▪ Complexity Risk: The user interface may be too technical for potential Token purchasers to understand how to engage with the Public Sale. For example, a potential Token holder may not understand transaction verification challenge can be successfully completed.
▪ Third Party Service Provider: The idOS Association (“Association”) may resort to third party services providers to support the Public Sale of the Token. As the Association does not operate, control, oversee, or manage the functioning of the services provided by the Third-Party Service Provider, it implies that:
▪ Any legal relationship between Token holders and the Third-Party Service Providers is governed solely by the terms and conditions set by the Launchpad at its discretion.
▪ The Association assumes no responsibility or liability for the operations, services, security, performance, or any outcomes - whether financial or technical - arising from transactions conducted through the Third-Party Service Providers. Technical disruptions or failures could adversely affect the Public Sale, the value of the Token and/or the situation of Token holders; and
▪ The Association provides no assurances regarding the Third-Party Service Provider itself and assumes no responsibility or liability for any regulatory, compliance, operational, financial, technical, or reputational failures that may adversely affect its activities. This includes, but is not limited to, circumstances where such failures result in disruptions, halting or ceasing the Third-Party Service Providers’ services entirely, due to sanctions, bankruptcy, cyber-attacks, technical disruptions or alike. The foregoing may result in substantial or even total losses for the Token holders.
▪ Accessibility Risk: Potential Token purchasers understand that their wallet may not be compatible with the public sale venue’s website. They are invited to check the technical requirements.
▪ Technical Risk: Potential Token purchasers understand public sale interface experiences downtime. There is a risk the public sale interface does not adequately or fully recover from a recovery process, and transactions are either incomplete or partially incomplete.
▪ Custody Risk: Potential Token purchasers understand that the public sale rely on third-party services such as custodian which are required under article 10 of MiCA to safeguard the funds or crypto-assets raised during the offer. These providers may be susceptible to security breaches, operational failures, and regulatory non-compliance, or bankruptcy which could lead to the loss or theft of the crypto-assets or funds or result in the crypto-assets or funds becoming part of the custodian’s bankruptcy estate.
▪ AML / CFT Risk: Potential Token purchasers may fail to successfully pass anti-money laundering (AML) and counter-terrorist financing (CFT) checks and may be subsequently excluded from the public sale.
The offeror, i.e., the Association is simultaneously the entity controlling the technical minting of the Token. As such, the offeror qualifies as the issuer within the meaning of article (3) (1) (10) of MiCA. Given that the issuer and the offeror are the same entity, and for the sake of consistency, statements related to the issuer shall be deemed as statement related to the offeror, i.e., the Association.
▪ Abandonment / Lack of Success Risk: This is the risk that the activities of the Association must be partially or totally abandoned for several reasons including, but not limited to, lack of interest from the public, lack of funding, incapacitation of key developers and project members, force majeure (including pandemics and wars) or lack of commercial success or prospects.
▪ Project Change Risk: The project of the Association, for which the Protocol serves as the implementation, may evolve over time. This could involve pivoting from its original vision, or modifying how that vision is executed. Such changes may be driven by market conditions, regulatory developments, technological advancements, or strategic decisions by the project’s team. While adaptation can foster innovation and resilience, it also introduces risks, including shifts in value proposition and potential misalignment with prior expectations.
▪ No Protocol Control Risk: The Protocol may not be operated or controlled by the Association. Should potential Token holders interact with the Protocol, they are engaging directly with the Protocol and potentially with third parties that have no relationship to the Association. This means the Association does not oversee or manage these interactions, nor does it assume responsibility for any outcomes that may arise.
▪ Withdrawing Partners Risk: This is the risk that the Association faces in its business relationships with one or more third parties. The implementation of the Protocol depends strongly on the collaboration and functioning of services provided by several third parties and other crucial partners. Loss or changes in the project’s leadership or key partners can lead to disruptions, loss of trust, or project failure. The Association cannot guarantee that the Protocol and the related project will be successfully developed and deployed.
▪ Legal and Regulatory Compliance Risk: Crypto-assets and blockchain-based technologies are subject to evolving regulatory landscapes worldwide. Regulations vary across jurisdictions and may be subject to significant changes. This could lead to changes with respect to offering or trading of the Token and increase the Association’s costs and/or obligations in offering or admitting the Token for trading. Changes in laws or regulations may negatively impact the value, legality, or functionality of the Token. Non-compliance can result in investigations, enforcement actions, penalties, fines, sanctions, or the prohibition of the trading of the Token impacting its viability and market acceptance. The Association could also be subject to private litigation.
▪ Operational Risk: Any failure to develop or maintain effective internal control or any difficulties encountered in the implementation of such controls, or their improvement could harm the business of the Association, causing disruptions, financial losses, or reputational damage.
▪ Industry Risk: The Association is and will be subject to all the risks and uncertainties associated with any new venture, visionary projects, including the risk that the Association will not be able to realize its purpose or vision about the Protocol and the project. Other projects may have the same or a similar vision as the Association. Many of such other projects are profit-oriented, substantially larger and have considerably greater financial, technical and marketing resources than the Association does, and thus may attract more participants than the Protocol, the project and the ecosystem initiated by the Association.
▪ Reputational Risk: The Association faces the risk of negative publicity, whether due, without limitation, to operational failures, security breaches, or association with illicit activities, all of which can damage the Association’s reputation and, by extension, the value and acceptance of the Token.
▪ Competition Risk: There are several other crypto-assets and projects, and new competitors may enter the market at any time. The effect of new or additional competition on the Token or its market price cannot be predicted or quantified. Competitors may have significantly greater financial and legal resources than the Association and there is no guarantee that the Association will be able to compete successfully, or at all, with such competitors. Moreover, increased competition may severely impact the profitability and creditworthiness of the Association.
▪ Unsolicited Admission to Trading Risk: Third parties can elect to support Tokens on their Trading Platforms without any request or authorization or approval by the Association or anyone else. As a result, Token integration on any third-party platform does not imply any endorsement by the Association that such third-party services are valid, legal, stable or otherwise appropriate.
▪ Market Risk: Crypto-assets, including the Token, are highly volatile and can experience significant price swings in short periods, increasing the risk of sudden and substantial losses. Such valuation risk arises as the market value of a crypto-asset may not always reflect its underlying utility or fundamentals and is subject to subjective assessment. Potential Token holders are thus exposed to potential for losses due to the Token’s:
▪ Potential fluctuations in value, driven by various factors such as supply and demand dynamics, investor sentiment, and broader market trends, incl. changes in interest rates, general movements in local and international markets technological advancements, regulatory changes, and media coverage. Notably, momentum pricing of crypto-assets has previously resulted, and may continue to result, in speculation regarding future appreciation or depreciation in the value of such assets, further contributing to volatility and potentially inflating prices at any given time.
▪ Liquidity risk, where a lack of depth in secondary markets - if any - or limited trading volumes can hinder the ability to execute trades at favorable prices, which could lead to significant losses, especially in fast-moving market conditions. As a result, holders of Tokens may experience challenges in managing their holdings, with the value of the asset subject to unpredictable fluctuations and potential depreciation.
▪ Solvency and collateral risk, if the Token is used to finance further activities, especially in leveraged positions or as collateral for loans. Significant fluctuations in the value of the Token could adversely affect the solvency of its holder particularly if the Token is pledged as collateral. A drastic decline in its value may trigger margin calls or automatic liquidations, which could further depress the Token's price, creating a negative feedback loop. This volatility poses the risk of forced asset sales, potentially resulting in substantial losses for the holder and amplifying downward pressure on the market price of Tokens.
▪ Custodial Risk: The method chosen to store Tokens, like any crypto-asset, carries inherent risks related to the security and management of the storage solution. The chosen storage method - whether hot or cold wallets, or centralized custody - can significantly impact the safety, liquidity, and accessibility of Tokens, with direct consequences for the holder's ability to access, trade, or retain their assets.
▪ Scam Risk: This is the risk of loss resulting from a scam or fraud suffered by Token holders from other malicious actors. These scams include – but are not limited to – phishing on social networks or by email, fake giveaways, identity theft of the Association or its management body, creation of fake Tokens, offering fake Token airdrops, among others.
▪ Anti-Money Laundering/Counter-Terrorism Financing Risk: This is the risk that crypto-asset wallets holding Token or transactions in Token may be used for money laundering or terrorist financing purposes or identified to a person known to have committed such offenses. There is thus a risk that a public address holding Tokens could be flagged in relation to Anti-Money Laundering or Counter- Terrorism Financing efforts. In such cases, receiving Tokens could result in the holder’s address being flagged by relevant authorities, Exchanges, or other service providers, which may lead to restrictions on transactions or the freezing of assets. Consequently, holders of Tokens may face legal or regulatory challenges if their address becomes associated with illicit activities, impacting their ability to freely access, trade, or transfer their Tokens.
▪ Taxation Risk: The taxation regime that applies to the trading of Tokens by either individual holders or legal entities will depend on each potential Token holder’s jurisdiction. The Association cannot guarantee that the holding of Tokens, the reception of the Token, conversions of fiat currency against Tokens, or conversions of other crypto-assets against Tokens, will not incur tax consequences. It is the potential Token holder’s sole responsibility to comply with all applicable tax laws, including, but not limited to, the reporting and payment of income tax, wealth tax or similar taxes arising in connection with the appreciation and depreciation of the Token.
▪ Market Abuse Risk: The market for crypto-assets is rapidly evolving, spanning local, national, and international platforms with an expanding range of assets and participants. Any market abuse, along with a potential loss of confidence among holders, could adversely impact the value and stability of the Token. Notably:
▪ Significant trading activity may take place on systems and platforms with limited oversight and predictability. Sudden and rapid changes in the supply or demand of a crypto-asset, particularly those with low market capitalization or low unit prices, can result in extreme price volatility.
▪ Additionally, the inherent characteristics of crypto-assets and their underlying infrastructure may be exploited by certain market participants to engage in abusive trading practices such as front-running, spoofing, pump-and-dump schemes, and fraud across different platforms, systems, or jurisdictions.
▪ Legal and Regulatory Risk: There is a lack of regulatory harmonization and cohesion globally, which results in diverging regulatory frameworks and possible further regulatory evolutions in the future. These could negatively impact the value, utility, and overall viability of the Token and, in extreme cases, force the Association to cease operations. Notably:
▪ While the Token does not create or confer any contractual or other obligations against any party, certain non-EU regulators may nevertheless classify them as securities, financial instruments, or payment instruments under their respective legal frameworks. Such classifications could impose specific regulatory constraints, leading to significant changes in how the Token is structured, issued, purchased, or traded.
▪ Evolving regulations could substantially increase the Association’s compliance costs and operational burdens related to facilitating transactions in the Token.
▪ New or restrictive regulations could result in the Token losing functionality, depreciating in value, or even becoming illegal or impossible to use, buy, or sell in certain jurisdictions.
▪ Regulators could take enforcement action against the Association if they determine that the Token constitutes a regulated instrument or that the Association’s activities violate existing laws. Such actions could expose the Association, its affiliates, directors, and officers to legal and financial penalties, including civil and criminal liability.
▪ Novel Ecosystem Risk: The potential Token holder understands and acknowledges that the ecosystem, as evolving around the Protocol, is built on emerging and rapidly evolving technologies, which inherently carry significant risks. The underlying software, blockchain infrastructure, smart contracts, and related technologies are still in their early stages of development, meaning there is no guarantee that the process of receiving, using, or holding Tokens will be uninterrupted or error-free. As with any novel technology stack, there is an inherent risk that the underlying blockchain, smart contracts, or associated components may contain weaknesses, vulnerabilities, or bugs, despite audits being conducted. Such issues could lead to unintended behaviors, security breaches, or critical failures, potentially resulting in the partial or complete loss of Tokens or their functionality. Additionally, unforeseen technical limitations, incompatibilities, or the emergence of superior alternatives could further impact the stability, security, and long-term viability of the ecosystem.
▪ Withdrawing Partner Risk: The potential Token holder understands and accepts that the feasibility of the Protocol as a whole depends strongly on the collaboration of services providers and other crucial partners. The potential Token holder therefore understands that there is no assurance that the Protocol as a whole will be successfully implemented.
▪ Suitability Risk: (i) The Protocol will be deployed on an "as is" and "as available" basis, with reasonable level of care but without warranties of any kind, and the Association expressly disclaims all implied warranties as to the Token, the Protocol including, without limitation, implied warranties of merchantability, fitness for a particular purpose, title and non-infringement; (ii) the Association does not warrant that the Token and/or, the Protocol are reliable, current or error-free, meet the Token’s requirements, or that defects in the Token and/or the Protocol will be corrected; and (iii) the Association cannot and does not warrant that the Token, the software code of the Token smart contracts, or the delivery mechanism for Token or the Protocol, are free of viruses or other harmful components.
▪ Unanticipated Risks: In addition to the risks outlined in this Section, unforeseen risks may arise. Additionally, new risks could emerge such as unexpected variations or combinations of the risks discussed in these Sections I.01 to I.05.
The offeror and its affiliate, directors and officers shall not be responsible or liable for any damages, losses, costs, fines, penalties or expenses of whatever nature, whether reasonably foreseeable by them and the potential Token holder, and which the potential Token holder, may suffer, sustain, or incur, arising out of or relating to the technical risks outlined below or a combination thereof.
▪ General Cybercrime Risk: The potential Token holder acknowledges that, despite best efforts to enhance security, the technological components supporting the Token - including its blockchain infrastructure, smart contracts, wallets - may be vulnerable to cyberattacks. Malicious actors may exploit software vulnerabilities, attack consensus mechanisms, or compromise private keys to gain unauthorized access to Tokens. Risks include hacking attempts on the Protocol, smart contract exploits, phishing attacks, malware infections, and other forms of cybercrime that could result in the theft, loss, or unauthorized transfer of Tokens. Since digital assets exist entirely in a technological environment, they are inherently exposed to evolving cyber threats, some of which may be undetectable or irreparable until after significant damage has occurred.
▪ Blockchain-Level Risk: The potential Token holder understands and accepts that, as with other blockchains, the blockchain used for the issuance of the Token could be susceptible to consensus-related attacks, including but not limited to double-spend attacks, DDoS attacks, majority validation power attacks, censorship attacks, and byzantine behavior in the consensus algorithm, Sybil attacks or be subject to forks. Any successful attack or fork presents a risk to the Token, the expected proper execution and sequencing of Token-transactions and the expected proper execution sequencing of contract computations as well as the token balances in the wallet of the potential Token holders.
▪ Smart Contract-Level Risk: The issuance and transfers of Tokens rely on smart contracts deployed on a blockchain network, which introduce specific technical and security risks.
▪ Smart contracts are self-executing, meaning any vulnerabilities, coding errors, or unforeseen logic flaws in the issuance contract could result in unintended consequences, such as the incorrect distribution of tokens, loss of funds, or permanent locking of tokens. Additionally, smart contracts are exposed to potential exploits, including hacking attempts, reentrancy attacks, and other forms of malicious activity that could compromise the security of the issuance process.
▪ Once deployed, the smart contract governing the issuance of Tokens cannot be easily altered or corrected, meaning any discovered vulnerabilities may be difficult or impossible to fix without significant coordination, community approval, or even a network fork. Furthermore, changes to the underlying blockchain protocol—such as updates to consensus mechanisms, transaction processing rules, or gas fee structures—could affect the functionality or cost efficiency of the issuance smart contract. These risks could lead to disruptions in token issuance, security breaches, or a loss of confidence in the ecosystem, potentially impacting the Token's value and usability.
▪ Protocol-Level Risk: It cannot be excluded that any technical failure, malfunction, attack, upgrade or vulnerability within the Protocol could directly or indirectly impact the value of the Token.
▪ The Protocol could be subject to critical exploits, such as reentrancy attacks, logic errors, or oracle manipulation, which could lead to unintended token transfers, assets being drained from the system, or Tokens being irretrievably lost. Fixing such issues may require significant coordination, governance approval, or even disruptive measures such as protocol migrations or forks, none of which are guaranteed to be successful.
▪ The Supply chain for the encryption technology used by the Protocol may be infiltrated by nefarious actors to gain privileged access to the Protocol.
▪ The Protocol could require an upgrade (for example, without limitation, to address a security concern), which could lead to a temporary halt of the Protocol or cause unforeseen disruptions to transactions on the Protocol.
▪ Third-Party Risk: Crypto-assets such as the Token often rely on third-party services such as exchanges and wallet providers for trading and storage. These providers can be susceptible to security breaches, operational failures, and regulatory non-compliance, which can lead to the loss or theft of crypto-assets. The Protocol encapsulate young technologies, which is why there is no warranty that the process for receiving, using, and holding the Token will be uninterrupted or error-free and that there is an inherent risk that the underlying blockchain, the smart contracts thereon, as well as any related technologies or concepts could contain weaknesses, vulnerabilities or bugs causing, inter alia, the complete loss of Token or its functionality.
Unanticipated Risks
In addition to the risks outlined in this document, unforeseen risks may arise. Additionally, new risks could emerge as unexpected variations or combinations of the risks discussed in this document.
While security tests are intended to be conducted, potential Token holders understand that the risks outlined above are inherent to the Protocol activities and the broader ecosystem, making elimination impossible.