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

Description of ATOM

History of ATOM

In the year 2014, popular blockchain developers Jae Kwon and Ethan Buchman introduced Tendermint Byzantine Fault Tolerance (BFT) to the crypto world. This laid the foundations for the Cosmos network of today. Then, in June 2016, the duo started working on a project called GNuclear with a vision to create a decentralized network of blockchains that are interoperable. With help from the community, the project started to grow and was eventually renamed Cosmos.

In 2017, Cosmos held an initial coin offering (ICO) of ATOM, during which it raised more than $17M. By December 2018, the network began its major testing program, and the Cosmos mainnet was finally launched in March 2019.  

What is ATOM used for

Cosmos creates interoperability between blockchains, making it ideal for a variety of use cases. Blockchains within the ecosystem can effectively communicate, exchange data, and process transactions quickly. Developers can also use the network to build highly scalable and secure dApps.

The native governance token ATOM plays a key role in the Cosmos network. By owning ATOM, community members gain the right to vote on network governance proposals. It can also be delegated to validators to earn rewards.  

How ATOM works

The Cosmos ecosystem essentially consists of three main parts.

1. Zones: Zones are individual blockchain networks that can operate independently of the Cosmos ecosystem.
2. Cosmos Hub: The Cosmos Hub is the meeting point of all the blockchains in the network. Every Zone in the network is connected to the Hub. The Zones use an Inter-Blockchain Communications Protocol to communicate with other blockchains in the network.
3. Tendermint BFT Engine: The Tendermint BFT engine is central to all the operations of the Cosmos ecosystem. Instead of having the traditional three-layered blockchain network, Tendermint BFT packs the network and consensus layers into a single engine. The engine secures the network, adds blocks to the blockchain, and lets developers build their own blockchain networks. Tendermint uses a proof-of-stake (PoS) consensus mechanism where users can become validators by staking ATOM. The top 100 users staking the highest number of ATOM tokens become validators and can vote on governance decisions. Validators are rewarded with ATOM tokens based on how much they stake.

Certain Staking Services Terms Applicable to ATOM

You can cancel your opt-in to the staking services for any crypto-asset within the first four hours of your initial opt-in.

In addition to the other staking terms that you agree to when you opt-in to our staking services, please consult the table below for additional terms that currently apply to the staking service for ATOM at this time. Note that the annual percentage yield (“APY”) is an estimate, and terms are subject to change. All terms in effect are maintained on our website. 

Example: If you have 100 coins staked at 13% APY, the gross reward will be 13 coins for the year. Ndax will earn a fee of 20%, in this case, 2.6 coins and 10.4 coins will be credited to your account based on the payout frequency.

For purposes of the above table:

• “Instant Redemption” may be available for flexible plans on a first-come, first serve basis, subject to availability. If elected, your opt-out is effective immediately, and you are not entitled to any rewards generated within the reward period. This is subject to Ndax liquidity management provisions to fulfill client instructions to sell or transfer crypto assets prior to the Unbonding Period.
• “Standard Redemption” means that your opt-out is delayed for the period of time indicated in the above table, but you collect any rewards generated up to and including generated within the reward period.”
• “Ndax Admin Fee” refers to the percentage fee on the total amount of the reward generated through staking.
• “Bonding Period” refers to the amount of time it takes before you begin to generate staking rewards for that crypto asset from the time you have started staking.
• “Unbounding Period” refers to the amount of time you need to hold your eligible staked crypto assets after opting-in to the staking service before you are able to opt-out.

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 ATOM. 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.

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

Risks Specific to Staking ATOM  

• In addition to the risks described above, prior to staking ATOM, you acknowledge that:  
• given the volatility of crypto assets, the value of your staked ATOM when you sell or withdraw it, and the value of any reward you earn through staking, may be significantly less than their current value;    
• there is no guarantee that you will receive any reward on staked ATOM;    
• past rewards are not indicative of expected future rewards;  
• the rewards you are entitled to may be changed at the discretion of Ndax;  
• you may lose all or a portion of your staked ATOM if the validator does not perform as required by the network, and additional risks can be found in the Risk Statement.  

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

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