What is Tezos?
First conceptualized in 2014, Tezos was founded by Arthur and Kathleen Breitman and their startup Dynamic Ledger Solutions. One of the first protocols to enable on-chain governance, or what the project team called a “self-amending blockchain,” Tezos governance allows participants to vote on proposals to change how the protocol operates. The Tezos blockchain is secured via liquid proof-of-stake, an algorithm very similar to proof-of-stake but with two slight differences to encourage honest participation: participation requires a fairly significant amount of assets staked (referred to as “baking” with Tezos) and participants can easily change to which nodes they delegate their votes.
When Tezos was first developing its protocol, the team raised $232 million in July 2017 via Initial Coin Offering (ICO). Shortly thereafter, the Tezos Foundation was founded to “sustainably deploy resources that support the long-term success of Tezos” at an arm’s length from the team operating the protocol. The Foundation sources grants and other funding, and also runs advisory and audit committees to help the Foundation play an active and valuable role in the Tezos community.
Tezos positions itself as an ideal platform for developers to build applications on top of because its liquid proof-of-stake and adaptable infrastructure (primarily via on-chain governance) should serve to mitigate against potential code forks, which create two separate chains and disrupt associated development.
What is XTZ?
As mentioned, Tezos is secured by proof-of-stake, a validation mechanism powered by participants staking the blockchain’s native token, in this case XTZ or tez. XTZ holders can stake, or “bake”, their XTZ tokens to help secure the chain and earn rewards in return. (Please note that Wealthsimple Crypto does not currently allow for clients holding XTZ in their account to participate in securing the chain and earning rewards.) In addition to serving as means of validation, XTZ bakers can also vote on community proposals as part of the Tezos governance process.
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 XTZ can be supported by Wealthsimple’s platform, including whether XTZ is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.
We evaluated XTZ based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of XTZ, 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 Tezos;
- The supply, demand, maturity, utility and liquidity of XTZ;
- Material technical risks associated with XTZ, including any code defects, security breaches and other threats concerning XTZ 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 XTZ, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of XTZ; and
- Statements made by regulators or securities regulatory authorities in Canada and other jurisdictions regarding whether XTZ, 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 XTZ may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support XTZ.
Like all other crypto assets, there are some general risks to investing in XTZ. 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 XTZ. 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