Crypto Asset Statement - Celestia

Although Celestia is a layer-1 blockchain, it is heavily intertwined with the Cosmos Network. Celestia was developed using the Cosmos SDK, and it utilizes a Tendermint-based consensus mechanism. While native TIA and the Celestia blockchain are not reliant on the Cosmos network as an ERC20 token is reliant on the Ethereum network, there are still clear links between Celestia and Cosmos as explained above. This relation between the two networks could have the potential to impact market price of either asset based on news or movements in the other asset. Potential investors should be aware of the link between Celestia and Cosmos and consider this when evaluating TIA for investment.  

Celestia is one of many new layer-1 blockchains that aim to solve the problems of transaction cost, transaction throughput, scalability, and speed that exist with older blockchains. These new networks are in direct competition with each other for similar activity and often employ similar solutions to the same problems listed above.  

As with staking any crypto asset, staking TIA is not without risk. Many of the risks of staking TIA are explained in our Risk Statement https://coinsquare.com/en-ca/ccml-rs/ in the following sections:

What is Staking, How Does Coinsquare Help You Earn Staking Rewards?, Validators, Custody, Slashing, Unbonding Periods, Rewards, Fees, Risks Related to Staking, Reliance on third party vendors, Slashing and missed rewards, Due diligence on validators may be insufficient, Illiquidity during unbonding periods, Due diligence on Digital Assets may be insufficient, Short History risk.

In addition to these general staking risks, we outline some information and risks that are more specific to TIA below.

Celestia employs a delegated proof-of-stake (DPoS) system for securing its network, called CometBFT, which is a fork of the Tendermint Core. Tendermint is the standard consensus mechanism for networks built using the Cosmos SDK. This allows TIA holders to delegate their tokens to be staked with an approved validator, which builds that validator’s reputation and relative size within the network of validators. As validators earn rewards for their activities in the blockchain, those who have delegated their TIA to those validators earn a share of those rewards proportional to the amount of TIA that the holder has staked with the validator.

Staking rewards are computed and distributed after each successful block. If a reward is accrued  during a block, it will be issued immediately upon the completion of the block. When rewards are received by Coinsquare, Coinsquare will provide statements to users indicating the amount of the rewards that the user is entitled to as well as the total rewards that were earned and any fees payable. For each block, your share of TIA rewards is proportionate to the amount of TIA that you had staked when the block began.

Coinsquare’s staking service is designed to automatically stake any rewards (“auto re-staking”) that are earned by clients through the staking service. This means that when rewards are distributed to any client account, those rewards immediately enter that network’s bonding period. Once the bonding period is complete, the rewarded amount joins the pre-existing staked balance to earn rewards through the staking service. Currently, Coinsquare does not offer the ability for clients to opt out of the reward auto re-staking mechanism. However, if a client withdraws enough of their staked balance, causing the total staked amount to fall below the minimum stake amount for that asset, no rewards earned from then onwards will be automatically staked and instead will be credited to the client’s unstated holdings. Any assets that were in the bonding period when the staked amount fell below the minimum amount will enter the unbonding period immediately upon completing the bonding period, after which it will be added to that client’s unstaked holdings.

The estimated rewards percentage that appears throughout the Coinsquare app is a calculated annual percentage yield (APY) rate, which is derived from an APY rate that reported to us from our Staking partner, BitGo. The reported rate is then reduced by BitGo’s fee and Coinsquare’s fee, leaving the estimated rewards percentage that is displayed to in the app. The displayed rate is approximately what you might earn by staking the asset, but is subject to fluctuations based on various factors for each network and is not guaranteed. Additionally, it’s important to note that past performance is not necessarily indicative of future performance with respect to rewards earned from staking any asset. Coinsquare evaluates the net rewards paid to clients against the calculated and displayed estimated rewards percentage on an ongoing basis, at least quarterly.

Each crypto asset for which Coinsquare provides staking services is subject to specific fees because of the unique nature of each blockchain network. These fees are calculated on a percentage basis in relation to the amount of rewards earned. Coinsquare’s service fee may be up to 30% of net rewards earned by a user (as more fully described in our fee schedule https://coinsquare.com/en-ca/ccml-fs/).

Coinsquare receives net rewards from its Custodian, BitGo. This means that BitGo’s fees of 9% of gross rewards are removed on-chain from the total amount earned by the validator before the net amount is distributed to CCML. CCML then takes the amount received, removes the fee as explained below, and distributes the remaining amount proportionally to each user that had assets staked for the entirety of the period in which the rewards were earned.

With respect to any rewards earned on your staked TIA: (i) Coinsquare’s custodian, BitGo, will be entitled to a fee (as described above) and may pay a portion of that fee to any third-party service provider it selects to act as validator; (ii) any remaining portion of the rewards (the “Net Rewards”) will be delivered to one of Coinsquare’s custodial wallets with BitGo; (iii) Coinsquare will be entitled to a fee of up to 30% in respect of the Net Rewards (the “Coinsquare Services Fees”); and (iv) after the Coinsquare Service Fee has been paid, your account will be credited with any remaining portion of the rewards, and, subject to any unbonding, lock-up or cooling-down period, you will be able to hold, sell or withdraw your rewards.

Currently, the third-party service provider we use is our custodian, BitGo. BitGo is regulated as a trust company under the Division of Banking in South Dakota. Pursuant to Coinsquare’s relationship with BitGo, BitGo may act as the validator in respect of staked crypto assets or may select a third-party service provider to act as the validator. BitGo currently has a contractual relationship with Figment, whereby Figment acts as validator for the crypto assets stored in Coinsquare’s custodial wallets with BitGo. Headquartered in Toronto, Figment is one of the world’s largest blockchain infrastructure and services providers.

Validators miss out on TIA rewards if they fail to participate when called upon, and their existing stake can be destroyed if they behave dishonestly.

Coinsquare may, at its sole discretion, transfer reimbursements for slashing penalties it receives from BitGo to its users less any administrative costs or expenses Coinsquare incurs in reimbursing users. In the event a supported Cosmos validator is slashed, Coinsquare has no obligation to replace any lost TIA or otherwise provide any compensation for any losses. Negative impacts of slashing will be allocated to all clients using the staking service in proportion to the amount of TIA they had staked.