You acknowledge and agree that there are risks associated with purchasing Tokens, holding Tokens, and using Tokens for providing or receiving Services in the Network, as disclosed and explained herein. By purchasing, holding and using Tokens, you expressly acknowledge and assume the following risks:
Risk of Losing Access to COLL Due to Loss of Credentials
The purchaser’s COLL Tokens will be associated with a COLL account and a Stellar wallet address. The COLL account can only be accessed with login credentials selected by the purchaser. The loss of these credentials may result in the loss of the purchaser’s COLL Tokens. Best practices dictate that purchasers safely store credentials in one or more backup locations geographically separated from the working location.
Risk of Losing Access to Tokens Due to Loss of Private Secret Key(s)
A private secret key, or a combination of private keys, is necessary to control and dispose of Tokens stored in your digital wallet. Accordingly, loss of requisite private key(s) associated with your digital wallet storing Tokens will result in loss of such Tokens. Moreover, any third party that gains access to such private key(s), including by gaining access to login credentials of a hosted wallet service you use, may be able to misappropriate your Tokens. Any third party that gains access to, or learns of the purchaser’s login credentials or private keys, may thus be able to dispose of the purchaser’s COLL Tokens. To minimize this risk, the purchaser should guard against unauthorized access to their electronic devices at all times.
Risks Involving Cloud Storage
As the Foundation provides services to individual clients, including users and developers of applications which may involve data storage to some extent, such Services are susceptible to a number of risks related to the storage of data in the cloud. While the Foundation does not have access to the contents of the data stored through the Services, the Services may involve the storage of large amounts of sensitive and/or proprietary information, which may be compromised in the event of a cyber-attack or other malicious activity. Similarly, the Services may be interrupted, and files may become temporarily unavailable in the event of such an attack or malicious activity. Because users can use a variety of hardware and software that may interface with the Network, there is the risk that the Services may become unavailable or interrupted based on a failure of interoperability or an inability to integrate these third-party systems and devices that the Foundation does not control with the Foundation’s Services. The risk that the Services may face increasing interruptions and the Network may face additional security vulnerabilities could adversely affect the Network and therefore the future utility of any Tokens held by parties.
Risks Associated with the Stellar Protocol
Because the Tokens and the Network, COLL Tokens and the COLL platform, are based on the Stellar protocol, any malfunction, breakdown or abandonment of the Stellar protocol may have a material adverse effect on the Network or Tokens. Also, any malfunction, unintended function, unexpected functioning of or attack on the Stellar protocol may cause the COLL platform or COLL Tokens to malfunction or function in an unexpected or unintended manner. Lumens, the native unit of account of the Stellar protocol may itself lose value in ways similar to COLL Tokens, and also other ways. More information about the Stellar protocol is available at http://www.stellar.org Moreover, advances in cryptography, or technical advances such as the development of quantum computing, could present risks to the Tokens and the Network by rendering ineffective the cryptographic consensus mechanism that underpins the Stellar protocol.
Risk of Mining Attacks
As with other decentralized cryptographic tokens based on the Stellar protocol, the COLL Tokens are susceptible to attacks by miners in the course of validating Token transactions on the Stellar blockchain, including, but not limited, to double-spend attacks, majority mining power attacks, and selfish-mining attacks. Any successful attacks present a risk to the Network and the Tokens, including, but not limited to, accurate execution and recording of transactions involving Tokens.
Risk of Hacking and Security Weaknesses
Hackers or other malicious groups or organizations may attempt to interfere with the Network or the Tokens in a variety of ways, including, but not limited to, treasury vulnerability, malware attacks, denial of service attacks, consensus-based attacks, 51 percent attacks, man in the middle, Sybil attacks, smurfing and spoofing. Furthermore, because the Network is based on open-source software, there is a risk that a third party or a member of the Foundation team may intentionally or unintentionally introduce weaknesses into the core infrastructure of the Network, which could negatively affect the Network and the Tokens.
Hackers or other groups or organizations may attempt to steal the ETH or BTC revenue from the initial sale, thus potentially impacting the ability of the Foundation to continue to develop and support the Platform and operate the Network. To account for this risk, the Foundation has and will continue to implement comprehensive security precautions to safeguard the proceeds obtained from the sale of COLL.
Multi-factor security measures will be taken to protect ETH, BTC and all currencies and proceeds including physical elements, algorithms, multisignature keys, anti-spear-phishing procedures, splitting of funds, hot/cold wallet partitioning and diversification. Moreover, regular security audits of hot and cold wallets will be conducted by internal and external teams. As acknowledged, there is always a risk that the COLL Team, or other third parties not directly affiliated with the Parties, may intentionally or unintentionally introduce weaknesses or bugs into the core infrastructural elements of the Platform causing the system to lose COLL stored in one or more Purchaser accounts or other accounts or lose sums of other valued tokens issued on the Platform. The Foundation has taken steps to build, maintain, and secure the infrastructure of the Platform and will continue to do so after the initial sale. For example, the Foundation intends to hire external consultants on a periodic basis to assess and audit the security of the Platform and will work with cryptography and security experts to develop and employ best practices to audit the Platform. As acknowledged, advances in code cracking, or technical advances such as the development of quantum computers, could present risks to cryptocurrencies and the Platform, which could result in the theft or loss of COLL, stored cryptocurrencies or other valuable assets. To the extent possible, the Foundation intends to update the protocol underlying the Platform to account for any advances in cryptography and to incorporate additional security measures, but it cannot predict the future of cryptography or the success of any future security updates. As with other cryptocurrencies, the blockchain used for the COLL Platform is susceptible to mining attacks, among others. Any successful attacks present a risk to the Stellar Platform generally, and the COLL network specifically, effecting expected proper execution and sequencing of COLL transactions, and expected proper execution and sequencing of contract computations, as well as other potential losses identified here as risk factors, in addition to those unidentified or unexpected. The purchase of COLL carries with these significant risks. Prior to purchasing COLL, the Purchaser should carefully consider the risks herein identified, and, to the extent necessary, consult experts of your choosing (cryptographic and cyber security specialists, lawyers, accountants, and/or other professionals) prior to determining whether to purchase COLL.
Risks Associated with Markets for Tokens
The COLL Tokens are intended to be used solely within the Network. The Foundation will not support or otherwise facilitate any secondary trading or external valuation of Tokens. This restricts the contemplated avenues for using Tokens to the provision or receipt of Services, and could therefore, create illiquidity risk with respect to the Tokens held by any party. Even if secondary trading of Tokens is facilitated by third party exchanges; such exchanges may be relatively new and subject to little or no regulatory oversight, making them more susceptible to fraud or manipulation. Furthermore, to the extent that third parties do ascribe an external exchange value to Tokens (e.g., as denominated in a digital or fiat currency), such value may be extremely volatile and diminish to zero. Thus, since cryptocurrencies are volatile, and the price of most crypto currencies as it relates to fiat currency may decrease over a short period of time, significant loss to purchasers of any cryptocurrency, or even of a Token similar to COLL Token may result. Regardless, any cryptocurrency exchanges, or buyers and sellers on the free market, may, and most likely, will, set a price that is different from the initial price set by the Foundation, and purchased by the participants of the COLL Token Participation Event. A system or technical failure, or deficient source code, may negatively impact the ability to exchange cryptocurrencies, or even the specter of such, may affect the price of cryptocurrencies or the price of COLL Token. Likewise, a hacking incident or malicious attack may negatively impact the price of cryptocurrencies, generally, or COLL Token, specifically.
Risk of an Illiquid Market for COLL Tokens
There very well may never be a secondary market for COLL Tokens. Currently COLL Tokens are not traded on any third party centralized exchange, but only on the Stellar exchange. If ever additional third party exchanges do develop, they will likely be relatively new and subject to poorly understood regulatory oversight. They may, therefore, be more exposed to fraud and failure than established, regulated exchanges for other products and could potentially have a negative impact on COLL Tokens.
Risk of an Unfavorable Fluctuation of Lumens and Other Currency Value
The Foundation team intends to use part of the proceeds from selling Tokens to fund the maintenance and further development of the Network, as described further throughout the site, whitepaper and promotional material. The proceeds of the Token Participation Event will be denominated in Ether or Bitcoin, and other currencies and converted into other cryptographic and fiat currencies. In addition, some pre-sales of the Tokens may also be denominated in fiat currencies. If the value of Bitcoin, Ether, Lumens, or other currencies fluctuates unfavorably during or after the Sale Period, the Foundation team may not be able to fund certain development, or may not be able to fully develop or maintain the Network in the manner that it intended.
Risk of an Unfavorable Fluctuation of Other Currency Value
The Foundation team intends to use the proceeds from selling Tokens to fund the maintenance and development of the Network, as described further in the Terms herein. The proceeds of the Token Participation Event will be denominated in cryptocurrency, Ether, Bitcoin, Lumens and others and converted into other cryptographic and fiat currencies. In addition, some pre-sales of the Tokens may also be denominated in fiat currencies. If the value of other currencies fluctuates unfavorably during or after the Sale Period, the Foundation team may not be able to fully fund certain development, or may not be able to develop or maintain the Network in the manner that it intended.
Risks Associated with the Development and Maintenance of the Network
The COLL Network is still under certain ongoing development, integrating participation of users and may undergo significant changes over time.
Although we intend for the COLL Tokens and Network to follow the specifications set forth in the Foundation Whitepaper, Terms and Conditions, and objectives described throughout the site, and the Foundation intends, with the ongoing input of Network members as collaborative participants, to take reasonable steps toward mutually determined ends, the Foundation may have to make changes to the specifications of the COLL Tokens or Network for any number of legitimate reasons.
This could create the risk that the COLL Tokens or Network, as further developed and maintained, may not meet purchaser expectations held at the time of purchase. Furthermore, despite good faith efforts to develop and maintain the COLL Network, it is still possible that the Network will experience malfunctions or otherwise fail to be adequately developed or maintained, which may negatively impact the function, utility and value of COLL Network and Tokens.
Risk of Alternative Networks
It is possible that alternative networks could be established that utilize the same open source code and protocol underlying the COLL Network and attempt to facilitate services that are materially similar to the Services offered on the COLL Network. The COLL Network may thus compete with these alternative networks, which could negatively impact the COLL Network and Tokens. Since cryptocurrencies compete with all other cryptocurrencies, such competition may negatively impact the price of any specific cryptocurrency, and in this instance, may negatively impact the price of COLL Token.
Risk of Insufficient Interest in the Network or Distributed Applications
It is possible that the COLL Network will not be used by a large number of individuals, and other entities or that there will be limited public interest in the creation and development of distributed ecosystems (such as the COLL Network) more generally. Such a lack of use or interest could negatively impact the development of the COLL Network and therefore the potential utility of COLL Tokens.
Risk of Insufficient Interest in the Network ( COLL Platform) or the Foundation’s Distributed Applications
It is possible that the Network will not be used by a large number of individuals, families, charities, organizations and other entities or that there will be limited public interest in the creation and development of distributed applications in ecosystems such as the COLL Network. Such a lack of use or interest could negatively impact the expanded development of the Network and therefore the potential utility of Tokens, thus negatively impacting COLL Tokens and the COLL platform.
Risk that the COLL Platform, as Developed, Will Not Meet the Expectations of Collegecoin Users, the Foundation or the Purchaser
The COLL platform is presently under feature enhancing development and may undergo significant changes before our full release. Any expectations or assumptions regarding the form and functionality of the COLL platform or the COLL Tokens (including participant behavior) held by COLL or the purchaser may not be met upon full release, for any number of reasons including mistaken assumptions or analysis, a change in the design and implementation plan and execution of the COLL platform.
Risk of Malfunction in the Collegecoin Platform
It is possible that the COLL platform malfunctions in an unfavorable way, including one that results in the loss of COLL Tokens.
Risk of Uninsured Losses
Unlike bank accounts or accounts at some other financial institutions, Tokens are uninsured unless you specifically obtain private insurance to insure them. Thus, in the event of loss or loss of utility value, there is no public insurer, such as the Federal Deposit Insurance Corporation, or private insurance arranged by us, to offer recourse to you.
Risks Arising from Taxation
The tax characterization of Tokens is uncertain. You must seek your own tax advice in connection with purchasing Tokens, which may result in adverse tax consequences to you, including withholding taxes, income taxes and tax reporting requirements.
Risks Associated with Uncertain Regulations and Enforcement Actions
The regulatory status of Tokens generally, and this form of Utility Token, specifically, as well as distributed ledger technology, in all forms, is unclear, evolving, or otherwise unsettled in many jurisdictions. Accordingly, it is difficult to predict how or whether regulatory agencies may apply existing regulation with respect to such technology and its applications, including the COLL Network and COLL Tokens. It is likewise difficult to predict how or whether legislatures or regulatory agencies may implement changes to law and regulation affecting distributed ledger technology and its applications, including the Collegecoin Network and COLL Tokens. Regulatory actions could negatively impact the Network and the Tokens in various ways, including, for purposes of illustration only, through a determination that Tokens are a regulated financial instrument that require registration or licensing. The Foundation may cease operations in a jurisdiction in the event that regulatory actions, or changes to law or regulation, make it illegal to operate in such jurisdiction, or commercially undesirable to obtain the necessary regulatory approval(s) to operate in such jurisdiction. In any event, governments may adopt legislation or regulations that may negatively impact the use, transfer, exchange or price of cryptocurrencies, and thereby affect the Collegecoin Network and COLL Tokens.
Risk of Ultimately Unfavorable Regulatory Action in One or More Jurisdictions
As noted, Blockchain technologies have been the subject of scrutiny by various regulatory bodies around the world. The functioning of the COLL platform and COLL Tokens could be impacted by one or more regulatory inquiries or actions, including the licensing of or restrictions on the use, sale, or possession of digital tokens like COLL, which could impede, limit or end the further development or refinement of the COLL platform.
Cryptographic tokens such as COLL Tokens are a new and untested technology. In addition to the risks included herein, there are other risks associated with purchase, holding and use of Tokens, including those that the Foundation cannot anticipate. Such risks may further materialize as unanticipated variations or combinations of the risks discussed in this Disclosure.
Risk of Dissolution of the Foundation or Network
It is possible that, due to any number of reasons, including, but not limited to, an unfavorable fluctuation in the value of Lumens, COLL (or other cryptographic and fiat currencies), decrease in the Tokens’ utility, the failure of commercial, creative and cooperative relationships, or intellectual property ownership challenges, the Network may no longer be viable to operate, and the Foundation may dissolve.
Risks Arising from Lack of Governance Rights
Because Tokens confer no governance rights of any kind with respect to the Network or Foundation or its affiliates, all decisions involving the Network or Foundation will be made by the Foundation at its sole discretion, including, but not limited to, decisions to discontinue the Network, to create and sell more Tokens for use in the Network, or to sell or liquidate the Foundation. These decisions could adversely affect the Network and the Tokens held by parties.
As noted elsewhere in these Terms, the Tokens are not being structured or sold as securities or any other form of investment product. Accordingly, none of the information presented in this Disclosure is intended to form the basis for any investment decision, and no specific recommendations are intended.
The Foundation expressly disclaims any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from:
(i) reliance on any information contained in this Disclosure of Risks;
(ii) any error, omission or inaccuracy in any such information; or,
(iii) any action resulting from such information.
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