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

Description of ETH

History of ETH

Ethereum was developed as a potential solution to the shortcomings of the Bitcoin network and was proposed in 2013 by Vitalik Buterin. After initial feedback on the concept, Buterin and the founding team publicly announced its development in 2014. Soon after the announcement, Ethereum conducted a crowd sale of ETH and raised US$18.4 million for network developments and operations.

The founders launched the test version of the network, or testnet, in 2015. Almost a month after the launch of the testnet, they launched the first mainnet version of Ethereum on June 30, 2015. The fully functional Ethereum network was later launched in March 2016.

What ETH is used for

Ether (ETH) is a global digital currency that has the same value all over the world. Unlike banks, ETH transactions do not involve intermediaries, making the transactions faster, more secure, and cost-effective. Anyone can use ETH to make payments anywhere in the world. Many online and brick-and-mortar stores accept ETH as a means of payment.

ETH is also the native currency of the Ethereum ecosystem. Network users can use ETH to use DApps on Ethereum or pay for services of any kind within the ecosystem. It is also one of the most common cryptocurrencies used in the decentralized finance (DeFi) sphere — a new financial system built on the blockchain.

Ethereum DApps

Ethereum integrated the concept of self-executing contracts called smart contracts into the blockchain. Developers can create smart contracts with varied functionalities that operate applications within the decentralized ecosystem. These apps deployed over blockchains are called decentralized applications or DApps.

They can have all the functionalities of a traditional application, but they are based on top of a decentralized network. This means, that once a DApp is deployed, no central entity can control its operation. All proposed changes must be voted upon by the community members.

Ethereum Nodes

As a decentralized network, the transactions on Ethereum are authenticated by computer systems distributed throughout the world. These computer systems that help authenticate transactions in a decentralized network are called nodes, or cryptocurrency miners.

To become a node in the current Ethereum network, i.e. Ethereum 1.0, a user must download the complete Ethereum blockchain data and run the Ethereum application on their system. Upon completing the setup, they can start verifying transactions and adding new blocks to the network.

Certain Staking Services Terms Applicable to ETH

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 particular crypto assets 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 3% APY, the gross reward will be 3 coins for the year. Ndax will earn a fee of 20%, in this case, 0.6 coins, and 2.4 coins will be credited to your account based on the payout frequency.

For purposes of the above table:

• “Ndax Admin Fees” 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 ETH. 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 ETH 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 ETH. You should also do your own research on ETH to make sure you are comfortable investing in such a crypto asset.

Risks specific to Staking ETH  

Prior to staking your crypto assets, you acknowledge that:  

• given the volatility of crypto assets, the value of your staked ETH when you sell or withdraw it, and the value of any rewards you earn through staking, may be significantly less than their current value;    
• there is no guarantee that you will receive any rewards on staked ETH;  
• 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 ETH 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 ETH, Ndax assesses whether ETH 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 ETH (such as how it was created and its governance structure), its characteristics, its market capitalization, and any regulatory concerns regarding ETH. Based on its assessment, Ndax concluded that ETH 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 ETH from trading on the Platform and stop any future trading of Crypto Contracts based on ETH, and users holding ETH may be required to liquidate their positions, potentially at a significant loss. In this event, users holding positions in ETH 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 ETH.

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