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

Description of TAO

History of TAO 

TAO is the native token of Bittensor, a decentralized blockchain network designed as a “peertopeer intelligence market” for AI models. Launched by the Opentensor Foundation in 2021, Bittensor enables AI models to collaborate and evaluate each other’s outputs using a novel consensus mechanism known as ProofofIntelligence (or the Yuma Consensus).  

What is TAO used for 

TAO serves multiple functions within the Bittensor ecosystem. It is used to pay transaction fees on the network and for staking by validators, which secures block production. Additionally, TAO incentivizes network participants—rewarding miners for contributing valuable AI outputs—and supports the overall economic model of the decentralized AI marketplace. 

How TAO works 

Bittensor operates on a standalone blockchain built with Substrate. Its unique ProofofIntelligence consensus selects miners based on the quality of their AI outputs. TAO is distributed as mining rewards under a fair-launch model with a fixed supply cap of 21 million tokens and a halving schedule to reduce inflation over time. The network’s design leverages gametheoretic mechanisms (such as Shapley value calculations) to ensure fair reward distribution and collusion resistance. 

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 TAO. Each of these risks are 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. 

Specific risks associated with TAO may include significant market volatility driven by speculative trading and early adoption dynamics; technical vulnerabilities arising from the network’s innovative ProofofIntelligence mechanism and complex integration of AI models, which—despite rigorous audits (e.g., the GovSpearbit audit available at https://github.com/bittensor/security-audits/blob/main/20241024-Gov-Spearbit.pdf)—may harbor undiscovered issues; operational risks highlighted by the July 2024 supplychain attack via a malicious Python package that resulted in significant token losses and underscored weaknesses in software verification practices; governance and centralization risks, as early network control remains concentrated in the hands of the Opentensor Foundation and a limited group of early miners, raising concerns about potential conflicts of interest and manipulation. Investors should be aware that these factors, combined with the experimental nature of the technology and ongoing development of the decentralized AI marketplace, render TAO a high-risk, speculative asset. 

While we have tried to describe the key risks associated with TAO 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 TAO. You should also do your own research on TAO 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 TAO, NDAX assesses whether TAO 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 TAO (such as how it was created and its governance structure), its characteristics, its market capitalization and any regulatory concern regarding TAO. Based on its assessment, NDAX concluded that TAO 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 TAO from trading on the Platform and stop any future trading of Crypto Contracts based on TAO, and users holding TAO may be required to liquidate their positions, potentially at a significant loss. In this event, users holding positions in TAO 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 TAO. 

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

Last Updated: March 12 2025