About this Statement

Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell yearn.finance in reliance on a prospectus exemption granted by the Canadian Securities Administrators (CSA) in the exemptive relief decision dated October 12, 2022. The statutory rights of action for damages and the right of rescission in section 130.1 of the Securities Act (Ontario) and similar legislation in the other CSA jurisdictions do not apply in respect of a misrepresentation in this statement to the extent that a crypto contract is distributed under the above-noted prospectus relief.

No securities regulatory authority in Canada or any other jurisdiction has expressed an opinion about any of the crypto assets (or crypto contracts) that are available through Coinsquare’s platform, including an opinion that the crypto assets are not themselves securities and/or derivatives.

Coinsquare has compiled the information contained in this Crypto Asset Statement to the best of its ability based on publicly available information.

About yearn.finance

Yearn.finance was founded by Andre Cronje. Cronje has a long career in cryptocurrency and has become synonymous with DeFi over the years. YFI is the native token of the yearn.finance service and is used for governance of the network. Yearn.finance is an aggregator service for decentralized finance (DeFi) investors, using automation to allow them to maximize profits from a process known as “yield farming” in which users lock their cryptocurrencies on the protocol to earn YFI tokens.

Risks

As with all assets, investing in yearn.finance is not without some general risks. Many of these risks are identified and explained in our Risk Statement.

The relevant sections in the Risk Statement are as follows:  

Platform Risk, Short History Risk, Price Volatility, Potential Decrease in Global Demand for Digital Assets, Potential for Illiquid Markets, Transfers of Digital Assets are Irreversible, Concentration Risks, Uncertainty in Regulation, Financial Institutions May Refuse to Support Transactions Involving Digital Assets,  Digital Assets’ Blockchain May Temporarily or Permanently Fork and/or Split, Cyber-Security Risk, Airdrops, Issues with Cryptography Underlying Digital Asset Networks, Internet Risk, Open Loop System, Risk if Entity Gains a 51% Share of Digital Asset Network, Possible Increase in Transaction Fees, Possible Increase in Service Fees, Limited Canadian Investor Protection Fund Account, No Voting Rights, Custody of Digital Assets, Custody Risk Insurance, Threats to Coinsquare’s Physical Assets, Covid-19 Outbreak, Use of Leverage, Halting, Suspending, and Discontinuing Digital Assets.

In addition to the general risks, we outline some risks that are specific to yearn.finance below. While we make an effort to identify every source of risk, we encourage you to do your own research and ensure you are comfortable investing in yearn.finance.

Exposure to Strategy Risks & 3rd Party Protocols

YFI is a platform that enables users to interact with other Decentralized Finance (DeFi) products, including lending and market-making products. Users of the Yearn.Finance platform select strategies to earn a return on their staked funds. The Yearn protocol uses client funds to seek yield in other DeFi products. These products include other blockchain platforms, such as Curve, Aave and Compound. Thus, YFI investors may be subject to risks associated with these technologies, as well as the strategies employed to generate the yield earned, such as staking, lending, and provision of trading collateral to other investors.

Concentration of YFI Supply

The YFI token supply is highly concentrated. The top 10 wallet addresses hold 37.4% of the supply, and the top 100 wallet addresses hold 85.3% of the supply1. The vast majority of the total supply of YFI (36,666 tokens) is currently in circulation, with no scheduled additions. This means that the decisions of the largest holders could greatly affect the market price of YFI as they control the majority of marketable supply.

Relatedly, YFI has no scheduled supply increases and no portion of supply is reserved for network participants. However, supply can be increased by a voting process, in which voting power is distributed based on holdings of YFI. For example, in February, 2021 a vote to increase the YFI supply by 22% passed with just 1,671 votes in favour.2 This creates a risk that large YFI holders will have a concentrated decision-making power over the project’s economic model and future token supply.

Protocol Security Risks

YFI is a platform that permits automated deposit, withdrawal and transfer of funds between strategies. The value of YFI is dependent on the stability and security of its deposit vaults and transfer mechanisms. Yearn Finance publishes documentation regarding the risks their platform and each strategy is exposed to at https://docs.yearn.finance/resources/risks/protocol-risks

YFI Network reliance on Ethereum

As YFI is built on top of the Ethereum network, it is highly dependent on the continued stability of that network. Any fundamental issues in the Ethereum network may impact YFI token value. Investors should consider this dependency when evaluating Yearn.Finance.

Coinsquare’s Due Diligence for Digital Assets

To be made available for trading on Coinsquare’s platform, a digital asset must pass the following due diligence reviews:

  1. Coinsquare Securities Law Assessment
  2. Coinsquare Digital Asset Security Audit
  3. New Digital Asset Business Case

Coinsquare undertakes these three levels of due diligence in order to determine whether the digital asset is compliant with our legal and regulatory obligations, is secure, and has historical data supporting a beneficial business case. Coinsquare’s New Product Committee must provide final approval for a new digital asset to be made available on the platform.

References:

  1. Jimmy Aki. “Yearn Finance Mints 6,666 YFI Tokens ($225M) After Supply Proposal Vote Passes.” Bitcoin Exchange Guide. February 3, 2021. https://bitcoinexchangeguide.com/yearn-finance-mints-6666-yfi-tokens-225m-after-supply-proposal-vote-passes/
  2. “YFI Holders Statistics”. CoinMarketCap, Jul 21, 2022. https://coinmarketcap.com/currencies/yearn-finance/holders/

Last updated on Jun 17, 2024