Company: HBAR
Filing Date: 2025-09-09
Form Type: S-1
Source: 0000950170-25-113803
Chunk: 40

Company: Grayscale Hedera Trust ETF
Filing Date: 2025-09-09
Form: S-1
Chunk 40
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 networks that facilitate DeFi protocols in particular, such as the Hedera Network, users may attempt to gain an advantage over other users by increasing offered transaction fees. Certain software solutions, such as Flashbots, have been developed which facilitate validators in capturing MEV produced by these increased fees. The MEV incentive system may lead to an increase in transaction fees on the Hedera Network, which may diminish its use. Users or other stakeholders on the Hedera Network could also view the existence of MEV as unfair manipulation of decentralized digital asset networks, and refrain from using DeFi protocols or the Hedera Network generally. In addition, it’s possible regulators or legislators could enact rules which restrict the use of MEV, which could diminish the popularity of the Hedera Network among users and validators. Any of these or other outcomes related to MEV may adversely affect the value of HBAR and the value of the Shares.

Validators may suffer losses due to Staking, or Staking may prove unattractive to validators, which could adversely affect the Hedera Network.

Validation on the Hedera Network requires HBAR to be transferred into smart contracts on the underlying blockchain network not under the control of the person who owns such HBAR. If the Hedera Network source code or protocol were to fail to behave as expected, suffer cybersecurity attacks or hacks, experience security issues, or encounter other problems, such transferred (i.e., staked) HBAR may be irretrievably lost.

Separately, as part of the “activating” and “de-activating” or “cooling down” processes of staking, staked HBAR will be inaccessible for a variable period of time determined by a range of factors, including network congestion, resulting in potential inaccessibility during those periods. “Activation” is the finding of a validator to be included in the active set, thereby allowing the validator to participate in the Hedera Network’s proof-of-stake consensus protocol. “De-activating” is the request to exit from the active set and no longer participate in the Hedera Network’s proof-of-stake consensus protocol. As part of these “activating” and “de-activating” processes of staking on the Hedera Network, any staked HBAR will be inaccessible for a period of time, denominated in “epochs.” On the Hedera Network, an epoch is approximately two days, and deactivation can take between one to several epochs to complete. The duration of activation and de-activation periods are dependent on a range of network