What is Kyber Network?

Kyber Network is a decentralized exchange that provides on-chain liquidity by using “liquidity pools.” These pools are reserves of cryptocurrencies provided by investors, known as liquidity providers. When a user trades on Kyber Network, the network searches for the most competitive rate. This also removes the need for a centralized order book—which presents an added security risk—as the exchange rates are already determined by the reserves on the Network.

Kyber Network, and its decentralized exchange KyberSwap, is able to integrate with and provide liquidity to a few different potential users, including crypto wallets (exchange between cryptocurrencies), decentralized applications can leverage Kyber’s liquidity and transaction protocol, and vendors can use KyberSwap to accept more currencies while settling in their preferred currency.

Kyber Network launched during the 2017 ICO boom, raising $60 million in the process. Today, the protocol has a market cap in excess of $400 million.

What is the Kyber Network Crystal (KNC) token?

The Kyber Network has its own native token, called the Kyber Network Crystal (KNC). KNC is an ERC-20 token that exists on the Ethereum blockchain. As of May 2021, there are 138 million KNC tokens in circulation. When KNC is used for network fees, it is then taken out of the token supply (called burning) which creates a deflationary economic model over time.

KNC’s primary function is to decentralize decision-making power by conveying voting rights to KNC holders. The Kyber Network community can propose improvements and changes to the protocol, which are then reviewed and voted on by the KyberDAO — decentralized autonomous organization — via weighted KNC staking. Stakers also earn rewards for their participation in this governance process because the protocol is designed to distribute a portion of network fees to KNC stakers (in ETH.)

In addition to voting rights, KNC can also serve as a means of payment through Kyber Network partnerships (in participating jurisdictions, the Monolith VISA card enables spending of KNC), or KNC can be deposited on lending platforms like Aave for holders to earn yield on their assets.

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 KNC can be supported by Wealthsimple’s platform, including whether KNC is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.

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

• The creation, governance, usage and design of Kyber Network, 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 Kyber Network;
• The supply, demand, maturity, utility and liquidity of Kyber Network;
• Material technical risks associated with Kyber Network, including any code defects, security breaches and other threats concerning Kyber Network 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 Kyber Network, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of KNC; and
• Statements made by regulators or securities regulatory authorities in Canada and other jurisdictions regarding whether KNC, 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 KNC may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support KNC.

Like all other crypto assets, there are some general risks to investing in KNC. 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.

Additional risks and Information

On November 23, 2023, the KyberSwap protocol was subject to a malicious attack, resulting in the loss of funds held by the protocol. Although the KNC token was not directly affected by this attack, KNC holders may be subject to greater volatility, liquidity, and demand risk as a result of this event, as the hack may trigger a loss of confidence in the KyberSwap protocol. 

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading KNC. 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: January 1, 2024