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

Description of UNI

History of UNI

In the year 2016, Vitalik Buterin, the founder of Ethereum proposed the concept of a decentralized exchange. This is where the idea for Uniswap originated. A year later, an engineer named Hayden Adams took this idea and started working on it. With massive support from the Ethereum community, Adams managed to receive several grants, including $100,000 from the Ethereum Foundation. Then, after a year of intense trial and testing, Uniswap finally launched in November 2018.

In the months to follow, Uniswap gained popularity and received $1M in funding from an investment firm called Paradigm. In September 2020, the platform launched its primary token UNI. To celebrate this launch, Uniswap gave away 150M UNI to the users of the platform. As of March 2021, Uniswap is valued at $15.1B, making it the largest DEX by market cap.

What is UNI used for

Uniswap is a non-custodial cryptocurrency exchange that can be used to swap or trade ERC-20 tokens without the need for intermediaries. Anyone can list tokens on this platform without the need for permission.

Users can use UNI, the governance token of Uniswap, to vote on platform development decisions. Token holders can also use the token to fund liquidity pools, partnerships, grants, and any other initiatives meant for the development of the platform.  

How UNI works

Uniswap eliminates the need for the order book model used by centralized exchanges. Instead, the protocol utilizes liquidity pools and automated market makers (AMM).

A liquidity pool is a collection of tokens that are locked in a self-executing digital contract called a smart contract. Liquidity providers fund an equal value of two tokens to create a pool. They then receive special tokens called Liquidity tokens, which are equivalent in value to the funded tokens.

An AMM manages all the pools in the platform. When there is a buyer looking to trade a token, the AMM determines the best price for the token based on demand and supply. The token the trader wants is then drawn from the liquidity pool. Traders are required to pay a fee of 0.3% for using the platform and a part of this fee is used to reward the liquidity providers of the platform.

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 UNI. 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 UNI below.  

Price Dependence on Uniswap Protocol

As UNI is primarily a utility token insofar as it provides its holders with governance rights in relation to the Uniswap Protocol, UNI’s value is linked to the success of the Uniswap Protocol. In order to be successful, the Uniswap Protocol requires users both to provide liquidity to its liquidity pools and to trade with its liquidity pools. Should demand decline for the Uniswap Protocol, it is likely that the value of UNI will also decline.  

Regulatory Risk of Decentralized Exchanges

The regulation of crypto assets and facilities for trading or exchanging crypto assets continues to evolve in North America and within foreign jurisdictions. Governmental authorities may implement new regulatory schemes or enforce existing regulatory requirements in a manner that could restrict the use of the Uniswap Protocol and otherwise impact the demand for and value of UNI.

Competition from Crypto Asset Trading Platforms and Other Decentralized Exchanges

The Uniswap Protocol faces competition from centralized crypto asset trading platforms and other decentralized exchanges. Decentralized exchanges are typically not as easy to use as centralized crypto asset trading platforms, and generally lack the speed and liquidity of centralized platforms. Over time, demand for the Uniswap Protocol may decline if centralized crypto asset trading platforms grow more dominant. In addition, demand for the Uniswap Protocol may decline in the face of competition from other decentralized exchanges, such as the Sushiswap Protocol. Should demand decline for the Uniswap Protocol, it is likely that the value of UNI will also decline.  

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

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