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 Polkadot 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 Polkadot 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 Polkadot 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
Polkadot is a decentralized, open-source blockchain platform that connects different blockchains with one another and it launched in May 2020. Polkadot was created by co-founders Robert Habermeier, Ethereum’s co-creator, Dr. Gavin Wood, and Peter Czaban. Polkadot supports cross-blockchain transfers of any type of data or asset (not just tokens). Polkadot was designed to be scalable with no limit to the number of chains (or transactions) it can accommodate.
DOT is the native token of Polkadot and has three distinct purposes: governance over the network, staking, and bonding. Because DOT serves as a governance token, it can be staked by holders to earn privileges such as voting rights and participation rewards. Staking provides token-holders with control over the protocol and power to participate in governance of the network. Holders of DOT also have the option of participating as a “validator” (through the Nominated Proof-of-Stake mechanism), “nominator”, “collator”, or “fisherman”, thus earning participation rewards. Polkadot encourages DOT holders to participate as nominators which may vouch for up to 16 validators as trusted validator candidates, as both validators and nominators have the option to lock their tokens as collateral in order to receive staking rewards.
* Currently, Newton does not provide its users with the ability to participate in the staking of DOT to earn rewards or to participate in governance.
Risks of Polkadot
Like an investment in other crypto assets, an investment in Polkadot 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 Polkadot 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 Polkadot.
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 Polkadot. We encourage all Newton users to perform their own due diligence to assess the risks associated with Polkadot and to determine whether this level of risk is acceptable to them. Neither Polkadot nor Newton guarantees the value of Polkadot, and holders of Polkadot will not have any recourse to Polkadot or Newton if the value of Polkadot declines for any reason whatsoever.
Newton’s Evaluation Process
Newton has reviewed and assessed Polkadot prior to making it available on the Newton Platform and has concluded that Polkadot 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 Polkadot 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 Polkadot, including an opinion that Polkadot is not itself a security and/or derivative.
Based on publicly available information Newton has reviewed Polkadot, including, but not limited to, a review of the following:
- The creation, governance, usage, and design of Polkadot, including the source code, security, and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created Polkadot.
- The supply, demand, maturity, utility, and liquidity of Polkadot.
- Material technical risks associated with Polkadot, including any code defects, security breaches and other threats concerning Polkadot 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 Polkadot, including (i) any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Polkadot, 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 Polkadot about whether Polkadot, or generally about whether the type of crypto asset, is a security and/or derivative.
A link to the Polkadot White Paper is available at the following link.