Investing in Enjin Coin
Underlying Value Risk
Enjin, like all volatile altcoins, is a risky investment that could earn astounding returns or suffer devastating losses. However, if you purchased it near the peak, you would be down more than 50%. The price of Enjin Coin fluctuates with the Gas fee or transactional fee, which has a strong relation to the demand and supply of Enjin Coin as a coin and network. If these means of valuing Enjin Coin prove to be fundamentally flawed, then the market may undergo a repricing of Enjin Coin, which could have an adverse impact on its price.
Regulation of Enjin Coin
The regulation of Enjin Coin continues to evolve in North America and within foreign jurisdictions, which may restrict the use of Enjin Coin or otherwise impact the demand for Enjin Coin.
Volatility of Enjin Coin
The risks of trading Enjin Coin 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 Enjin Coin to quickly drop or rise thereby negatively or positively impacting your investment.
Loss of “Private Keys”
The loss or destruction of certain “private keys” (numerical codes required by Coinberry to access its Enjin Coin) could prevent Coinberry from accessing its Enjin Coin. Loss of these private keys may be irreversible and could result in the loss of all or substantially all crypto assets held in trust by Coinberry.
Your Holdings May Become Illiquid
You may not always be able to liquidate your Enjin Coin 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 Enjin Coin trading platforms. Unexpected market illiquidity may cause major losses to the holders of Enjin Coin. The large size of Enjin Coin that Coinberry may hold increases the risks of illiquidity by both making the Enjin Coin difficult to liquidate and in liquidating, Coinberry may affect Enjin Coin’s price significantly.
Enjin Coin transfers are not currently supported by Coinberry. 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 Enjin Coin Network
Dependence on Enjin Coin Developers
While many contributors to Enjin Coin’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 Enjin Coin’s software.
Disputes on the Development of the Enjin Coin Network may lead to Delays in the Development of the Network
There can be disputes between contributors on the best paths forward in building and maintaining Enjin Coin’s software. Furthermore, the miners supporting the network and companies using it can disagree with the contributors as well, creating greater debate. Therefore, the Enjin Coin community often iterates slowly upon contentious protocol issues, which many perceive as prudently conservative, while others worry that it inhibits innovation.
Significant Increase in Enjin Coin Interest Could Affect the Ability of the Enjin Coin Network to Accommodate Demand
One of the most contentious issues within the Enjin Coin community has been around how to scale the network as user demand continues to rise. The debate goes back to the earliest days of Enjin Coin. There are many possible solutions, and most of them boil down to different ideologies on how Enjin Coin should be used. However, it will be important for the community to continue to develop at a pace that meets the demand for transacting in Enjin Coin, otherwise, users may become frustrated and lose faith in the network.
Attacks on the Enjin Coin Network
The Enjin Coin Network is periodically subject to distributed denial of service attacks to clog the list of transactions being tabulated by miners, which can slow the confirmation of authentic transactions. Another avenue of attack would be if many miners were taken offline then it could take some time before the difficulty of the mining process algorithmically adjusts, which would stall block creation time and therefore transaction confirmation time. Thus far these scenarios have not plagued the network for long or in a systemic manner.
Competitors to Enjin Coin
To the extent a competitor to Enjin Coin gains popularity and greater market share, the use and price of Enjin Coin could be negatively impacted, which may adversely affect its price. Similarly, Enjin Coin and the price of Enjin Coin could be negatively impacted by competition from incumbents in the credit card and payments industries.
Significant Energy Consumption to run the Enjin Coin Network
Because of the significant computing power required to mine Enjin Coin, 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 Enjin Coin Trading Platforms
Regulation of Enjin Coin Trading Platforms
Enjin Coin trading platforms are spot markets in which Enjin Coin can be exchanged for fiat currencies (CAD, USD, etc.). Coinberry seeks to ensure that the Enjin Coin trading platforms on which it transacts are reputable, stable, and operating in compliance with applicable laws.
Limited Operating History of Enjin Coin Trading Platforms
Enjin Coin trading platforms have a limited operating history. The potential for instability of Enjin Coin 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 Enjin Coin, which may adversely affect its price.
Hacking of Enjin Coin Trading Platforms May Have a Negative Impact on Perception of the Security of the EnJin Coin Network
While Enjin Coin’s blockchain has never been compromised by hackers, exchanges frequently have. Enjin Coin trading platforms that adhere to best practices are insured, and most of these have not been hacked, or if they have the loss has been minimal. Enjin Coin’s price is at risk if a platform is hacked as it can shake consumer confidence for those that do not understand the difference between a weakness in the platform versus a weakness in Enjin Coin and its blockchain.
Different Prices of Enjin Coin on the Enjin Coin Trading Platforms
Most platforms operate as isolated pools of liquidity, and so when demand spikes for a specific platform the market price for Enjin Coin 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 Enjin Coin Network
Upgrades by Ethereum to the Ethereum platform, a hard fork in the Ethereum platform, or a change in how transactions are confirmed on the Ethereum platform may have unintended, adverse effects on all blockchains using the ERC-20 standard, ERC-721 standard, or any other future Ethereum standard.
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 Jan 31, 2022