What is EtherFi?

EtherFi is a decentralized, non-custodial Ethereum staking protocol that allows users to stake their ETH while retaining control of their private keys. The platform was designed to address concerns about centralization in staking, where users traditionally give up control of their assets to third-party operators. EtherFi provides an alternative by letting users delegate validator operations to node operators while still maintaining control over their staked assets via smart contracts.

Launched in March 2023 during ETHDenver, EtherFi also incorporates innovations such as NFT representations of validators and liquid staking tokens (like eETH), allowing stakers to use their staked assets in decentralized finance (DeFi) applications while continuing to earn rewards from Ethereum staking.

The governance token, ETHFI, was introduced in March 2024, with a portion of the total supply distributed via airdrop to early supporters and participants. This token enables holders to participate in protocol governance, vote on key decisions, and influence the protocol’s future.

What is ETHFI?

ETHFI is an ERC-20 token on the Ethereum network, and it is the governance token for the EtherFi protocol designed to allow holders to influence key decisions within the platform. With a total supply capped at 1 billion tokens, ETHFI was first distributed via an airdrop in March 2024, with 6% allocated to early participants. The token grants governance rights, enabling holders to vote on protocol upgrades, treasury management, and staking strategies. The remaining tokens are allocated to investors, contributors, and future growth initiatives, ensuring a gradual distribution to support EtherFi’s long-term development.

Risk statement

Before trading any crypto assets 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.

No securities regulatory authority or regulator in Canada has evaluated or endorsed the Crypto Contracts or any of the crypto assets made available through the platform.

Wealthsimple has performed an assessment of whether ETHFI can be supported by Wealthsimple’s platform, including whether ETHFI is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.

We evaluated ETHFI based on publicly available information, including (but not limited to):

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

Wealthsimple monitors ongoing developments related to crypto assets available on its platform for significant changes that may affect Wealthsimple’s original assessment of those assets, including Wealthsimple’s assessment of the application of securities and derivatives laws. Any significant changes relating to ETHFI may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support ETHFI.

Like all other crypto assets, there are some general risks to investing in ETHFI. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Please review the Wealthsimple Crypto Product Risk Disclosure for additional discussion of general risks associated with the crypto assets made available through the platform.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading ETHFI. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Wealthsimple is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Investments Inc. dated December 18, 2023 (the Decision).

The statutory rights of action for damages and rescission in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under securities legislation of other jurisdictions of Canada, do not apply in respect of this Crypto Asset Statement to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.

Last updated: September 20, 2024