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The information contained in this Crypto Asset Statement was last updated on September 25, 2024.

No securities regulatory authority in Canada has expressed an opinion about Solana 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 Solana 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 March 8, 2024.  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 Solana 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

Solana is a layer one blockchain billed as an “Ethereum killer”, that is designed to facilitate DApp creation and improve upon scalability issues in the space.  Solana places an emphasis on usability and aims to scale using the proof-of-history (PoH) consensus mechanism, which differentiates Solana from various other protocols.  Traditionally, timestamping is crucial in verifying transactions on the blockchain, and so the time a block takes to be mined needs to be computed.  Proof of history solves the time problem, by creating a historical record and verifying that an event took place at a certain moment in time.  Solana was founded by Anatoly Yakovenko and Greg Fitzgerald.  Yakovenko worked as a software engineer at Qualcomm and Dropbox prior to founding Solana, and Solana has inspired institutional and retail interest both.

Solana (SOL) is the Solana platform’s native token and is used to power the protocol’s network as well as pay transaction fees, and it can also be staked.

Risks of Solana

Like an investment in other crypto assets, an investment in Solana 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 Solana 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 Solana.

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 Solana.  We encourage all Newton users to perform their own due diligence to assess the risks associated with Solana and to determine whether this level of risk is acceptable to them.  Neither Solana nor Newton guarantees the value of Solana, and holders of Solana will not have any recourse to Solana or Newton if the value of Solana declines for any reason whatsoever.

Newton’s Evaluation Process

Newton has reviewed and assessed Solana prior to making it available on the Newton Platform and has concluded that Solana 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 Solana 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 Solana, including an opinion that Solana is not itself a security and/or derivative.

Based on publicly available information Newton has reviewed Solana, including, but not limited to, a review of the following:

• The creation, governance, usage, and design of Solana, including the source code, security, and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created Solana.
• The supply, demand, maturity, utility, and liquidity of Solana.
• Material technical risks associated with Solana, including any code defects, security breaches and other threats concerning Solana 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 Solana, including (i) any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Solana, 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 Solana about whether Solana, or generally about whether the type of crypto asset, is a security and/or derivative.

A link to the Solana White Paper is available at the following link.

Addendum to Crypto Asset Statement (SOL)

How does SOL staking work? 

Solana uses a Proof of Stake (PoS) consensus mechanism, where any token holder or group of token holders can stake SOL to become a validator on the network. The responsibilities and role of validators are to check transactions, verify on-chain activity, maintain records, and produce new blocks on the blockchain. Staking rewards are distributed to validators and delegators who stake their SOL.

For a more detailed general explanation of staking and the associated risks of staking, please refer to the Newton Platform Risk Statement. Additional information regarding staking of SOL on Newton is set out below.

Supported Validators 

The infrastructure providers of the validator nodes that Newton arranges to stake SOL with and the total fees for staking SOL are set out in our Staking Asset Supplementary Disclosure: Solana (SOL).

Approved validators will receive a fee (a Validator Commission) based on a percentage of staking rewards earned from the delegated SOL. The Validator Commission is determined by the respective validators and will be deducted by the Solana protocol upon the distribution of staking rewards. The estimated annual percent yield (APY) presented in-app is inclusive of this fee.

Epochs

 An epoch is the length of time taken to complete a specific amount of blocks on the blockchain. For the Solana protocol, an epoch is currently approximately 2 days.

Staking Rewards

 Staking rewards on Solana are computed once per epoch. Rewards accrued in a given epoch are issued to all participants (validators) in the first block of the following epoch. When rewards are received, Newton will calculate and distribute your share of SOL staking rewards to your respective account on a weekly basis. For each rewards distribution period, your share of SOL staking rewards is proportional to the amount of SOL that you had staked when the reward period began. When you unstake your SOL, you may be ineligible to receive any staking rewards for that period.

Staking Fees 

Newton charges you a fee equal to a percentage of staking rewards to be received by or attributed to your staked SOL. The amount of the fee for staking SOL is set out in our Staking Asset Supplementary Disclosure: Solana (SOL) next to “Reward Fee”. This fee includes the Validator Commission described above along with Newton’s staking fee, and is deducted prior to any staking rewards being distributed to your account.

Custody of Staked SOL 

SOL staked through Newton’s platform are staked from dedicated wallets with Newton’s custodian (Coinbase Custody Trust Company) with approved validators. Newton’s custodian will continue to hold the private keys or other cryptographic key material required to control staked SOL for so long as these assets are staked. Your staked SOL will not leave Newton’s omnibus accounts with the cold wallet custodian and your SOL will continue to be attributed to your account.

Slashing 

If a validator node “misbehaves”, such as confirming invalid transactions or trying to attack the network, staked SOL may be partially or wholly confiscated in a process called “Slashing”. This is an extremely rare occurrence. If a SOL validator is slashed, the validator will be scheduled to irreversibly exit the network. The validator will receive a penalty for each epoch that passes until the validator is ejected from the SOL network. The amount of staked SOL slashed is determined by the number of other validators slashed over the same period. In extreme circumstances, it is possible for a validator to lose the entire balance of their staked SOL. While due diligence is performed on validator operators, Newton cannot guarantee that there is no risk of Slashing. Newton will not be responsible or liable for and will not replace any lost SOL in accordance with the Newton TOU. Please understand the risks of staking SOL and read the Newton Platform Risk Statement.

Staking Asset Supplementary Disclosure: Solana (SOL) 

Prior to staking any Solana (SOL), please review Newton’s Platform Risk Statement and the Crypto Asset Statement for SOL.

SOL can be staked on the Newton platform. The following is a summary of the key fees, bonding periods, and other relevant factors to staking SOL on Newton’s platform. This disclosure is in addition to and should be read with the risk information provided in Newton’s Platform Risk Statement and the Crypto Asset Statement for SOL.`

Newton arranges to stake SOL with validator nodes operated by the following infrastructure providers:

* Rewards are expressed as a percentage of units of the crypto asset staked and not the Canadian dollar value of crypto assets staked.

**MEV (Maximum Extractable Value) refers to the additional profits that validators can earn by reordering, including, or censoring transactions within the blocks they produce. In the context of Solana staking, Newton will take 100% of these MEV rewards, which are additional to the regular staking rewards.