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 EOS. We created this summary to help you understand the basics of EOS as well as some of the risks involved in trading in EOS. While we tried to describe the key features of EOS, this summary isn’t meant to tell you everything you’d want to know before investing in EOS. You should also do your own research on EOS to make sure you are comfortable investing in it.

Description of EOS

History of EOS

EOS was designed to simplify the programming and integration of smart contracts and the development of distributed applications. While Ethereum-based apps are created from scratch, EOS allows developers to deploy various standard applications with minimal effort.

The project was formally launched in 2017 by a blockchain firm called Block.One. Interestingly, the CTO of Block.One is Daniel Larimer, creator of both Steemit and BitShares. He also helped develop the delegated proof-of-stake consensus mechanism that was adopted by the EOS network.

EOS began its ICO in 2017, which lasted an entire year. During the year following the launch, over 1 billion tokens were distributed by Block.One. Since the EOS blockchain was under development at ICO, ERC-20 tokens were issued to the participants. They were later swapped for EOS tokens.

What is EOS used for

EOS allows developers to create highly-scalable blockchain-based distributed applications on its network, but with minimal effort.

The EOS blockchain is powered by EOS tokens that provide bandwidth and storage to the network. Developers must hold EOS tokens equivalent to the amount of storage and processing capacity required to run a smart contract on the EOS platform.

EOS has partnered with Google Cloud, Galaxy Digital, OSSBERGER, and many more projects to improve its network efficiency in recent years. It’s why the blockchain community has adopted EOS positively.

EOS token is currently ranked in the top ten crypto assets by market cap.

How EOS works

EOS uses a delegated proof-of-stake consensus mechanism to find a block. Before adding the discovered block to the chain, a bet is placed to validate the block. As soon as the block is appended, the validators receive a reward proportionate to their bets.

Though the EOS network has similar abilities as Ethereum, the EOS token is considerably different from Ether. One must hold EOS tokens commensurate with the RAM processing power and CPU space to execute a smart contract on the EOS network.

Block.One offered 900 million EOS tokens in ICO, with a further 100 million tokens allocated to itself over a ten-year vesting schedule. About 200 million tokens were sold during the first five days of the ICO sale, and the remaining tokens were split evenly in a 23-hour sale period.

EOS tokens’ total supply is inflationary at an annual rate of 5% to fund transactions and pay block users.

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 EOS. 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 EOS below.  

Risks Related to Potential Centralization

There is a heightened risk of centralization with the EOS.IO Network’s DPoS protocol because the twenty-one delegated block producers exert significant control over the EOS.IO Network. Delegated block producers are selected through a highly competitive voting process which is held every two minutes, and individuals are constantly voted into and out of the delegate roles. Anyone on the EOS.IO Network can theoretically be voted in, but block validation requires a powerful computer and an advanced understanding of network RAM usage, so the average person is effectively excluded from participating in EOS governance. Some individuals or entities are repeatedly voted as delegated block producers, thereby increasing the centralization of the EOS blockchain protocol. DPoS may make the EOS.IO Network more vulnerable to security threats if the delegate composition or their validation decisions are influenced by vote buying, collusion, or state intervention.  

Concentration of EOS Holdings

The largest EOS addresses hold a very large portion of the EOS currently outstanding. Market volatility may result when large holders of EOS decide to sell significant amounts of their Bitcoin positions.

While we have tried to describe the key risks associated with EOS 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 EOS. You should also do your own research on EOS to make sure you are comfortable investing in such a crypto asset.

Regulatory Information  

Ndax is offering Crypto Contracts in accordance with the terms of a pre-registration undertaking dated March 23, 2023, that we entered into with the Canadian securities regulators, while our application for registration in certain Canadian jurisdictions is reviewed. Please note that Ndax is not currently registered under securities or derivatives legislation of Canada and there is no guarantee that registration will be granted.

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 EOS, Ndax assesses whether EOS 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 EOS (such as how it was created and its governance structure), its characteristics, its market capitalization, and any regulatory concerns regarding EOS. Based on its assessment, Ndax concluded that EOS 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 EOS from trading on the Platform and stop any future trading of Crypto Contracts based on EOS, and users holding EOS may be required to liquidate their positions, potentially at a significant loss. In this event, users holding positions in EOS 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 EOS.

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