SEC Filing Document

Company: T. Rowe Price Active Crypto ETF
Ticker: 
CIK: 2089855
Filing Type: S-1
Document Type: S-1
Date Filed: 2025-10-22
Accession Number: 0001999371-25-015832
Exchange: 
SIC Code: 6221
SIC Description: Commodity Contracts Brokers & Dealers
URL: https://www.sec.gov/Archives/edgar/data/2089855/000199937125015832/activecrypto-s1_102225.htm

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Word Count: 1421
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on a decentralized network are kept in consensus. The Bitcoin Protocol is thus an open-source project with no official company or group in control, and anyone can review the underlying code for its clients. There are, however, a number of individual developers that regularly contribute to a specific Bitcoin Client known as the “bitcoin core” (Bitcoin Core). Developers of the Bitcoin Core loosely oversee the development of the source code. There are many other compatible versions of the Bitcoin Protocol, but Bitcoin Core is the most widely adopted and currently provides the de facto standard for the Bitcoin Protocol. Bitcoin Core developers are able to access, and can alter, the client’s source code and, as a result, they are responsible for quasi-official releases of updates and other changes to the Bitcoin Core. Upgrade proposals to the Bitcoin protocol can be created by any individual as a Bitcoin Improvement Proposal (BIP).

However, due to a lack of central authority,
the release of updates to the Bitcoin Core or other Bitcoin Clients by their developers does not guarantee that the updates will be automatically
adopted by the other network participants. Users and miners must accept any changes made to the source code by downloading the proposed
modification and that modification is effective only with respect to those Bitcoin users and miners who choose to download it and run.
As a practical matter, a modification to the source code becomes part of the Bitcoin Network only if it is accepted by individuals that
collectively form a majority of the Bitcoin Network. If a modification is accepted by only a small percentage of users and miners, a division
will occur such that one network will run the pre-modification source code and the other network will run the modified source code. Such
a division is known as a “hard fork.” To avoid network splits, the Bitcoin community chooses to implement BIPs via soft forks,
which are backward-compatible updates and thus optional in nature, meaning multiple versions of the same Bitcoin Client can coexist in
the Bitcoin Network.

Development of Bitcoin Clients has
increasingly focused on amendments to the Bitcoin Protocol to enhance speed and scalability. For example, in August 2017, a BIP known
as “segregated witness” was adopted in a Bitcoin soft fork. Among other things, it enables so-called second layer solutions,
such as the “Lightning Network,” or payment channels, which could potentially allow greater speed and a greater number of
transactions that the Bitcoin Network can process in a given time interval (i.e., transaction throughput). The Lightning Network is an
open-source decentralized network that enables the instant off-blockchain transfer of bitcoin without requiring a trusted third party.
The Lightning Network uses bidirectional payment channels, which work as follows: an on-blockchain transaction is required to open a channel,
which can later be closed through another on-blockchain transaction. Once a channel is open, value can be transferred instantly between
counterparties engaging in bitcoin transactions without such transactions being broadcasted to the Bitcoin Network. This enables increased
transaction throughput and reduces the computational burden on the Bitcoin Network. The Lightning Network is currently a subject of ongoing
research and development and does not yet have material adoption as of August 2024, with approximately 5,200 bitcoins in total liquidity
deposited in its payment channels.

Other uses of segregated witness include
smart contracts (which are programs that automatically execute on a blockchain) and distributed registers built into, built atop, or pegged
alongside the Bitcoin Blockchain. For example, one white paper published by the blockchain technology company Blockstream Corporation
Inc. calls for the use of “pegged sidechains” to develop programming environments built within blockchain ledgers that can
interact with and rely on the security of the Bitcoin Network and blockchain while remaining independent thereof. Applications of this
concept include open-source projects such as RSK (Rootstock), which seeks to create novel open-source smart contract platforms built on
the Bitcoin Blockchain to allow automated, condition-based payments with increased speed and scalability.

Such research and development projects
may utilize bitcoin as tokens for the facilitation of their non-financial uses, thereby potentially increasing demand for bitcoin and
the utility of the Bitcoin Network as a whole. Conversely, to the extent that such projects operate on the Bitcoin Blockchain, they may
increase the data flow on the Bitcoin Network and could either “bloat” the size of the blockchain or result in slower confirmation
times. At this time, such projects remain in early stages and have not been materially integrated into the blockchain or Bitcoin Network.

The latest Bitcoin soft
fork known as “Taproot” was activated in November 2021, introducing a new scheme for digital signatures, enhancing the
privacy of more complex Bitcoin scripts and optimizing block space usage for multi-signature transactions. Taproot has become more
prominent since late 2022 with the launch of Bitcoin inscriptions, which uses Taproot functionality to assign pieces of information
to distinct satoshis. Also, Taproot is being used in the implementation of Taproot Assets, a novel programmability layer built on
top of Bitcoin that allows users to create other crypto assets on the Bitcoin Blockchain, while using them at fast speeds and low
costs over the Lightning Network. Similar to the adoption of the Lightning Network, inscriptions and Taproot Assets are still
experimental technologies and might be subject to significant risks.

Bitcoin
wallets and transactions

Users of the Bitcoin Network must either
run a Bitcoin Client or use a Bitcoin wallet. To initiate a Bitcoin transaction, users generate one or more unique pairs of private and
public keys, the latter being used to receive funds, and the former to authenticate transactions and send bitcoin. These pairs can be
hierarchically derived from a single set of words known as a seed phrase. As their names suggest, public keys can be safely shared with
anyone in the network, whereas private keys should be kept secret. This is analogous to the use of a bank account, with a public key similar
to the bank identifier and branch number, and the private key the analogue to the account’s transaction password.

A private-public key pair is generated
using asymmetric cryptographic, meaning that deriving a public key from its corresponding private key is easy, whereas guessing a private
key from a known public key is virtually impossible. The generation of the pair and the signing of transactions is securely carried out
using a device disconnected from the internet, maintaining the secrecy of the private key and the custody of bitcoins in a so-called cold
wallet. If a private key is at least once exposed to the internet, it turns the corresponding wallet into a so-called hot wallet, exposing
the user to the risk of theft of funds by a malicious actor that might gain access to the device during the time of internet exposure.
Therefore, security and ownership of bitcoins rely heavily on the proper management of private keys, as these keys are the only way to
authorize transactions. This property guarantees the possibility of secure custody of bitcoins without counterparty risk and the ability
for a user to be the only network participant knowing the private key to its wallet. On the other hand, losing a private key means losing
access to the associated funds permanently, similar to a bearer asset like cash, and exposing it to the internet creates the risk of a
malicious actor becoming able to drain funds from the wallet.

Bitcoin
Markets

In the Bitcoin market, participants
range from individual end-users who utilize bitcoin for peer-to-peer transactions, to merchants who accept bitcoin as payment for goods
and services. Despite its potential, bitcoin has not yet achieved widespread adoption as a mainstream payment method. Investors also represent
a significant portion of market participants, purchasing bitcoin as a speculative asset or as part of a diversified investment portfolio.
These transactions occur both on bitcoin spot markets and over-the-counter (OTC) markets, with the former being more accessible to retail
investors and the latter catering to institutional entities handling large volumes of bitcoin.

In addition to using bitcoin to purchase
goods and services, investors may purchase and sell bitcoin to speculate as to the value of bitcoin in the bitcoin market, or as a long-term
investment to diversify their portfolio. The value of bitcoin within the market is determined, in part, by the supply of and demand for
bitcoin in the global bitcoin market, market expectations for the adoption of bitcoin as a store of value, the number of merchants that
accept bitcoin as a form of payment, and the volume of peer-to-peer transactions, among other factors.