The information contained in this Crypto Asset Statement was last updated on August 15, 2022.
No securities regulatory authority in Canada has expressed an opinion about Avalanche or any of the other Crypto Contracts or Crypto Assets made available through Newton Crypto Ltd. (Newton) on the Newton Platform, including an opinion that Avalanche itself is not a security and/or derivative. Changes to applicable law may adversely affect the use, transfer, exchange, or value of any of your crypto assets, and such changes may be sudden and without notice.
Newton is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Newton Crypto Ltd. dated August 15, 2022. The statutory rights of action for damages and the right of rescission in section 130.1 of the Securities Act (Ontario) and similar legislation in the other provinces and territories of Canada would not apply in respect of a misrepresentation in this Crypto Asset Statement or the Newton Platform Risk Statement.
This overview provides a summary of certain risks associated with Avalanche and is not an exhaustive description or summary of these risks and, in addition, does not take into account an individual’s particular situation or risk tolerance. Investors are encouraged to conduct their own research prior to trading any crypto asset.
Newton users should read the Newton Platform Risk Statement for additional discussion of general risks associated with crypto assets made available through the Newton platform. A copy of the Newton Platform Risk Statement acknowledged by you is available in your account in the “Statements & Reports” section.
Token Description & Project Background
Avalanche is a layer one blockchain that serves as both a competitor and complement to Ethereum, and functions as a platform for decentralized apps, tokens, and custom blockchain networks. It aims to improve upon the Ethereum scalability issue, and offers a higher transaction output of up to 6,500 transactions per second. The Avalanche network consists of 3 blockchains, the X-Chain, P-Chain and C-Chain. The X-Chain is the default asset chain on Avalanche and enables the creation of new assets, exchange of assets and subnet transfers. The P-Chain is the metadata blockchain on Avalanche used to coordinate validators and facilitate staking*, and the C-Chain is Avalanche’s Ethereum Virtual Machine (EVM) compatible chain, which allows for the creation of Ethereum compatible smart contracts. Ava Labs was founded in 2018 by Emin Gün Sirer, a Cornell University computer science professor and veteran in the cryptographic research space, along with computer science PhD’s Kevin Sekniqi and Maofan Yin.
Avalanche (AVAX) is the Avalanche platform’s native token and is used to power the protocol’s network as well as pay transaction fees for querying oracles for offchain data. Unlike Proof-of-Work (PoW), or Proof-of-Stake mechanisms, Avalanche’s nodes all process and validate transactions simultaneously, by employing a directed acyclic graph (DAG) protocol, to ensure transactions are correct using statistical certainty, and there are no blocks needed, resulting in immediate finalization of transactions on the blockchain.
* Currently, Newton does not provide its users with the ability to participate in the staking functions of AVAX.
Risks of Avalanche
Like an investment in other crypto assets, an investment in Avalanche includes the following general risks: (i) volatility risk and liquidity risk, (ii) short history risk, (iii) demand risk, (iv) forking risk, (v) code defects, (vi) regulatory risk, (vii) electronic trading risk, and (viii) cyber security risk.
For additional information of general risks associated with crypto assets, you may refer to the Newton Platform Risk Statement. In terms of specific risks, as Avalanche is one of the longest-standing crypto assets and its community base is widely decentralized, there is no central working group or authority to disclose material information to the public regarding Avalanche.
Please note that these risks and the associated summaries or overviews provided for each herein are not intended to be an exhaustive discussion pertaining to all such risks and, in addition, there may be other risks that come with exposure to Avalanche. We encourage all Newton users to perform their own due diligence to assess the risks associated with Avalanche and to determine whether this level of risk is acceptable to them. Neither Avalanche nor Newton guarantees the value of Avalanche, and holders of Avalanche will not have any recourse to Avalanche or Newton if the value of Avalanche declines for any reason whatsoever.
Newton’s Evaluation Process
Newton has reviewed and assessed Avalanche prior to making it available on the Newton Platform and has concluded that Avalanche is not a security or derivative under Canadian securities legislation; however, there is a risk that this conclusion could change in the future and that, in such event, Newton will be required to halt, suspend, and then remove Avalanche from its platform as described in the Newton Platform Risk Statement.
Further, as indicated above, no Canadian securities regulatory authority has expressed an opinion about Avalanche, including an opinion that Avalanche is not itself a security and/or derivative.
Based on publicly available information Newton has reviewed Avalanche, including, but not limited to, a review of the following:
- The creation, governance, usage, and design of Avalanche, including the source code, security, and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created Avalanche.
- The supply, demand, maturity, utility, and liquidity of Avalanche.
- Material technical risks associated with Avalanche, including any code defects, security breaches and other threats concerning Avalanche and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them.
- Legal and regulatory risks associated with Avalanche, including (i) any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Avalanche, and (ii) statements made by any securities regulatory authorities in Canada, other regulators in IOSCO-member jurisdictions, or the regulator with the most significant connection to Avalanche about whether Avalanche, or generally about whether the type of crypto asset, is a security and/or derivative.
A link to the Avalanche White Paper is available at the following link.