Bitwise 10 Crypto Index Fund

Previous wording

Crypto Assets are subject to volatile price fluctuations which can impact investments in the Trust.

Current wording

Crypto Assets are subject to significant price volatility which can impact investments in the Trust;

Previous wording

the value of the Trust’s Crypto Assets is dependent, directly or indirectly, on prices established by Crypto Asset exchanges and other Crypto Asset trading venues, which are new and, in most cases, largely unregulated;

Current wording

the value of the Crypto Assets is dependent on prices established by Crypto Asset exchanges and other Crypto Asset trading venues, the instability, failure, closure, or manipulation of which could adversely affect an investment in the Trust;

Previous wording

Changes in the governance of a Crypto Asset's Blockchain network may not receive sufficient support from users, Validators and/or Miners, which may negatively affect that Blockchain network’s ability to grow and respond to challenges.

Current wording

changes in the governance of a Crypto Asset’s Blockchain network may not receive sufficient support from users, Validators or Miners, which may negatively affect that Blockchain network’s ability to grow and respond to challenges;

Previous wording

A temporary or permanent “fork” could adversely affect the value of the Shares.

Current wording

a temporary or permanent “fork” could adversely affect the value of the Shares and the operations of the Trust;

Previous wording

competition from the emergence or growth of other Crypto Assets or the development of other methods of investing in Crypto Assets could have a negative impact on the price of Portfolio Crypto Assets and adversely affect the value of the Shares;

Current wording

competition from the emergence or growth of other Crypto Assets or the development of other methods of investing in Crypto Assets could have a negative impact on the price of Crypto Assets and adversely affect the value of the Shares;

Previous wording

Certain Portfolio Crypto Assets utilize DeFi protocols, which are typically developed on top of other public blockchain networks and are therefore subject to the risks of the underlying public blockchain network, as described above.

Current wording

certain Portfolio Crypto Assets utilize DeFi protocols, which are typically developed on top of other public Blockchain networks and are therefore subject to the risks of the underlying public Blockchain networks, as described above;

Previous wording

It is possible that the SEC or a court may determine that the Trust’s redemption program, which ended prior to the quotation of the Shares on OTCQX, violated Regulation M.

Current wording

it is possible that the SEC or a court may determine that the Trust’s redemption program, which ended prior to the quotation of the Shares on the OTCQX, violated Regulation M;

Previous wording

Prices of Crypto Assets have fluctuated widely for a variety of reasons including uncertainties in government regulation and may continue to experience significant price fluctuations. Since the inception of the Trust, volatility has had a significant impact on the fair market value of the Portfolio Crypto Assets, to date resulting in a large positive change in the Trust’s net realized and unrealized gain on investment in Crypto Assets, but also periods of significant negative changes. For example, the average price of Bitcoin, the Trust’s primary Portfolio Crypto Asset, increased from an average of $8,119.40 a Bitcoin during the period from November 22, 2017 (the inception of the Trust) to December 31, 2018 to an average of $11,107.74 a Bitcoin during the period from January 1, 2020 to December 31, 2020 to an average of $47,422.06 a Bitcoin during the period from January 1, 2021 to December 31, 2021 to an average of $28,197.75 per Bitcoin during the period from January 1, 2022 to December 31, 2022 to an average of $28,836.24 per Bitcoin during the period from January 1, 2023 to December 31, 2023. There can be no assurance, however, that ongoing volatility will continue to positively impact the value of the Portfolio Crypto Assets. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Historical Portfolio Crypto Asset Prices.”

Current wording

Prices of Crypto Assets have fluctuated widely for a variety of reasons, including negative perception and a lack of stability and standardized regulation in the Crypto Asset economy and may continue to experience significant price fluctuations. Since the inception of the Trust, volatility has had a significant impact on the fair market value of the Portfolio Crypto Assets, to date resulting in a large positive change in the Trust’s net realized and unrealized gain on investment in Crypto Assets, but also periods of significant negative changes. For example, Bitcoin’s average price has seen significant volatility over recent years. From the Trust’s inception on November 22, 2017, through the end of 2018, the average price was $8,119.40 per Bitcoin. It climbed to $11,107.74 in 2020, followed by a substantial surge to $47,422.06 in 2021. However, the average dropped to $28,197.75 in 2022 and remained relatively stable at $28,836.24 in 2023. In 2024, the average price has hovered around $29,000 through December, but recent developments have driven sharp increases. In March 2024, Bitcoin reached a then all-time high of $73,737.94, fueled by record inflows into Spot Bitcoin ETFs and rising investor enthusiasm. More recently, on January 20, 2025, Bitcoin hit another record high of $109,114.88. There can be no assurance, however, that ongoing volatility will continue to positively impact the value of the Portfolio Crypto Assets. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Historical Portfolio Crypto Asset Prices."

Previous wording

Investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in bitcoin, ether or other Crypto Assets that utilize either Crypto Asset’s Blockchain;

Current wording

Crypto Assets market fragmentation, consolidation, and trading activities of large investors;

Previous wording

Consumer preferences and perceptions of such Crypto Asset specifically and Crypto Assets generally;

Current wording

Consumer preferences and perceptions of Crypto Assets;

Previous wording

If Crypto Asset markets continue to be subject to sharp fluctuations, Shareholders may experience losses as the value of the Trust’s investments declines. Even if Shareholders are able to hold their Shares in the Trust for the long-term, their Shares may never generate a profit, since Crypto Asset markets have historically experienced extended periods of flat or declining prices, in addition to sharp fluctuations. In addition, Shareholders should be aware that there is no assurance that Crypto Assets will maintain their long-term value in terms of future purchasing power.

Current wording

If Crypto Asset markets remain highly volatile, Shareholders may experience losses as the value of the Trust’s investments declines. Even if Shareholders are able to hold their Shares in the Trust for the long term to offer some resilience, their Shares may never generate a profit, since Crypto Asset markets have historically experienced extended periods of flat or declining prices, in addition to sharp fluctuations. There is no assurance that Crypto Assets will retain their value over the long term or maintain their purchasing power in the future.

Previous wording

If a Shareholder contributes to the Trust in Crypto Assets, the number of Shares the Shareholder ultimately receives will depend on the value of the Crypto Assets at the time of admission to the Trust. Shareholders are admitted periodically. There may be considerable differences in the value of a Crypto Asset from the time the Crypto Asset is contributed by a Shareholder to the Trust (or its agent) and the time the Crypto Asset is valued for purposes of determining the number of Shares received. For the avoidance of doubt, if the value of a Crypto Asset declines after a Shareholder contributes the Crypto Asset and before the Crypto Asset is valued, the number of Shares the Shareholder receives may decline, potentially significantly. All Crypto Assets will be valued in accordance with the Trust’s valuation policies and procedures at the time of the valuation. The functional currency of the Trust is U.S. dollars.

Current wording

If a Shareholder contributes to the Portfolio Crypto Assets, the number of Shares the Shareholder ultimately receives will depend on the value of the Portfolio Crypto Assets at the time of admission to the Trust. Shareholders are admitted periodically. There may be considerable differences in the value of a Crypto Asset between the time a contribution is made and the time the Crypto Asset is valued for purposes of calculating the Shares to be issued. If the value of the contributed Portfolio Crypto Asset declines during the interval, the number of Shares the Shareholder receives may decline, potentially significantly.

Previous wording

The value of the Trust’s Crypto Assets is dependent, directly or indirectly, on prices established by Crypto Asset exchanges and other Crypto Asset trading venues, which are new and, in most cases, largely unregulated.

Current wording

The value of the Crypto Assets is dependent on prices established by Crypto Asset exchanges and other Crypto Asset trading venues, the instability, failure, closure, or manipulation of which could adversely affect an investment in the Trust.

Previous wording

Crypto Asset exchanges and other trading venues on which Crypto Assets trade are relatively new and, in most cases, largely unregulated and may therefore be more exposed to fraud and failure than established, regulated exchanges for securities, derivatives and other currencies. Much of the daily trading volume of Crypto Assets is conducted on poorly capitalized, unregulated, unaudited and unaccountable exchanges located outside of the United States where there is little to no regulation governing trading. Such exchanges may engage in unethical practices that may have a significant impact on Crypto Asset pricing, such as front-running, wash trades and trading with insufficient funds. To the extent that the Crypto Asset exchanges or other Crypto Asset trading venues are involved in fraud or experience security failures or other operational issues, this could result in a reduction in the Crypto Asset market prices and adversely affect an investment in the Trust. The SEC, in March 2017, stated that Crypto Asset exchanges currently lack the ability to enter into surveillance-sharing agreements with significant, regulated markets for trading in Crypto Assets thereby lacking the ability to detect and deter price manipulation. Although there has been improvement on this front with the self-certification of certain Bitcoin futures contracts resulting in information sharing agreements between certain futures markets and several Crypto Asset exchanges, regulators still lack the ability to surveil many Crypto Asset exchanges. In addition, users transacting on Crypto Asset trading platforms do not receive many of the market protections that they would when transacting through broker-dealers on registered securities exchanges or alternative trading systems, such as best execution, prohibitions on front running, short sale restrictions, and custody and capital requirements.

Current wording

Crypto Asset exchanges and trading venues are relatively new and largely unregulated, making them more vulnerable to fraud and failure than established, regulated markets for securities, derivatives, and currencies. A significant portion of daily Crypto Asset trading occurs on poorly capitalized, unaudited exchanges outside the United States, where regulatory oversight is minimal or nonexistent. This lack of regulation exposes Crypto Assets on such exchanges and other trading venues to higher risks of fraud, unethical practices (such as front-running, wash trades, and trading with insufficient funds), and operational failures. Instances of fraud, business failure, cyberattacks, malware, or government-mandated regulation can lead to the closure or temporary shutdown of exchanges and other trading venues, reducing confidence in the Crypto Asset exchange market and resulting in greater volatility in Crypto Asset prices. The SEC has noted that many Crypto Asset exchanges lack the ability to enter into surveillance-sharing agreements with significant, regulated markets for trading in Crypto Assets thereby lacking the ability to detect and deter price manipulation. Although there has been improvement on this front with the self-certification of certain Bitcoin futures contracts resulting in information sharing agreements between certain futures markets and several Crypto Asset exchanges, regulators still lack the ability to surveil many Crypto Asset exchanges and other trading venues.

Previous wording

On large Crypto Asset exchanges, users may buy or sell Crypto Assets for fiat currency or transfer Crypto Assets to other wallets. Operational limits (including regulatory, exchange policy or technical or operational limits) on the size or settlement speed of fiat currency deposits by users into Crypto Asset exchanges may (1) reduce demand on such exchanges, resulting in a reduction in the Crypto Asset price on such exchange or (2) reduce supply on such exchanges, potentially resulting in a temporary increase in the Crypto Asset price on such exchange during the existence of such operational limits. To the extent that fees for the transfer of Crypto Assets either directly or indirectly occur between Crypto Asset exchanges, the impact on Crypto Asset prices of operation limits on fiat currency deposits and withdrawals may be reduced by “exchange shopping” among Crypto Asset exchange users. For example, a delay in U.S. Dollar withdrawals on one site may temporarily increase the price on such site by reducing supply (i.e., sellers transferring Crypto Assets to another exchange without operational limits in order to settle sales more rapidly), but the resulting increase in price will also reduce demand because bidders on Crypto Assets will follow increased supply on other Crypto Asset exchanges not experiencing operational limits. To the extent that users are able or willing to utilize or arbitrage prices between more than one Crypto Asset exchange, exchange shopping may mitigate the short-term impact on and volatility of Crypto Asset prices due to operational limits on the deposit or withdrawal of fiat currency into or out of larger Crypto Asset exchanges.

Current wording

Operational limits on fiat currency transactions within large Crypto Asset exchanges can also significantly influence Crypto Asset prices. Regulatory restrictions, exchange policies, or technical issues that limit the size or speed of fiat deposits may reduce demand, leading to lower prices, or restrict supply, causing temporary price increases. Users may engage in “exchange shopping” to mitigate these effects, transferring assets between platforms to capitalize on price differences. For example, a delay in U.S. Dollar withdrawals on one exchange may temporarily increase the price on that exchange by reducing supply (i.e., sellers transferring Crypto Assets to another exchange without operational limits in order to settle sales more rapidly), but the resulting increase in price will also reduce demand because bidders on Crypto Assets will follow increased supply on other Crypto Asset exchanges not experiencing operational limits. To the extent that users are able or willing to utilize or arbitrage prices between more than one Crypto Asset exchange, exchange shopping may mitigate the short-term impact on and volatility of Crypto Asset prices due to operational limits on the deposit or withdrawal of fiat currency into or out of larger Crypto Asset exchanges.

Previous wording

The Trust is designed to have limited exposure to individual trading venue interruptions by using multiple data sources and liquidity providers. Despite efforts to ensure accurate pricing, the Trust, and the price of Crypto Assets generally, remains subject to volatility experienced by the Crypto Asset exchanges and other Crypto Asset trading venues. Such volatility can adversely affect an investment in the Trust. The value of Crypto Assets is also dependent on the availability of exchanges on which to buy and sell such assets. If exchanges for Crypto Assets became increasingly sparse, then there would be a material adverse impact on the value of Crypto Assets and an investment in the Trust.

Current wording

These risks also apply to other Crypto Asset trading venues, including over-the-counter markets and derivatives platforms, which may be used by Crypto Asset exchanges and therefore by the Sponsor in calculating the net asset value of the Trust. The Trust aims to minimize exposure to individual exchange disruptions by using multiple data sources and liquidity providers. However, despite efforts to ensure accurate pricing, the Trust remains subject to market volatility affecting Crypto Asset prices. A decline in active exchanges could adversely impact on the value of Crypto Assets and an investment in the Trust.

Previous wording

In the event of a Hard Fork affecting a Portfolio Crypto Asset, the Sponsor will use its discretion to determine, in good faith, which peer-to-peer network, among a group of incompatible forks of such network, is generally accepted as the network for such Crypto Asset and should therefore be considered the appropriate network for the Trust’s purposes. The Sponsor will base its determination on a variety of the relevant factors, including, but not limited to, the Sponsor’s beliefs regarding expectations of the core developers of such Crypto Asset, users, services, businesses, Miners or Validators and other constituencies, as well as the actual continued acceptance of, Mining power on or Validator participation in, and community engagement with, the network of such Crypto Asset. There is no guarantee that the Sponsor will choose the Crypto Asset that is ultimately the most valuable fork, and the Sponsor’s decision may adversely affect the value of the Shares as a result.

Current wording

In the event of a Hard Fork affecting a Portfolio Crypto Asset, the Sponsor will use its discretion to determine, in good faith, which peer-to-peer network, among a group of incompatible forks of such network, is generally accepted as the network for such Crypto Asset and should therefore be considered the appropriate network for the Trust’s purposes. The Sponsor will base its determination on a variety of relevant factors, including, but not limited to, the Sponsor’s beliefs regarding expectations of the core developers of such Crypto Asset, users, services, businesses, Miners or Validators and other constituencies, as well as the actual continued acceptance of, Mining power on or Validator participation in, and community engagement with, the network of such Crypto Asset. There is no guarantee that the Sponsor will choose the Crypto Asset that is ultimately the most valuable fork, and the Sponsor’s decision may adversely affect the value of the Shares as a result.

Previous wording

Competition from the emergence or growth of other Crypto Assets or the development of other methods of investing in Crypto Assets could have a negative impact on the price of Portfolio Crypto Assets and adversely affect the value of the Shares.

Current wording

Competition from the emergence or growth of other Crypto Assets or the development of other methods of investing in Crypto Assets could have a negative impact on the price of Crypto Assets and adversely affect the value of the Shares.

Previous wording

The Trust faces competition with respect to the creation and maintenance of a competing Crypto Asset index fund. Much of the information used to construct and maintain the Index is within the public domain. Competitors could develop a similar, competing Crypto Asset index or fund. Many of the Sponsor’s competitors have significantly greater financial, technical and human resources than the Sponsor has and superior expertise in fund operation and management, and thus may be better equipped than the Sponsor to develop and commercialize an index. These competitors also compete with the Sponsor in recruiting and retaining qualified personnel. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Accordingly, the Sponsor’s competitors may commercialize an index involving Crypto Assets more rapidly or effectively than the Sponsor is able to, which would adversely affect the Sponsor’s competitive position, the likelihood that the Index will achieve initial market acceptance and the Sponsor’s ability to generate meaningful revenues from the Trust.

Current wording

The Trust’s competitors may have greater financial, technical and human resources than the Trust. These competitors may also compete with the Trust in recruiting and retaining qualified personnel. Smaller or early-stage companies may also prove to be effective competitors, particularly through collaborative arrangements with large and established companies. Some competing investment vehicles may also charge a substantially lower fee than the Management Fee to achieve initial market acceptance and scale. Accordingly, the Trust’s competitors may commercialize a competing product more rapidly or effectively than the Trust is able to, which could adversely affect the Trust’s competitive position, reduce demand for the Shares, and impact the Trust’s ability to sustain operations.

Previous wording

Shareholders may invest in Crypto Assets through means other than the Shares, including through direct investments in Crypto Assets and through the purchase of other financial vehicles, including securities that hold, are backed by or are linked to one or more Crypto Assets (for example, exchange traded funds that hold Bitcoin), as well as through other Crypto Asset financial vehicles that are similar to and competitive with, the Trust. Market and financial conditions, as well as other conditions beyond the Sponsor’s control, may make it more attractive to invest in these other financial vehicles or to invest in Crypto Assets directly. This could limit the market for, and reduce the liquidity or value of, the Shares. In addition, to the extent other Crypto Asset financial vehicles that track the price of one or more Crypto Assets are formed, and these vehicles represent a significant proportion of the demand for any particular Crypto Asset, large purchases or redemptions of the securities of such Crypto Asset financial vehicles could negatively affect the relevant Crypto Asset reference rates, the relevant Crypto Asset holdings, the price of the Shares, the NAV and the NAV Per Share. Any of these situations could have a negative impact on the price of Portfolio Crypto Assets or adversely affect the value of the Shares.

Current wording

Shareholders may also invest in Portfolio Crypto Assets through means other than the Shares, including through direct investments in Portfolio Crypto Assets and through the purchase of other financial vehicles, including securities that hold, are backed by or are linked to one or more Portfolio Crypto Assets (for example, exchange traded funds that hold Bitcoin and/or Ether), as well as through other Portfolio Crypto Asset financial vehicles that are similar to and competitive with, the Trust, or futures-based products. Market and financial conditions, as well as other conditions beyond the Sponsor’s control, may make it more attractive to invest in these other financial vehicles or to invest in Portfolio Crypto Assets directly. This could limit the market for, and reduce the liquidity or value of, the Shares. In addition, if Competing Portfolio Crypto Asset financial vehicles that track the price of one or more Portfolio Crypto Assets gain significant market share, large purchases or redemptions of the securities of such Portfolio Crypto Asset financial vehicles could negatively affect the relevant value of the Shares.

Previous wording

negative consumer sentiment and perception of Crypto Assets.

Current wording

In addition, some have argued that certain stablecoins, particularly Tether, are improperly issued without sufficient backing in a way that, when the stablecoin is used to pay for Crypto Assets such as Ether, could cause artificial rather than genuine demand for Ether, potentially inflating the price of Ether or other Crypto Assets. Critics also argue that those associated with certain stablecoins may be involved in money laundering. On February 17, 2021, the New York Attorney General entered into an agreement with Tether’s operators, requiring them to cease any further trading activity with New York persons and pay $18.5 million in penalties for false and misleading statements made regarding the assets backing Tether. On October 15, 2021, the CFTC announced a settlement with Tether’s operators in which they agreed to pay $42.5 million in fines to settle charges that, among others, Tether’s claims that it maintained sufficient U.S. dollar reserves to back every Tether stablecoin in circulation with the “equivalent amount of corresponding fiat currency” held by Tether were untrue. In addition, a large amount of Tether is issued as ERC-20 tokens on the Ethereum network. If Tether were to no longer be issued or to cease operating on the Ethereum network, demand for Ether used to pay gas fees for ERC-20 Tether transactions, and a substantial source of demand for Ether, could decline, which may cause the price of Ether to decrease. Any material decrease in the value of Ether could negatively affect the value of the Shares. In addition, concerns persist about the adequacy and transparency of Tether’s reserves, which could influence the stability and perception of Crypto Assets, including Portfolio Crypto Assets.

Previous wording

The networks underlying the Portfolio Crypto Assets rely on software and programming that is complex, and if this software contains undetected errors, the value of the Portfolio Crypto Assets and the Shares could be adversely affected.

Current wording

The Blockchains underlying the Crypto Assets, including Portfolio Crypto Assets rely on software and programming that is highly complex, and if this software contains undetected errors or vulnerabilities, the value of the Portfolio Crypto Assets and the Shares could be adversely affected.

Previous wording

The networks underlying the Portfolio Crypto Assets rely on software that is highly complex. Any errors, bugs or defects discovered in the software on which these networks rely could result in harm to the reputations of these networks, loss of developers or users on those networks, and, in turn, loss in value of Portfolio Crypto Assets and the Shares. In the past, for example, flaws in the source code for Crypto Assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ Crypto Assets. In addition, the cryptography underlying a Crypto Asset held by the Trust could prove to be flawed or ineffective, or developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in such cryptography becoming ineffective. In any of these circumstances, a malicious actor may be able to take the Crypto Assets held by the Trust, which would adversely affect an investment in the Shares.

Current wording

The Blockchains underlying the Crypto Assets, including Portfolio Crypto Assets rely on software that is highly complex. Any vulnerabilities or flaws discovered in such software could harm the reputations of these networks, leading to a loss of developers or users, and ultimately, a loss in the value of the Portfolio Crypto Assets and the Shares. Flaws in the source code for Crypto Assets have been exploited in the past, resulting in disabled functionality, exposure of users’ personal information, and theft of users’ Crypto Assets. For instance, high-profile security breaches have occurred where vulnerabilities in smart contracts or blockchain protocols led to significant losses. In addition, the cryptography that secures these Crypto Assets could prove to be flawed or ineffective due to developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing. In any of these circumstances, a malicious actor could steal the Portfolio Crypto Assets, which would adversely affect an investment in the Shares. A decline in confidence in the underlying code or cryptography of Crypto Assets could also reduce demand for these assets, negatively impacting the value of the Shares.

Previous wording

The Blockchains on which ownership of Portfolio Crypto Assets are recorded and the Portfolio Crypto Assets themselves may be the target of malicious cyberattacks or may contain exploitable flaws in their underlying code, which may result in security breaches, the loss or theft of Portfolio Crypto Assets or the decline in value of Portfolio Crypto Assets.

Current wording

The Blockchains on which ownership of Crypto Assets are recorded and the Crypto Assets themselves may be the target of malicious cyberattacks or may contain exploitable flaws in their underlying code, which may result in security breaches, the loss or theft of Crypto Assets, or the decline in value of Crypto Assets.

Previous wording

The Portfolio Crypto Assets rely on Blockchains for records of ownership. As a result, the Portfolio Crypto Assets are subject to a number of reliability and security risks attendant to Blockchain and distributed ledger technology, including malicious attacks seeking to identify and exploit weaknesses in the software. Some of these known risks include:

Current wording

The Crypto Assets rely on Blockchains for records of ownership. As a result, the Crypto Assets, including Portfolio Crypto Assets are subject to a number of reliability and security risks attendant to Blockchain and distributed ledger technology, including malicious attacks seeking to identify and exploit weaknesses in the software. Some of these known risks include:

Previous wording

“51% attacks,” which occur when an attacker controls a majority of computing power or staked Crypto Assets necessary to validate transactions on a Blockchain, giving the attacker a majority of the validation power on the network. Miners or Validators on Blockchains who successfully obtain this validation power—either individually or as part of a “Mining pool” or group of validators—may block other users’ transactions or make it appear as though they still have Crypto Assets that have been spent, which is known as a “double-spend attack,” or otherwise change the order of transactions. A 51% attack may also allow an attacker to use its monopoly over new blocks to “censor” other user transactions by actively preventing them from being written to the Blockchain. Any such attack on the Blockchains could result in the loss of Portfolio Crypto Assets or their valuation.

Current wording

“51% attacks,” which occur when an attacker controls a majority of a Blockchain’s computing power or staked Crypto Assets necessary to validate transactions on a Blockchain, giving the attacker a majority of the validation power on the network. Miners or Validators on Blockchains who successfully obtain this validation power, either individually or as part of a “Mining pool” or group of validators, may block other users’ transactions, double-spend Crypto Assets, or alter transaction sequences. A 51% attack may also allow an attacker to use its monopoly over new blocks to “censor” other user transactions by actively preventing them from being written to the Blockchain. Any such attack on the Blockchains could result in the loss of Crypto Assets or their valuation.

Previous wording

A "Sybil attack" occurs when a single entity or a concentrated number of entities attempt to gain a larger influence on the Blockchain by creating multiple identities (or Sybil identities) that appear to be unique. This puts the reputation of the Blockchain at risk. A Blockchain's failure to be Sybil-resistant can lead to 51% attacks.

Current wording

A “Sybil attack” occurs when a single entity or a concentrated number of entities attempt to gain disproportionate influence on the Blockchain by creating multiple fake identities (or "Sybil identities"). This undermines the network’s integrity and can facilitate further attacks, including 51% attacks.

Previous wording

A “Finney attack” occurs when an attacker mines a block but does not announce it to the network. In this case, a Miner can double-spend Crypto Assets by sending them to another user in a legitimate transaction and then create a valid new block with a double-spend of those same Crypto Assets; for the attack to be successful, this block must be released so that it is added to the Blockchain before the target user’s legitimate transaction. Once the block the attacker mines is accepted, the legitimate transaction will not be accepted and the honest user will not receive the Crypto Assets, thereby being out of a payment. Typically, developers and users who accept “quick transactions” (transactions that are accepted before the counterparty can confirm that the transaction has been written to the correct version of the Blockchain) when accepting payment on the network are vulnerable to this type of attack. These attacks can be avoided by requiring that several additional network operations be written to the Blockchain after any transaction before considering that transaction complete; however, developers may be incentivized not to do so to allow for quicker processing of network operations on their application.

Current wording

A “Finney attack” occurs when an attacker mines a block but delays broadcasting it to the network. The attacker can conduct a transaction with another user and then release the previously mined block containing a conflicting transaction, causing the legitimate transaction to be invalidated. Users accepting transactions without sufficient confirmations are particularly susceptible to this risk. These attacks can be avoided by requiring that several additional network operations be written to the Blockchain after any transaction before considering that transaction complete; however, developers may be incentivized not to do so to allow for quicker processing of network operations on their application.

Previous wording

Such attacks may materially and adversely affect Blockchains recording the ownership of Portfolio Crypto Assets, which may in turn materially and adversely affect the transfer or storage of Portfolio Crypto Assets. As a result of these and other risks of malicious attacks, there can be no assurances that the transfer or storage of Portfolio Crypto Assets will be uninterrupted or fully secure. Any such interruption or security failure may result in impermissible transfers of Portfolio Crypto Assets and/or loss of Portfolio Crypto Assets.

Current wording

Such attacks may materially and adversely affect a Blockchain recording the ownership of Crypto Assets, which may in turn materially and adversely affect the transfer or storage of Crypto Assets. As a result of these and other risks of malicious attacks, there is no assurance that the transfer or storage of Crypto Assets will be uninterrupted or fully secure. Any such interruption or security failure may result in impermissible transfers of Crypto Assets and/or loss of Crypto Assets.

Previous wording

the Blockchains on which ownership of Portfolio Crypto Assets are recorded are dependent on the efforts of third parties acting in their capacity as the Blockchain transaction Miners and/or Validators, and if these third parties fail to successfully perform these functions, the operation of the Blockchains that record ownership of Portfolio Crypto Assets could be compromised;

Current wording

The Blockchains on which ownership of Crypto Assets are recorded are dependent on the efforts of third parties acting in their capacity as the Blockchain transaction Miners, Validators, and centralized entities, and if these third parties fail to successfully perform these functions, the operation of the Blockchains that record ownership of Crypto Assets, including Portfolio Crypto Assets, could be compromised.

Previous wording

Additionally, crypto Mining entities may encounter financial difficult and have to cease or curtail operations, which

Current wording

Over the past several years, Crypto Asset Mining operations have evolved from individual users Mining with standard computer hardware to highly specialized, large-scale operations utilizing proprietary equipment and advanced application-specific-integrated-circuit (“ASIC”) machines. Similarly, the emergence of PoS consensus mechanisms has given rise to Validators, who contribute to network security by staking their Crypto Assets instead of utilizing computational power for Mining. If transaction fees decline, or other economic factors reduce profitability, Crypto Asset Miners and Validators are more likely to immediately sell tokens earned by Mining or staking, resulting in an increase in the liquid supply of that Crypto Asset, which could potentially lower its market prices. Additionally, Crypto Asset Mining entities or Validators may encounter financial difficulties and have to cease or curtail operations, which could result in a reduction of the “hash power” dedicated to mining a particular Crypto Asset or a decrease in the total staked Crypto Assets dedicated to securing the network, which could reduce that asset’s security and potentially reduce the price of related Crypto Assets.

Previous wording

Finally, a significant amount of capital staked in proof of stake Blockchains may be from centralized entities including centralized exchanges, like Coinbase. In the event that such centralized entities find themselves in financial and/or legal difficulties, staked capital (in the form of Crypto Assets) could be at risk of being sold off and/or being tied up in litigation, which could materially harm the value of Crypto Assets or interfere with certain activities. For example, in November 2022, the centralized exchange FTX filed for bankruptcy and halted user withdrawals of Crypto Assets.

Current wording

Additionally, a significant amount of capital staked in PoS Blockchains may be controlled by centralized entities including centralized exchanges, such as Coinbase. In the event that such centralized entities find themselves in financial and/or legal difficulties, staked Crypto Assets could be subject to liquidation or tied up in litigation, which could materially harm the value and liquidity of Crypto Assets. For example, when the exchange FTX filed for bankruptcy in November 2022, it suspended user withdrawals, impacting over two million customers. Although FTX has made progress in repaying customers under new leadership, uncertainties remain about the timeline and extent of recoveries, highlighting the potential risks associated with relying on centralized entities for staking activities.

Previous wording

The technology underlying Crypto Asset and Blockchain technology is subject to a number of known and unknown technological challenges and risks that may prevent wide adoption and use of the Portfolio Crypto Assets, which may negatively affect the value of Portfolio Crypto Assets and the Shares.

Current wording

The Blockchain technology underlying the Crypto Asset is subject to a number of known and unknown technological challenges and risks that may prevent wide adoption and use of the Crypto Assets, which may negatively affect the value of Portfolio Crypto Assets and the value of the Shares.

Previous wording

The Blockchain technology used in connection with Portfolio Crypto Assets, which is sometimes referred to as “distributed ledger technology,” is a relatively new, untested and evolving technology. It represents a novel combination of several concepts, including a publicly available database or ledger that represents the total ownership of the currency at any one time, novel methods of authenticating transactions using cryptography across distributed network nodes that permit decentralization by eliminating the need for a central clearing-house while guaranteeing that transactions are irreversible and consistent, differing methods of incentivizing this authentication (for example, the issuance of new Crypto Assets for each new block as a reward for the Validator on PoS Blockchains or for the Miner or PoW Blockchains), and hard limits on the aggregate amount of currency that may be issued. As a result of the new and untested nature of Crypto Assets and Blockchain technology, the Portfolio Crypto Assets are vulnerable to risks and challenges, both foreseen and unforeseen. Examples of these risks and challenges include:

Current wording

The Blockchain technology used in connection with Crypto Assets, also known as “distributed ledger technology,” is a relatively new, untested and evolving technology. It represents a novel combination of several concepts, including a publicly available database or ledger that represents the total ownership of a currency at any one time, novel methods of authenticating transactions using cryptography across distributed network nodes that permit decentralization by eliminating the need for a central clearing-house while guaranteeing that transactions are irreversible and consistent, and various methods of incentivizing this authentication, such as issuing new Crypto Assets to Validators on PoS Blockchains or Miners on PoW Blockchains. Despite these developments, Blockchain technology and Crypto Assets are susceptible to risks and challenges, including technological vulnerabilities, regulatory uncertainties, market volatility, and unforeseen issues. Consequently, Portfolio Crypto Assets are exposed to these evolving risks, including:

Previous wording

Scalability is a challenge for platforms working with large Blockchains, because the addition of records to a Blockchain requires the network to achieve consensus through a transaction validation mechanism, which often can involve redundant and extensive computation, processing of transactions is slower than that achieved by a central clearing-house, and delays and bottlenecks in the clearance of transactions may result as the Crypto Asset expands to a greater number of users.

Current wording

Scalability is a challenge for platforms working with large Blockchains, because the addition of records to a Blockchain requires the network to achieve consensus through a transaction validation mechanism, which often involves redundant and extensive computation. The process can be slower than centralized clearinghouses, leading to delays and bottlenecks as Crypto Asset usage expands. Although solutions like Layer 2 protocols on the Ethereum network and PoS mechanisms have been introduced to improve scalability and efficiency, these innovations may not fully resolve the issues, and their long-term effectiveness remains uncertain.

Previous wording

To the extent incentive payments are used to incentivize the validation of a transaction or record to a block on the Blockchains that record ownership of the Portfolio Crypto Assets, these fees may spike during times of high transaction volume. We believe that these rewards do not warrant validator registering as a broker-dealer, as discussed in the section “Item 1. Business—Overview of Government Regulation”; however, there is no guarantee that regulatory agencies will agree with our position.

Current wording

To the extent that incentive payments are used to validate transactions on the Blockchains that record ownership of Crypto Assets, these fees may spike during times of high transaction volume, increasing the costs associated with transferring or storing Crypto Assets. We believe that these rewards do not warrant a Validator registering as a broker-dealer, as discussed in the section “Item 1. Business—Overview of Government Regulation”; however, regulatory agencies may disagree with our position. Recent regulatory developments have heightened scrutiny over Crypto Asset transactions and staking rewards, and changes in regulations could materially impact our operations.

Previous wording

Generally, blocks cannot be removed from a Blockchain, but during the validation process for large Blockchains, competing Blockchains may arise with respect to the last few blocks on the Blockchain. As a result, a block is often not considered to be irreversible on the Blockchain until several additional blocks have been added to it and occasionally blocks with a handful of confirmations can be dropped and modified.

Current wording

While blocks on a Blockchain are generally immutable, temporary forks or competing chains can arise during the validation process, especially concerning recent blocks. As a result, a block is often not considered irreversible until several additional blocks have been added. Occasionally, blocks with few confirmations may be dropped or modified, affecting the perceived permanence of transactions.

Previous wording

Although Blockchains are generally considered reliable, they are subject to certain attacks as described above under “—The Blockchains on which ownership of Portfolio Crypto Assets are recorded and the Portfolio Crypto Assets themselves may be the target of malicious cyberattacks or may contain exploitable flaws in their underlying code, which may result in security breaches, the loss or theft of Portfolio Crypto Assets or the decline in value of Portfolio Crypto Assets.”

Current wording

Although Blockchains are generally considered reliable, they are subject to certain attacks, including 51% attacks, double-spending, and vulnerabilities in smart contracts. New types of exploits, such as attacks targeting cross-chain bridges and DeFi platforms, have emerged. These vulnerabilities may lead to security breaches, the loss or theft of Crypto Assets, or a decline in their value. For more details, see the risk factor “The Blockchains on which ownership of Crypto Assets are recorded and the Crypto Assets themselves may be the target of malicious cyberattacks or may contain exploitable flaws in their underlying code, which may result in security breaches, the loss or theft of Crypto Assets or the decline in value of Crypto Assets, including Portfolio Crypto Assets.”

Previous wording

The software related to the Blockchains on which ownership of Portfolio Crypto Assets is recorded may either increase or decrease the incentive payments paid to Miners or Validators required to complete transactions, which could materially and adversely affect the transfer or storage of Portfolio Crypto Assets. In addition, changes could also reduce the number of Miners or Validators on the Blockchains on which ownership of Portfolio Crypto Assets is recorded—which could possibly leave these Blockchains increasingly vulnerable to a 51% attack.

Current wording

The software related to the Blockchains on which ownership of Crypto Assets is recorded may alter the incentive payments to Miners or Validators required to complete transactions, which could materially and adversely affect the transfer or storage of Crypto Assets. In addition, modifications to consensus algorithms, such as the transition from PoW to PoS, can reduce the number of Miners or Validators, potentially making the Blockchain more vulnerable to attacks.

Previous wording

Although there may be solutions that have been proposed and implemented to these and other challenges facing various Crypto Assets, the effectiveness of these solutions has not been proven. Further, other challenges may arise in the future that we cannot predict. For example, advances in cryptography and/or technical advances, such as the development of quantum computing, could present risks to the Blockchains on which ownership of the Portfolio Crypto Assets is recorded and the Portfolio Crypto Assets by undermining or vitiating the cryptographic consensus mechanism that underpins the Blockchain protocols. Similarly, legislatures and regulatory agencies could prohibit the use of current and/or future cryptographic protocols which could limit the utility and value of the Portfolio Crypto Assets and, in turn, the Shares, resulting in a significant loss of value or the termination of Portfolio Crypto Assets. Accordingly, the further development and future viability of Crypto Assets in general or specific Crypto Assets, such as the Portfolio Crypto Assets, is uncertain, and unknown challenges may prevent their wider adoption.

Current wording

Although solutions have been proposed and implemented to address these challenges, their effectiveness has not been proven. Further, unforeseen challenges may arise in the future that cannot be predicted. For example, advances in cryptography and/or technical advances, such as the development of quantum computing, could present risks to the Blockchains that record ownership of the Portfolio Crypto Assets by undermining the cryptographic consensus mechanism that underpins the Blockchain protocols. Additionally, legislative and regulatory agencies may prohibit the use of current and/or future cryptographic protocols which could limit the utility and value of Crypto Assets, including Portfolio Crypto Assets and, in turn, the value of the Shares. Recent regulatory actions and increased scrutiny by authorities have intensified the uncertainty surrounding Crypto Assets. Accordingly, the further development and future viability of Crypto Assets, including the Portfolio Crypto Assets, remain uncertain, and unknown challenges may prevent their wider adoption.