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

Description of SEI

History of SEI

SEI is a Layer-1 blockchain built on the Cosmos SDK, designed to be the fastest blockchain for trading and decentralized finance (DeFi). It was co-founded by Dan Edlebeck, Jayendra Jog, and Jeff Feng in 2022 and launched its mainnet in August 2023.

What is SEI used for

SEI, the native token of the SEI blockchain, serves several important functions within the network. Primarily, SEI is used to pay transaction fees for processing and storing transactions on the blockchain, ensuring the smooth operation of decentralized finance (DeFi) applications built on the platform. Additionally, SEI plays a critical role in securing the network through its Delegated Proof-of-Stake (DPoS) mechanism. Users can stake SEI tokens to participate in network validation or delegate their tokens to validators in exchange for rewards. Furthermore, SEI holders are also given governance rights, allowing them to vote on key decisions and protocol upgrades that shape the future of the SEI ecosystem. 

How SEI works

SEI operates using a Twin-Turbo Consensus mechanism, designed for high performance and scalability in trading applications. This combines optimistic parallel execution and a Central Limit Order Book (CLOB), which serves as a native order-matching engine for decentralized exchanges. The CLOB ensures that transactions are executed in the correct sequence, preventing frontrunning and optimizing order processing. This makes SEI particularly well-suited for decentralized finance (DeFi) and high-frequency trading applications. Built on the Cosmos SDK, SEI also leverages the Inter-Blockchain Communication (IBC) protocol, allowing seamless interoperability with other blockchains in the Cosmos ecosystem.
In addition to its innovative consensus mechanism, SEI uses a Delegated Proof-of-Stake (DPoS) system. Validators secure the network by validating transactions, and users can delegate their SEI tokens to these validators in return for staking rewards. This structure supports both network security and efficiency. The combination of DPoS with SEI’s Twin-Turbo Consensus allows the platform to achieve low-latency, high-throughput transaction processing, making it ideal for DeFi applications and other high-demand use cases
 

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 SEI. 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.

In addition to the general risks set out in the Risk Statement, we also point out other specific risks to SEI below:

• Validator and Infrastructure Performance: SEI relies heavily on validators to secure the network and process transactions. However, the performance of these validators, particularly in high-demand scenarios, could be a risk. For example, SEI’s innovative Twin-Turbo Consensus system, designed for high-frequency trading, requires fast and reliable validators. If validators experience outages or performance degradation, it could disrupt transaction finality and the overall performance of the blockchain
• Market Volatility and Liquidity Risk: SEI is still relatively new, and while it has made strides in building a trading-focused blockchain, it is subject to the same market volatility as other cryptocurrencies. Additionally, its liquidity hubs and decentralized exchanges built on SEI must maintain sufficient liquidity. If liquidity falls, it could lead to greater price fluctuations and slippage for users
• Operational Risks: SEI aims to optimize trading efficiency with features like a central limit order book (CLOB) and Twin-Turbo Consensus, but high-frequency trading introduces additional risks of market manipulation, such as frontrunning. While SEI has designed mechanisms to minimize these risks, vulnerabilities could still be exploited, especially by sophisticated traders or bots.

• Regulatory Risks: As with all blockchain-based projects, regulatory changes can impact the operation and value of the SEI Network and its token.

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

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

Last Updated: 10/7/2024