What is Ethereum?
Ethereum is the blockchain that cryptographically mines transactions of ether (ETH), validates the ledger, and underpins most of the existing smart contract technology. Ether is its native crypto asset, but many other popular and valuable crypto assets are ERC-compliant tokens, which means they are created and hosted on the Ethereum blockchain, are stored and sent using Ethereum addresses and transactions, and are compliant with the protocol, but operate on applications built on top of the blockchain.
Ether and Bitcoin are similar in a lot of ways. Both, for instance, rely on a blockchain, a publicly accessible electronic ledger that permanently, and immutably records every transfer of the cryptocurrency units, and by doing so, provides the system with both self-policing and accountability.
Bitcoin vs Ethereum
One of the biggest differences between Ethereum and Bitcoin is how they came to be. Bitcoin’s creation is a great mystery; it was created by a person or group of people going by “Satoshi Nakamoto” who have still yet to be publicly identified, and is so “decentralized” that it has no office you can visit.
Ethereum arrived on the scene with a known team of developers. Ethereum was first described in a 2013 white paper by Vitalik Buterin, a cryptocurrency expert well known for his work writing for Bitcoin Magazine. Ethereum transactions are processed more quickly using a different algorithm (ethash), and its code can transmit more information through its smart contract layer. This is the key differentiator and the piece that enables Ethereum to support complex development applications and executable contracts on top of its blockchain.
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. First and foremost:
No Canadian securities regulatory authority has expressed an opinion about Ethereum, including an opinion that ETH is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of ETH prior to making it available on Wealthsimple Crypto and has concluded that ETH is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.
We evaluated Ethereum based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of Ethereum, 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 Ethereum;
- The supply, demand, maturity, utility and liquidity of Ethereum;
- Material technical risks associated with Ethereum, including any code defects, security breaches and other threats concerning the Ethereum blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
- Legal and regulatory risks associated with Ethereum, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of ETH.
Like all other crypto assets, there are some general risks to investing in ETH. 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. Each of these risks are described in more detail in our in-app Product Disclosure. Further, the Ethereum community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of ETH have no recourse to its community or Wealthsimple if ETH declines in value for any reason.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading ETH. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.
Last updated: July 26, 2021