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

Description of POL

History of POL

Founded in 2017, the Polygon Network is the brainchild of developers Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun. Before its rebranding to Polygon, the project was called Matic Network, and it was a massive contributor to the Ethereum ecosystem.

Matic Network was a side chain solution that used Plasma technology to process transactions off-chain before sending them off to the Ethereum mainnet. The main aim was to decrease the load on the mainnet, increase its efficiency, and, therefore, increase its scalability.

Revamped in 2019, the present-day Polygon is a full-fledged platform for developing Ethereum compatible, interoperable blockchains. It is popularly referred to as Ethereum’s internet of blockchains. The network has seen immense growth ever since and is famous for standing strong even through the recent crypto market crash.  Polygon has a market cap of $5.8B as of July 2021.

What POL is used for

As the primary utility token of the network, POL is used primarily as a means of payments and settlements on the platform. POL, whose maximum supply is 10B coins, is also used as an incentive to encourage participants to contribute to the network.

Apart from this, POL is used to run the network’s consensus mechanism where users stake tokens to validate blocks.  

How POL works

As mentioned above, the newly revamped Polygon network is a layer-2 solution for building interoperable blockchain networks. These blockchain networks are capable of communicating with each other as well as the Ethereum mainnet. They can use Polygon’s core architecture and yet be custom-made to meet individual developer’s needs. When blockchain networks of different capabilities communicate, they overcome their shortcomings and become one fully capable network.

To make all this possible, Polygon has a robust architecture in place. It has four important layers that carry out all the functions of the network. Firstly, there’s the Ethereum layer that allows all the blockchain networks to communicate with the mainnet. It is also responsible for checking finality, resolving disputes, and staking.

The second layer is an optional security layer. It offers validators on-demand service for any blockchain on the Polygon network for a fee. The third is the Polygon Networks Layer. This layer is like the meeting point for all the blockchains and is responsible for block production and local consensus. The final one is the execution layer which interprets and executes transactions.

Certain Staking Services Terms Applicable to POL

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:

• “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 POL. 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 POL below.

Dependence on Polygon Developers  

While many contributors to Polygon are employed by companies in the industry, most of them are not directly compensated for helping to maintain the network. As a result, there are no contracts or guarantees that they will continue to contribute to Polygon.

Concentration of POL Holdings

More than half of the POL currently in circulation is controlled by the founders and other persons associated with the development of Polygon. As a result, these persons control a significant vote related to the planning and decision-making of Polygon. A concentrated level of ownership by these persons may adversely affect the price of POL itself.  

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

Risks Specific to Staking POL  

In addition to the risks described above, prior to staking your crypto assets, you acknowledge that:  

• staked POL begins to start earning rewards after one day;  
• staked POL may be withdrawn at any time;  
• given the volatility of crypto assets, the value of your staked POL 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 POL;    
• 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 POL 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 POL, Ndax assesses whether POL 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 POL (such as how it was created and its governance structure), its characteristics, its market capitalization, and any regulatory concerns regarding POL. Based on its assessment, Ndax concluded that POL 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 POL from trading on the Platform and stop any future trading of Crypto Contracts based on POL, and users holding POL may be required to liquidate their positions, potentially at a significant loss. In this event, users holding positions in POL 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 POL.

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