What is The Graph?
Likened to the “Google of Blockchain,” The Graph is a decentralized, open-source indexing protocol used to query data from blockchains such as Ethereum and IPFS. Blockchain data is processed by core network participants called indexers and delegators and is aggregated and stored on open application programming interfaces (APIs), or subgraphs. Indexing blockchain data allows The Graph to offer efficiencies to developers of decentralized applications (dApps) who query the subgraphs and retrieve information which can then be leveraged in dApp project development.
Created by Yaniv Tal, Brandon Ramierz and Jannis Pohlmann, The Graph was founded in 2018. Following a successful launch of The Graph mainnet in 2020, Tal became the CEO of Edge & Node, a software development company led by the initial project team which has committed its continued support to the evolution of The Graph protocol into 2023. The Graph governance responsibilities now rest primarily with The Graph Foundation, The Graph Council and the broader ecosystem of community participants.
What is GRT?
The Graph economy is powered by its native utility token, GRT. GRT is an ERC-20 token which means that it is compatible with and secured by the Ethereum network. The public sale of GRT launched in 2020 with an initial maximum supply of 10 billion tokens. New tokens are issued as indexing rewards at a rate of 3% annually. The value of GRT is closely tied to the utility of The Graph and its development, but GRT can also be traded on public exchanges independently.
GRT has multiple uses in The Graph ecosystem: it is the medium of exchange used by developers and other end-users to pay for subgraph queries and it is earned by network participants including indexers, curators and delegators who stake GRT to perform their roles. GRT holders also participate in protocol governance. While the token’s governance function is currently limited, a DAO (Decentralized Autonomous Organization) is expected to launch in the future. As part of its mandate, The Graph Foundation supports the development of The Graph ecosystem and allocates grants to projects building on The Graph. These funding activities are supported by a small fee which is re-allocated from fees collected on the network.
Please note that Wealthsimple Crypto clients holding GRT in their account cannot currently stake their tokens or participate in on-chain governance.
How does GRT compare to Bitcoin?
First, Bitcoin is a “coin” and GRT is a “token.” Bitcoin powers the Bitcoin blockchain and it is mined by a decentralized network of computers that solve complicated puzzles to verify transactions. By contrast, GRT 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 GRT transactions. It is what is known as an ERC-20 token, the name applied to the generic token standard for the Ethereum blockchain.
Second, Bitcoin is far larger than The Graph, and older, too. While Bitcoin, the largest cryptocurrency by market capitalization, has a market cap of roughly $722 billion, GRT has a market cap of around $1.79 billion (as of February 2022.) And while GRT was created in 2019, and its development is still in progress, Bitcoin has been around for over a decade.
However, it should be noted that although GRT is different from Bitcoin, it is far from independent from it. Bitcoin, the coin with a larger market (by a long shot), can influence the price of all other cryptocurrencies. If Bitcoin crashes, there’s a good chance that GRT will feel the burn too (not directly as they operate entirely distinctly, but through overall market sentiment.) It is not clear, but unlikely, that a significant drop in GRT’s value would have a material impact on Bitcoin.
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 The Graph, including an opinion that GRT is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of GRT prior to making it available on Wealthsimple Crypto and has concluded that GRT 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 GRT based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of GRT, 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 The Graph;
- The supply, demand, maturity, utility and liquidity of GRT;
- Material technical risks associated with GRT, including any code defects, security breaches and other threats concerning GRT 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 GRT, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of GRT.
Like all other crypto assets, there are some general risks to investing in GRT. 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. As the value of GRT is closely linked to the utility of The Graph, changes in technological advancements and decreased involvement on the part of the initial project team may have adverse impacts on asset price and growth. GRT also presents higher short history risk and concentration risk with current distribution holding patterns suggesting that a small number of GRT token holders may have a sizeable influence on network staking and governance.
Edge & Node, The Graph Foundation, The Graph Council and community are not under any legal or regulatory obligation to disclose material information to the public regarding their activities. Holders of GRT have no recourse to Edge & Node, The Graph Foundation, The Graph Council or Wealthsimple if GRT declines in value for any reason.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading GRT. 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: February 24, 2022