What is Cosmos?

Cosmos is a decentralized network of independent parallel blockchains designed to let people build custom, secure, scalable and interoperable blockchain applications quickly. Each chain is secured by the Tendermint consensus, a BFT consensus algorithm. The protocol’s goal is to create an “Internet of Blockchains", which is "a network of blockchains where each participant is able to communicate with each other in a decentralized way".

This goal is achieved through three core open-source elements: Tendermint, the Cosmos SDK and the Inter-Blockchain Communication protocol. Each new independent blockchain created within Cosmos is called a “zone” and is tethered to the Cosmos Hub. The Hub is the first of many interconnected blockchains built on the network and acts as an intermediary. Validators and delegators in the Hub can vote on proposals that are then able to change the parameters of the system, coordinate the upgrades, and vote on the different governance policies of the Cosmos Hub.

The Cosmos SDK was developed by Jae Kwon and Ethan Buchman in 2014. Tendermint was also created at the same time. The Interchain Foundation (ICF), a Swiss non-profit that funds open-source blockchain projects, is the organization that supports Cosmos’ development.

What is ATOM?

ATOM is the native asset of the Cosmos Hub and performs various functions. ATOM owners can stake their tokens to ensure network security, in which case their locked tokens would be slashed in response to malicious behaviour. Cosmos utilizes a gas system similar to Ethereum and ATOMs are also used to pay transaction fees. Finally, ATOMs are required to participate in on-chain governance. Please note that Wealthsimple Crypto clients holding ATOMs in their account cannot currently stake their tokens or participate in on-chain governance.

The IFC ran multiple private investment rounds and a public fundraiser event that ended in April 2017, raising over 17 million USD through token sales. Out of the initial supply, 5% of the ATOM went to its initial donors, 10% went to the IFC, 10% went to Tendermint, and the remaining 75% to be distributed to public and private investors. There is no maximum supply of ATOM. Instead, new tokens are created based on the number of ATOMs being staked.

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

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

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

Like all other crypto assets, there are some general risks to investing in ATOM. 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 / Information

ATOM has elevated regulatory risk. The United States Securities and Exchange Commission (SEC) has alleged that ATOM is a security under U.S. federal securities laws in one or more enforcement proceedings pending before U.S. courts against crypto trading platforms. None of the Cosmos team or The Interchange Foundation are parties to this proceeding, and the U.S. courts have not determined that ATOM is a security. In the event that a U.S. court determines that ATOM is a security or there are other material developments affecting the treatment of ATOM under securities laws, Wealthsimple may cease to support ATOM and/or the market for ATOM may be adversely affected.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading ATOM. 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