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 Fantom. 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.
Fantom is a Layer-1 blockchain that uses a single consensus layer to support the creation of multiple execution chains. The network's independent consensus layer called Lachesis, featuring a novel consensus mechanism developed by the Fantom Foundation dubbed the "Lachesis Protocol." Lachesis can provide security to multiple other layers, the first of which is Fantom's EVM-compatible smart contract chain called Opera. The project's goal is to host an ecosystem of execution layers while enabling them to feature fast and cost-efficient transactions due to the benefits provided by the Lachesis Protocol. Opera is a Proof-of-Stake (PoS) layer whose validator set uses Lachesis to validate transactions and produce new blocks. It now features several decentralized finance (DeFi) applications, including SushiSwap and Curve.
Coinberry has performed due diligence with respect to Fantom 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 Fantom has been classified as a security or a derivative by any Canadian jurisdiction or the jurisdiction with which Fantom has the most significant connection
Risks Associated with Investing in Fantom
Underlying Value Risk
In addition to competition from other smart contract cryptos and a possible short-term price drop, the main longer-term threats to Fantom are increased DeFi regulation, technical hitches, and wider technical developments. Regulators around the world are worried about DeFi projects as they offer bank-like products without the same level of consumer protection. Hence, a crackdown on DeFi could impact applications on Fantom’s network. Further, the technology behind Fantom is also relatively untested, and a technical glitch could damage investor confidence. As such, the price of Fantom fluctuates with the transactional fee, which has a strong relation to the demand and supply of Fantom as a coin and network. If these means of valuing Fantom prove to be fundamentally flawed, then the market may undergo a repricing of Fantom, which could have an adverse impact on its price.
Regulation of Fantom
The regulation of Fantom, including increased DeFi regulations, continues to evolve in North America and within foreign jurisdictions, which may restrict the use of Fantom or otherwise impact the demand for Fantom besides increasing.
Volatility of Fantom
The risks of trading Fantom 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 Fantom 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 Fantom) could prevent Coinberry from accessing its Fantom. 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 Fantom 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 Fantom trading platforms. Unexpected market illiquidity may cause major losses to the holders of Fantom. The large size of Fantom that Coinberry may hold increases the risks of illiquidity by both making the Fantom difficult to liquidate and in liquidating, Coinberry may affect Fantom’s price significantly.
Fantom 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 Fantom Network
Dependence on Fantom Developers
While many contributors to Fantom’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 Fantom’s software.
Disputes on the Development of the Fantom 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 Fantom’s software. Furthermore, the miners supporting the network and companies using it can disagree with the contributors as well, creating greater debate. Therefore, the Fantom community often iterates slowly upon contentious protocol issues, which many perceive as prudently conservative, while others worry that it inhibits innovation.
Significant Increase in Fantom Interest Could Affect the Ability of the Fantom Network to Accommodate Demand
One of the most contentious issues within the Fantom community has been around how to scale the network as user demand continues to rise. The debate goes back to the earliest days of Fantom. There are many possible solutions, and most of them boil down to different ideologies on how Fantom 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 Fantom, otherwise, users may become frustrated and lose faith in the network.
Attacks on the Fantom Network
The Fantom 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 Fantom
To the extent a competitor to Fantom gains popularity and greater market share, the use and price of Fantom could be negatively impacted, which may adversely affect its price.
Significant Energy Consumption to run the Fantom Network
Because of the significant computing power required to mine Fantom, 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 Fantom Trading Platforms
Regulation of Fantom Trading Platforms
Fantom trading platforms are spot markets in which Fantom can be exchanged for fiat currencies (CAD, USD, etc.). Coinberry seeks to ensure that the Fantom trading platforms on which it transacts are reputable, stable, and operating in compliance with applicable laws.
Limited Operating History of Fantom Trading Platforms
Fantom trading platforms have a limited operating history. The potential for instability of Fantom 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 Fantom, which may adversely affect its price.
Hacking of Fantom Trading Platforms May Have a Negative Impact on Perception of the Security of the Fantom Network
While Fantom’s blockchain has never been compromised by hackers, exchanges frequently have. Fantom 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. Fantom’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 Fantom and its blockchain.
Different Prices of Fantom on the Fantom Trading Platforms
Most platforms operate as isolated pools of liquidity, and so when demand spikes for a specific platform the market price for Fantom 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 Fantom Network
Upgrades by Fantom to the Fantom platform, or a change in how transactions are confirmed on the Fantom platform may have unintended, adverse effects on all blockchains using the DeFi technology for settlement of transactions.
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