in connection with the redemption of Baskets. Cash Orders will be facilitated by the Transfer Agent and Grayscale Investments Sponsors, LLC, which will engage one or more Liquidity Providers receiving AVAX in connection with such orders. The Trust may also redeem Baskets via In-Kind Orders, pursuant to which an Authorized Participant or its AP Designee will receive AVAX directly from the Trust. See “Description of Creation and Redemption of Shares.” Staking The Trust Agreement provides that the Trust may engage in Staking, but only if (and, then, only to the extent that) the Staking Condition has been satisfied. The Sponsor expects that the Staking Condition will be satisfied as to the particular form of Staking described herein, and the Sponsor intends to cause the Trust to engage in Staking as described herein, in connection with the commencement of the offering of the Shares pursuant to the registration statement of which this prospectus forms a part. The Sponsor may in the future modify the form of Staking in which the Trust engages, but only if (and, then, only to the extent that) the Staking Condition has been satisfied with respect to any such modified form of Staking, and subject to compliance with any additional requirements that may arise in connection with satisfaction of the Staking Condition with respect thereto. Staking Arrangements and Provider-Facilitated Staking Model The Sponsor, on behalf of the Trust, has entered into written arrangements (the “Staking Arrangements”) with the Custodian to stake the Trust’s AVAX to one or more vetted third party staking providers (each, a “Staking Provider”) operating validator software and associated hardware (“Provider-Facilitated Staking”). The Sponsor anticipates that the Trust’s AVAX will be staked exclusively by means of Provider-Facilitated Staking. The Staking Arrangements are set forth in the Staking Addendum to the Custodial Services Agreement between the Trust and the Custodian, a copy of which is attached as an exhibit to the registration statement of which this prospectus forms a part. Under the Staking Arrangements, the Trust is permitted to accept only Native Staking Consideration received in the form of AVAX, and is not permitted to accept any Other Staking Consideration in the form of other digital assets. Neither the Trust, nor the Sponsor on behalf of the Trust, has the ability under the Staking Arrangements to take advantage of any variations in the market to improve the investments of shareholders, including with respect to variations based on the value of AVAX or the amount of Native Staking Consideration received as staking rewards. As a whole, the Staking Arrangements permit the Trust to retain ownership of its AVAX at all times for U.S. federal income tax purposes while simultaneously protecting and conserving the Trust Estate by mitigating the risk that another party or group could control a majority of the Avalanche Network and engage in transactions that could reduce the Trust Estate’s value. A Staking Provider must meet certain requirements in order to be selected to participate in the Provider- Facilitated Staking model contemplated by the Staking Arrangements. For example, each Staking Provider is required to be unrelated to both the Trust and the Sponsor. Moreover, a Staking Provider is also required to regularly enter into staking arrangements with unrelated persons involving activities similar to the Staking Arrangements. Under the Staking Arrangements, the Staking Provider would bear all of its own expenses (including those on account of its validation activities). The Staking Provider is the node operator and is obligated to operate the validator through which the Trust’s AVAX is staked to ensure that validation occurs. The Trust’s AVAX is staked from the Trust’s wallets administered by the Custodian, and the Staking Provider performs any related validation activities. The Trust retains control of its staked AVAX because the Avalanche Network does not permit the Staking Provider to transfer staked AVAX to any wallet other than as designated by the Sponsor. Because the Trust’s staked AVAX cannot, pursuant to the Avalanche Network protocol, be transferred other than as directed by the Sponsor, the Trust’s AVAX is not deemed commingled with the AVAX of any other AVAX holder in connection with Staking, such as the Staking Provider or others who stake to the Staking Provider, even if the Staking Provider is receipt of other AVAX holders’ validation rights. In particular, the Staking Provider is not able to transfer unstaked AVAX or Staking Consideration. The Trust does not itself undertake any validation activities, and the Sponsor is not required to perform any services. Moreover, the Sponsor is not required to make any decisions or take any actions, other than (i) selecting the Staking Provider(s) and entering into the corresponding Staking Arrangement(s), and (ii) determining, from time to time, what portion of the Trust’s AVAX to stake and informing the Staking Provider(s) of those determinations. Under the
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