What is Avalanche?
Sometimes described as a competitor to Ethereum, Avalanche is a layer one blockchain (meaning its own blockchain distinct from Bitcoin or Ethereum or any other blockchain) designed to be a platform on which decentralized applications (or dApps) can be built. The Avalanche ecosystem includes many projects and platforms which can be viewed on their website.
One of Avalanche’s unique characteristics is its chain architecture. In contrast to Bitcoin’s single blockchain, Avalanche operates three individual blockchains each with its own purpose. The Exchange Chain (X-Chain) mints and exchanges the AVAX token, Avalanche’s native token, with a standardized approach similar to ERC token standards. The Contract Chain (C-Chain) hosts smart contracts that power the dApps built on the Avalanche platform, and uses a consensus mechanism unique to Avalanche called Snowman. (Consensus mechanisms are the process by which a blockchain validates its transactions and secures its blockchain.) The Platform Chain (P-Chain) coordinates the subnets — sets of validators created to validate custom chains created on the Avalanche platform. Subnets can set their own requirements which gives more control and compliance functionality to participants in the Avalanche network. All three of these chains are validated by the Primary Network, which is also the network on which members take AVAX tokens.
Avalanche was developed by Ava Labs, a team dedicated to developing decentralized finance applications, located primarily in New York City and Miami. While the project is open source and consensus is decentralized, the Ava Labs team continues to play an important role in the ongoing development of the Avalanche protocol. The Avalanche Foundation also supports the development of the Avalanche project by raising and distributing funds “dedicated to accelerating development, growth, and innovation across the ecosystem of builders and users of the Avalanche public blockchain.”
What is AVAX?
The AVAX token is the Avalanche network’s native token. Transactions on Avalanche require the payment of a transaction fee which is paid in AVAX. Holders of AVAX can also stake their tokens on Avalanche’s primary network and earn rewards for participating in and validating the network.
There is a max supply of 720,000,000 AVAX tokens, with a circulating supply of just over 220 million (as of November 2021). Transaction fees paid in AVAX are burned (removed from the ecosystem) and AVAX is added to the supply via staking rewards and events like airdrops.
Please note that Wealthsimple Crypto does not currently allow for clients holding AVAX in their account to participate in staking of their tokens.
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 AVAX can be supported by Wealthsimple’s platform, including whether AVAX is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.
We evaluated AVAX based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of AVAX, 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 Avalanche;
- The supply, demand, maturity, utility and liquidity of AVAX;
- Material technical risks associated with AVAX, including any code defects, security breaches and other threats concerning AVAX 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 AVAX, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of AVAX; and
- Statements made by regulators or securities regulatory authorities in Canada and other jurisdictions regarding whether AVAX, 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 AVAX may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support AVAX.
Like all other crypto assets, there are some general risks to investing in AVAX. 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 AVAX. 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