non-concurrent trading hours and liquidity between NASDAQ and larger Digital Asset Trading Platforms. While the Shares are have been approved for listing on NASDAQ and are expected to trade during NASDAQ’s Core Trading Session from 9:30 a.m. to 4:00 p.m., New York time, liquidity in the Digital Asset Markets may fluctuate depending upon the volume and availability of larger Digital Asset Trading Platforms. As a result, during periods in which Digital Asset Market liquidity is limited or a major Digital Asset Trading Platform is off-line, trading spreads, and the resulting premium or discount, on the Shares may widen. Overview of the Avalanche Network and Market AVAX is a digital asset that is created and transmitted through the operations of the peer-to-peer Avalanche Network, a decentralized network of computers that operates on cryptographic protocols. No single entity owns or operates the Avalanche Network, the infrastructure of which is collectively maintained by a decentralized user base. The Avalanche Network allows people to exchange tokens of value, called AVAX, which are recorded on a public transaction ledger known as a blockchain. AVAX can be used to pay for goods and services, including computational power on the Avalanche Network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on Digital Asset Trading Platforms or in individual end-user-to-end-user transactions under a barter system. Furthermore, the Avalanche Network was designed to allow users to write and implement smart contracts— that is, general-purpose code that executes redundantly across the network and can instruct the transmission of information and value based on a sophisticated set of logical conditions. Using smart contracts, users can create markets, store registries of debts or promises, represent the ownership of property, move funds in accordance with conditional instructions and create digital assets other than AVAX on the Avalanche Network. Smart contract operations are executed on the Avalanche blockchain in exchange for payment of AVAX. The Avalanche Network is one of a number of projects intended to expand blockchain use beyond just a peer-to-peer money system. The Avalanche Network employs a proof-of-stake model to incentivize AVAX holders to validate transactions. Unlike proof-of-work, in which miners expend computational resources to compete to validate transactions and are rewarded coins in proportion to the amount of computational resources expended, in delegated proof-of-stake, validators risk or “stake” coins to participate in transaction validation and are rewarded coins in proportion to the amount of coins staked. Proof-of-stake is viewed as more energy efficient and scalable than proof-of-work and is sometimes referred to as “virtual mining”. Unlike with the Bitcoin blockchain, whereby every node validates every transaction, each Avalanche validator is only required to validate the “Primary Network,” which is comprised of three blockchains—the Exchange (X) Chain, the Platform (P) Chain, and the Contract (C) Chain—which each have a specific use. On the Exchange (X) Chain, AVAX and other assets exist and are traded. The Platform (P) Chain coordinates validators and creates Avalanche Layer 1s (as defined below). Finally, the Contract (C) Chain executes smart contracts. Historically, all validators on the Avalanche Network were required to validate the Primary Network and the three blockchains described above. However, in December 2024, the Avalanche Network implemented the “Avalanche 9000” upgrade whereby validators can elect to exclusively validate certain non-core blockchains (i.e., blockchains that are not fundamental to or necessary for the Avalanche Network to operate) of the Avalanche Network. Avalanche Network users can create tokens and transact on these non-core blockchains (each such blockchain, an “Avalanche Layer 1”) for specific applications and use cases. Transactions on these Avalanche Layer 1s are intended to be faster and less expensive than if they occurred on one single blockchain. The Primary Network then helps to coordinate activities among the Avalanche Layer 1s. For example, a single dApp might utilize a Avalanche Layer 1 to facilitate its core transactions and functionalities, while being able to interact with other Avalanche dApps and Avalanche Layer 1s via the Primary Network. These efficiencies can be achieved because the Avalanche Network allows independent groups of validators to validate Avalanche Layer 1s, reducing the resources required to validate transactions across the entire ecosystem. Consequently, the Avalanche Network is reportedly one of the fastest networks when measured by transaction time-to-finality at relatively low transaction costs. Nonetheless, Avalanche’s mechanisms to synchronize the Primary Network and Avalanche Layer 1s are new blockchain technologies that are not widely used. These mechanisms may not function as intended. For example, it may require more specialized equipment to participate in the network and fail to attract a significant number of users. In addition, there may be flaws in the cryptography underlying the Primary Network and Avalanche Layer 1s, including flaws that affect functionality of the Avalanche Network or make the network vulnerable to attack.
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