PLEASE READ THIS CAREFULLY. BY PROCEEDING TO TRANSACT IN AAVE, YOU ACKNOWLEDGE AND ACCEPT THE STATEMENTS SET OUT BELOW.

About this Summary

Ndax Canada Inc. (“Ndax”, “we” and “our”) believes that our users should understand the crypto assets that they are able to trade and stake using our crypto trading platform (the “Platform”). One of the crypto assets we offer on the Platform is AAVE. We created this summary to help you understand the basics of AAVE as well as some of the risks involved in trading in AAVE. While we tried to describe the key features of AAVE, this summary isn’t meant to tell you everything you’d want to know before investing in AAVE. You should also do your own research on AAVE to make sure you are comfortable investing in it.

Description of AAVE

History of AAVE

The origins of AAVE can be traced back to the year 2017 when its founder Stani Kulechov and a team of developers got together to take on the DeFi world. The idea was to create a decentralized platform that allows users to lend and borrow cryptocurrencies. This project was initially called ETHLend. The firm managed to raise $16.2M in an initial coin offering (ICO), during which it sold 1B of its native crypto tokens called LEND. After this initial high, however, ETHLend started to spiral down due to a lack of liquidity and difficulties processing loan requests. So, the founders revamped the entire platform and launched AAVE in January 2020.  

What is AAVE used for

Anyone can use AAVE to lend and borrow cryptocurrencies without the need for middlemen. There are 24 different ERC-20 tokens to choose from, and the lenders on this platform can earn interest on their crypto deposits.

AAVE is the protocol’s native token and it is quite crucial to the functioning of the platform. Token holders can participate in the governance of the platform by voting on proposals that direct its future course. Apart from this, they also get a fee discount while using the platform.

How AAVE works

Instead of directly matching lenders to borrowers like ETHLend, the revamped AAVE platform follows a different approach.

Lenders on this platform deposit the funds they wish to lend to other users. These funds are then collected into liquidity pools. Borrowers can draw from these pools by locking collateral greater than the amount they wish to borrow. The borrowers pay a rate of interest and the lender receives interest on their funds.

Lenders on this platform receive tokens (AAVE interest-bearing tokens). These tokens can be stored and traded. They have a value equivalent to the tokens deposited and can be redeemed on a 1:1 basis.

Risks

Before entering into an agreement (a “Crypto Contract”) with Ndax to buy or sell any crypto assets through the Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

Like other crypto assets, there are some general risks associated with investing in AAVE. Each of these risks is described in more detail in the Risk Statement provided to you at the time that you open your account with us and is also available online on the Ndax website and app. You should review the Risk Statement.

In addition to the general risks set out in the Risk Statement, we also point out other specific risks to AAVE below.

AAVE’s Dependence on the AAVE Protocol and Ethereum Blockchain

The price of AAVE is heavily dependent on the strength of the AAVE Protocol. As a result, the risks associated with the AAVE Protocol also comprise risks to AAVE itself. The specific risks facing the AAVE Protocol (as a decentralized lending platform), which include market risk and oracle risk, are highly technical in nature. We encourage you to consult AAVE’s website, where they publish a risk framework that sets out and explains those risks, and also explains how the AAVE Protocol functions to address those risks. The AAVE Protocol relies on the Chainlink Network to help protect against Oracle risk.

Also, as Chainlink runs on the Ethereum blockchain, if Ethereum were to crash or experience serious issues, LINK’s price could also be negatively impacted.

Flash Loans

The AAVE Protocol facilitates “flash loans”, which do not require upfront collateral and are instantly issued. Flash loans have previously been used to execute attacks on lending systems built on the Ethereum network. These attacks have resulted in large quantities of deposits being stolen. The AAVE Protocol relies on the Chainlink Network to help protect against the risk of flash loans.

While we have tried to describe the key risks associated with AAVE here and in our Risk Statement, we emphasize that this Crypto Asset Statement is not exhaustive of all of the risks associated with trading in AAVE. You should also do your own research on AAVE to make sure you are comfortable investing in such a crypto asset.

Regulatory Information  

Ndax is a registered investment dealer under securities legislation in all provinces and territories of Canada, and is a member of the Canadian Investment Regulatory Organization (CIRO) and of the Canadian Investor Protection Fund (CIPF). Ndax is offering Crypto Contracts in accordance with the terms of the Decision Document dated December 19, 2024 that we entered into with the Canadian securities regulators. Any fiat currency held in user's accounts are protected by the CIPF's Investment Dealer Fund in accordance with its Coverage Policy. However, CIPF coverage does not extend to any virtual assets held in user's accounts. These assets are not eligible for deposit insurance or any protection from the Canada Deposit Insurance Corporation (CDIC) or CIPF.

The statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply in respect of a misrepresentation in this Crypto Asset Statement.

Prior to offering a Crypto Contract on AAVE, Ndax assesses whether AAVE is a security and/or a derivative under the securities and derivatives laws of Canada. Ndax’s assessment includes a review of the history of the AAVE (such as how it was created and its governance structure), its characteristics, its market capitalization, and any regulatory concerns regarding AAVE. Based on its assessment, Ndax concluded that AAVE is not a security or a derivative. However, there is a risk that this conclusion could change in the future. In that case, Ndax may be required to halt or withdraw AAVE from trading on the Platform and stop any future trading of Crypto Contracts based on AAVE, and users holding AAVE may be required to liquidate their positions, potentially at a significant loss. In this event, users holding positions in AAVE will be notified via the Platform or other electronic means and advised of the options available to them and any applicable period to sell or withdraw their positions in AAVE.

No Canadian securities regulatory authority has expressed an opinion about AAVE, including an opinion that AAVE is not itself a security and/or derivative.