What is Shiba Inu?
Shiba Inu (or SHIB) is a meme coin, that is, a cryptocurrency inspired by a meme. Memes are jokes, phrases, images, or ideas that are shared or spread via the Internet, particularly social media platforms, and often for humorous purposes.
Shiba Inu is inspired by another meme coin, Dogecoin, a cryptocurrency created in 2013 based on a popular internet meme of a picture of a Shiba Inu dog. Like Dogecoin, Shiba Inu’s name and the imagery associated with it are based on the Shiba Inu meme.
SHIB was created in 2020 by a pseudonymous developer called Ryoshi. While Dogecoin has its own blockchain and miners, SHIB is an ERC-20 token based on the Ethereum blockchain. As an ERC-20 token, SHIB can be transferred between Ethereum addresses and so can be used as a way of transferring value in peer-to-peer transactions.
SHIB started with a token supply of one quadrillion. The founder, Ryoshi, transferred 50% of the supply of SHIB to a liquidity pool on Uniswap, a decentralized trading protocol, which allowed anyone to buy or sell SHIB in exchange for Ethereum. Ryoshi also transferred the other 50% of the total supply of SHIB to Vitalik Buterin, the co-founder of Ethereum. As a result, Buterin, not Ryoshi, controlled substantially more than half of the SHIB in existence.
In May 2021, Buterin used his control of SHIB and the Uniswap liquidity to make sizeable donations to charity and burned (that is, destroyed) most of the remainder. He stated that he would donate what remained to charity. In total, over 410 trillion SHIB - nearly half of the SHIB that ever existed - have been “burned” by sending them to an Ethereum address from which they can never be recovered.
A large online community, who call themselves the ShibArmy, has emerged to support SHIB. They participate in discussions in a variety of online forums, including on Twitter, Reddit, Telegram and Discord.
Although SHIB started as a meme coin, the Shiba Inu development team has been building an ecosystem around SHIB. SHIB can be traded on ShibaSwap, a “decentralized exchange” that allows various crypto assets, including SHIB, to be swapped for other assets. The team has also created new tokens related to SHIB, which are called LEASH and BONE. BONE is a governance token that lets the self-proclaimed ShibArmy vote on upcoming proposals on Doggy DAO, a decentralized autonomous organization that governs the project.
How does SHIB compare to Bitcoin?
SHIB differs from Bitcoin in a few important ways.
First, Bitcoin is a “coin” and SHIB is a “token.” That is because Bitcoin powers the Bitcoin blockchain, and it is mined by a decentralized network of computers that solve complicated maths puzzles to verify transactions. By contrast, SHIB is a token that runs on the Ethereum blockchain. On Ethereum, ETH is the only coin that can be mined. And miners mine ETH to process SHIB transactions. It is what is known as an ERC-20 token, the name applied to the generic token standard for the Ethereum blockchain.
Being an ERC-20 token has perks. Blockchains aren’t great at speaking to each other—you can’t get an Ethereum contract to work with a Bitcoin smart contract without some complicated engineering. However, it’s very easy for ERC-20 tokens to speak to one another, which means that SHIB can be used in most other decentralized finance applications.
Secondly, the Shiba Inu project now includes a protocol called ShibaSwap. ShibaSwap allows SHIB holders to trade, sell and engage in other transactions using SHIB and related tokens like LEASH and BONE. ShibaSwap is similar to protocols like SushiSwap.
Thirdly, unlike Bitcoin, SHIB is a meme coin. While, like Bitcoin, SHIB can be used as a means of payment or a store of value, its market price has been very volatile and so it may not be useful for payments or storing value. The price of SHIB may be significantly affected by public sentiment, among other factors. For example, the price of SHIB declined significantly when Vitalik Buterin gave away or destroyed most of his holdings of SHIB in May 2021. The price also declined when the billionaire Elon Musk suggested in October 2021 that he did not own any.
Finally, SHIB’s market capitalization is smaller than Bitcoin’s. As of October 2021, SHIB’s market capitalization was estimated to be $40 billion, as compared to Bitcoin’s market capitalization of $1.1 trillion.
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 SHIB, including an opinion that SHIB is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of SHIB prior to making it available on Wealthsimple Crypto and has concluded that SHIB 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 SHIB based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of SHIB, 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 SHIBA INU;
- The supply, demand, maturity, utility and liquidity of SHIB;
- Material technical risks associated with SHIB, including any code defects, security breaches and other threats concerning SHIB and its supporting 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 SHIB, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of SHIB.
Like all other crypto assets, there are some general risks to investing in SHIB. 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. In addition to these general risks, SHIB presents an elevated short history risk and other unique risks, notably significant volatility given its vulnerability to public sentiment, celebrity whims, and negative press. Further, the Shiba Inu community or the Shiba Inu development team is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of SHIB have no recourse to Shiba Inu or Wealthsimple if SHIB declines in value for any reason.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading SHIB. 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.