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 19th, 2021 [link]. 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 Tron. 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.
Tron is a blockchain-based decentralized digital platform with its own cryptocurrency, called Tronix or TRX. Tron uses the features of the blockchain and peer-to-peer (P2P) network technology to eliminate the middleman and allow content creators to sell their work directly to consumers. Software developers use the Solidity programming language to create apps that are hosted on the Tron platform.
Coinberry has performed due diligence with respect to Tron 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 Tron has been classified as a security or a derivative by any Canadian jurisdiction or the jurisdiction with which Tron has the most significant connection
Risks Associated with Investing in Tron
Underlying Value Risk
The TRON crypto price prediction from Wallet Investor was positive on the long-term outlook with a prediction of $0.107 in 12 months' time. Moreover, the algorithm-based site expected the price to reach $0.301 by March 2027. 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 Tron priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. If these means of valuing Tron prove to be fundamentally flawed, then the market may undergo a repricing of Tron, which could have an adverse impact on its price.
Top Tron Holders Control a Significant Percentage of the Outstanding Tron
Certain addresses on the Tron blockchain networks hold a significant amount of the currently outstanding Crypto Assets. However, the top 10 Tron holders have 27.99% possession.
Regulation of Tron
The regulation of Tron continues to evolve in North America and within foreign jurisdictions, which may restrict the use of Tron or otherwise impact the demand for Tron.
Volatility of Tron
Tron is considered very volatile. It has an Efficiency Ratio (i.e., Sharpe Ratio) of 0.0139, which indicates to have 0.0139% of return per unit of standard deviation over a 3-month period. As such, the risks of trading Tron 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 Tron 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 Tron) could prevent Coinberry from accessing its Tron. 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 Tron 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 Tron trading platforms. Unexpected market illiquidity may cause major losses to the holders of Tron.
Coinberry does not currently support Tron 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 Tron Network
Dependence on Tron Developers
While many contributors to Tron’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 Tron’s software. However, the uniqueness of TRON’s smart contracts is their compatibility with Ethereum’s EVM. Thus, facilitating developers to port their projects to TRON in days, instead of weeks, or months.
Significant Increase in Tron Interest Could Affect the Ability of the Tron Network to Accommodate Demand
TRON network has been expanding ever since its inception, thus, onboarding millions of new users and entering new verticals including DeFi. More than 1.3 billion transactions have now been made on the TRON network and over 16 million wallets were created. However, one of the most contentious issues within the Tron community has been around how to scale the network as user demand continues to rise. The debate goes back to the earliest days of Tron. There are many possible solutions, and most of them boil down to different ideologies on how Tron should be used.
Competitors to Tron
To the extent a competitor to Tron gains popularity and greater market share, the use and price of Tron could be negatively impacted, which may adversely affect its price. Similarly, Tron and the price of Tron could be negatively impacted by competition from incumbents in the credit card and payments industries.
Significant Energy Consumption to run the Tron Network
Because of the significant computing power required to mine Tron, 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. However, Tron’s peer-to-peer platform allows creators to share applications directly on the blockchain, making the whole process more energy efficient.
Risks Associated with Tron Trading Platforms
Regulation of Tron Trading Platforms
Tron trading platforms are spot markets in which Tron can be exchanged for fiat currencies (CAD, USD, etc.). Coinberry seeks to ensure that the Tron trading platforms on which it transacts are reputable, stable, and operating in compliance with applicable laws.
Limited Operating History of Tron Trading Platforms
Tron trading platforms have a limited operating history. The potential for instability of Tron 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 Tron, which may adversely affect its price.
Different Prices of Tron on the Tron Trading Platforms
Most platforms operate as isolated pools of liquidity, and so when demand spikes for a specific platform the market price for Tron 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 Tron Network
Upgrades by Tron to the Tron platform, a hard fork in the Tron platform, or a change in how transactions are confirmed on the Tron platform may have unintended, adverse effects on all blockchains using the ERC-20 standard, ERC-721 standard, or any other future Tron standard. However, according to stats on TRON's official blockchain explorer TRONSCAN, the transfer volume of TRON-based stable-coins stood at $19.93 billion on November 30, 2021, hitting an all-time high since this June and poised to surpass the $20 billion mark.
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