What is Hedera?
Hedera Hashgraph is a crypto project launched in 2018. It aims not only to offer a cryptocurrency in the traditional sense, but also an infrastructure for the decentralization of the Internet. It positions itself as a 3rd generation blockchain after Bitcoin and Ethereum. Like most cryptocurrencies, its technology is based on the Distributed Ledger Protocol.
This technology aspires to compete with Bitcoin by guaranteeing security and high performance, without giving up on decentralization. It is designed to execute multiple tasks with time variations between requests and responses within the system to improve performance. The HBAR is the native utility token of the system. It acts as a cryptocurrency, but also as a currency used to pay application transaction fees on the platform and protect the network from attack through proof-of-stake. Hedera’s governance council is made up of a diverse number of well-known global enterprises including Google, IBM, Standard Bank, Nomura, Boeing, and many others.
What is HBAR token?
HBAR is Hedera’s native token serving two primary functions within the network: the token is used to pay for transaction fees and to execute smart contracts. Users can also stake HBAR as part of the proof-of-stake consensus mechanism, however rewards are not currently accrued to the public. By design, there is a maximum supply of 50,000,000,000 HBAR units.
How does HBAR compare to Bitcoin?
HBAR differs from Bitcoin in a few key ways.
First, HBAR powers the underlying proof-of-stake process for Hedera, a blockchain entirely separate from the Bitcoin blockchain. Since HBAR uses proof-of-stake instead of the proof-of-work method of Bitcoin, HBAR tokens are staked as part of the validation mechanism, in contrast to BTC which are mined as a result of the proof-of-work algorithm.
The second major difference between HBAR and Bitcoin is their age. Hedera’s mainnet beta was launched in 2019, compared to Bitcoin which launched in 2009. Although still significantly behind Bitcoin, HBAR has reached a level of competitive market capitalization and token distribution.
Although HBAR is different from Bitcoin and operates independently from it, it may still be affected by Bitcoin. 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 HBAR 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 HBAR’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 HBAR, including an opinion that HBAR is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of HBAR prior to making it available on Wealthsimple Crypto and has concluded that HBAR 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 HBAR based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of HBAR, 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 HBAR;
- The supply, demand, maturity, utility and liquidity of HBAR;
- Material technical risks associated with HBAR, including any code defects, security breaches and other threats concerning HBAR 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 HBAR, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of HBAR.
Like all other crypto assets, there are some general risks to investing in HBAR. 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.
HBAR also presents an elevated short history risk, and in contrast to networks like Bitcoin and Ethereum, where multiple parties participate in development, Hedera and the Hedera Foundation direct ongoing development of the software underlying the HBAR network.
Further, Hedera, the Hedera Foundation, and the HBAR community are not under any legal or regulatory obligation to disclose material information to the public regarding their activities. Holders of HBAR have no recourse to HBAR or Wealthsimple if HBAR declines in value for any reason. Of specific concern is the reliance of HBAR on the hashgraph consensus algorithm that is currently licensed to it. Any revocation of this license may significantly impact the asset’s value.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading HBAR. 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: August 4th, 2022
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