Coinsquare Capital Markets Inc. (“Bitbuy”) is offering crypto contracts to purchase and sell Celestia in reliance on a prospectus exemption granted by the Canadian Securities Administrators (CSA) in the exemptive relief decision dated October 12, 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 CSA jurisdictions do not apply in respect of a misrepresentation in this statement to the extent that a crypto contract is distributed under the above-noted prospectus relief.
No securities regulatory authority in Canada or any other jurisdiction has expressed an opinion about any of the crypto assets (or crypto contracts) that are available through Bitbuy’s platform, including an opinion that the crypto assets are not themselves securities and/or derivatives.
Bitbuy has compiled the information contained in this Crypto Asset Statement to the best of its ability based on publicly available information.
TIA is the native token of Celestia. Celestia describes itself as a scale-out data availability-focused blockchain. It uses a core component of sharding technology to give itself the scalability that allows it to compete with other modern blockchains, expanding with the amount of users and allowing developers to launch their own blockchain on top of Celestia. Its main differentiator is its efficient solution to the data availability problem be empolying light nodes to sample chunks of each block to verify data. This allows the block size to increase without increasing the chain verification costs.(1)
As with all assets, investing in Celestia is not without some general risks. Many of these risks are identified and explained in our Risk Statement.
The relevant sections in the Risk Statement are as follows:
Platform Risk, Short History Risk, Price Volatility, Potential Decrease in Global Demand for Digital Assets, Potential for Illiquid Markets, Transfers of Digital Assets are Irreversible, Concentration Risks, Uncertainty in Regulation, Financial Institutions May Refuse to Support Transactions Involving Digital Assets, Digital Assets’ Blockchain May Temporarily or Permanently Fork and/or Split, Cyber-Security Risk, Airdrops, Issues with Cryptography Underlying Digital Asset Networks, Internet Risk, Open Loop System, Risk if Entity Gains a 51% Share of Digital Asset Network, Possible Increase in Transaction Fees, Possible Increase in Service Fees, Limited Canadian Investor Protection Fund Account, No Voting Rights, Custody of Digital Assets, Custody Risk Insurance, Threats to Bitbuy’s Physical Assets, Covid-19 Outbreak, Use of Leverage, Halting, Suspending, and Discontinuing Digital Assets.
In addition to the general risks, we outline some risks that are specific to Celestia below. While we make an effort to identify every source of risk, we encourage you to do your own research and ensure you are comfortable investing in Celestia.
Although Celestia is a layer-1 blockchain, it is heavily intertwined with the Cosmos Network. Celestia was developed using the Cosmos SDK, and it utilizes a Tendermint-based consensus mechanism. While native TIA and the Celestia blockchain are not reliant on the Cosmos network as an ERC20 token is reliant on the Ethereum network, there are still clear links between Celestia and Cosmos as explained above. This relation between the two networks could have the potential to impact market price of either asset based on news or movements in the other asset. Potential investors should be aware of the link between Celestia and Cosmos and consider this when evaluating TIA for investment.
Celestia is one of many new layer-1 blockchains that aim to solve the problems of transaction cost, transaction throughput, scalability, and speed that exist with older blockchains. These new networks are in direct competition with each other for similar activity and often employ similar solutions to the same problems listed above.
As with staking any crypto asset, staking TIA is not without risk. Many of the risks of staking TIA are explained in our Risk Statement https://Bitbuy.ca/en-ca/ccml-rs/ in the following sections:
What is Staking, How Does Bitbuy Help You Earn Staking Rewards?, Validators, Custody, Slashing, Unbonding Periods, Rewards, Fees, Risks Related to Staking, Reliance on third party vendors, Slashing and missed rewards, Due diligence on validators may be insufficient, Illiquidity during unbonding periods, Due diligence on Digital Assets may be insufficient, Short History risk.
In addition to these general staking risks, we outline some information and risks that are more specific to TIA below.
Celestia employs a delegated proof-of-stake (DPoS) system for securing its network, called CometBFT, which is a fork of the Tendermint Core. Tendermint is the standard consensus mechanism for networks built using the Cosmos SDK. This allows TIA holders to delegate their tokens to be staked with an approved validator, which builds that validator’s reputation and relative size within the network of validators. As validators earn rewards for their activities in the blockchain, those who have delegated their TIA to those validators earn a share of those rewards proportional to the amount of TIA that the holder has staked with the validator.
Staking rewards are computed and distributed after each successful block. If a reward is accrued during a block, it will be issued immediately upon the completion of the block. When rewards are received by Bitbuy, Bitbuy will provide statements to users indicating the amount of the rewards that the user is entitled to as well as the total rewards that were earned and any fees payable. For each block, your share of TIA rewards is proportionate to the amount of TIA that you had staked when the block began.
Bitbuy’s staking service is designed to automatically stake any rewards (“auto re-staking”) that are earned by clients through the staking service. This means that when rewards are distributed to any client account, those rewards immediately enter that network’s bonding period. Once the bonding period is complete, the rewarded amount joins the pre-existing staked balance to earn rewards through the staking service. Currently, Bitbuy does not offer the ability for clients to opt out of the reward auto re-staking mechanism. However, if a client withdraws enough of their staked balance, causing the total staked amount to fall below the minimum stake amount for that asset, no rewards earned from then onwards will be automatically staked and instead will be credited to the client’s unstated holdings. Any assets that were in the bonding period when the staked amount fell below the minimum amount will enter the unbonding period immediately upon completing the bonding period, after which it will be added to that client’s unstaked holdings.
The estimated rewards percentage that appears throughout the Bitbuy app is a calculated annual percentage yield (APY) rate, which is derived from an APY rate that reported to us from our Staking partner, BitGo. The reported rate is then reduced by BitGo’s fee and Bitbuy’s fee, leaving the estimated rewards percentage that is displayed to in the app. The displayed rate is approximately what you might earn by staking the asset, but is subject to fluctuations based on various factors for each network and is not guaranteed. Additionally, it’s important to note that past performance is not necessarily indicative of future performance with respect to rewards earned from staking any asset. Bitbuy evaluates the net rewards paid to clients against the calculated and displayed estimated rewards percentage on an ongoing basis, at least quarterly.
Each crypto asset for which Bitbuy provides staking services is subject to specific fees because of the unique nature of each blockchain network. These fees are calculated on a percentage basis in relation to the amount of rewards earned. Bitbuy’s service fee may be up to 30% of net rewards earned by a user (as more fully described in our fee schedule https://Bitbuy.ca/en-ca/ccml-fs/).
Bitbuy receives net rewards from its Custodian, BitGo. This means that BitGo’s fees of 9% of gross rewards are removed on-chain from the total amount earned by the validator before the net amount is distributed to CCML. CCML then takes the amount received, removes the fee as explained below, and distributes the remaining amount proportionally to each user that had assets staked for the entirety of the period in which the rewards were earned.
With respect to any rewards earned on your staked TIA: (i) Bitbuy’s custodian, BitGo, will be entitled to a fee (as described above) and may pay a portion of that fee to any third-party service provider it selects to act as validator; (ii) any remaining portion of the rewards (the “Net Rewards”) will be delivered to one of Bitbuy’s custodial wallets with BitGo; (iii) Bitbuy will be entitled to a fee of up to 30% in respect of the Net Rewards (the “Bitbuy Services Fees”); and (iv) after the Bitbuy Service Fee has been paid, your account will be credited with any remaining portion of the rewards, and, subject to any unbonding, lock-up or cooling-down period, you will be able to hold, sell or withdraw your rewards.
Currently, the third-party service provider we use is our custodian, BitGo. BitGo is regulated as a trust company under the Division of Banking in South Dakota. Pursuant to Bitbuy’s relationship with BitGo, BitGo may act as the validator in respect of staked crypto assets or may select a third-party service provider to act as the validator. BitGo currently has a contractual relationship with Figment, whereby Figment acts as validator for the crypto assets stored in Bitbuy’s custodial wallets with BitGo. Headquartered in Toronto, Figment is one of the world’s largest blockchain infrastructure and services providers.
Validators miss out on TIA rewards if they fail to participate when called upon, and their existing stake can be destroyed if they behave dishonestly.
Bitbuy may, at its sole discretion, transfer reimbursements for slashing penalties it receives from BitGo to its users less any administrative costs or expenses Bitbuy incurs in reimbursing users. In the event a supported Cosmos validator is slashed, Bitbuy has no obligation to replace any lost TIA or otherwise provide any compensation for any losses. Negative impacts of slashing will be allocated to all clients using the staking service in proportion to the amount of TIA they had staked.
To be made available for trading on Bitbuy’s platform, a digital asset must pass the following due diligence reviews:
Bitbuy undertakes these three levels of due diligence in order to determine whether the digital asset is compliant with our legal and regulatory obligations, is secure, and has historical data supporting a beneficial business case. Bitbuy’s New Product Committee must provide final approval for a new digital asset to be made available on the platform.
