Interesting stuff to this newbie here.. from the prospectusCompetition and Market Participants
In the cryptocurrency industry, there exist many online companies that offer cryptocurrency cloud mining services, as well as companies, individuals and groups that run their own mining farms. Miners can range from individual enthusiasts to professional mining operations with dedicated data centers, including those of the kind operated by one of the Company's principal competitors, HIVE Blockchain Technologies Ltd. ARGO Blockchain Plc, Bitfarms Ltd., Riot Blockchain Inc., and Marathon Digital Holdings, Inc. Miners may organize themselves in mining pools. A mining pool is created when cryptocurrency miners pool their processing power over a network and mine transactions together. Rewards are then distributed proportionately to each miner based on the hash power contributed. Mining pools allow miners to pool their resources so they can generate blocks quickly and receive rewards on a more consistent basis instead of mining alone where rewards may not be received for long periods. Hut 8 has also decided to participate in a mining pool in order to smooth the receipt of rewards. 9 Other market participants in the cryptocurrency industry include investors and speculators, retail users transacting in cryptocurrencies, and service companies that provide a variety of services including buying, selling, payment processing and storing of cryptocurrencies.
Material Contracts
On March 24, 2020, the Company entered into a business agreement (the "Slush Pool Agreement") with Braiins Systems s.r.o., an operator of the Slush Pool virtual currency mining pool. The Slush Pool Agreement governs the terms and conditions under which the Company contributes its processing power to the Slush Pool mining pool in exchange for certain remuneration. Under the Slush Pool Agreement, the Company has agreed to contribute processing power of at least 600 peta hashes per second ("PH/s") during the specified verification period. The initial term of the Slush Pool Agreement is for one year, ending on March 24, 2021. Pursuant to the Slush Pool Agreement, the Company has agreed to mine virtual currency exclusively on the Slush Pool, subject to certain exceptions. On February 12, 2020, the Company entered into an Amended and Restated Master Data Center Purchase Agreement with Bitfury (the "Purchase Agreement"). The Purchase Agreement governs the terms and conditions of the purchase of Bitfury's proprietary BlockBox AC – Air Cooled Mobile Datacenters (the "Data Centres") and certain equipment and ancillary assets used to run diverse cryptographic hash functions in connection with the mining of cryptocurrency. Pursuant to the Purchase Agreement, the Company may offer to purchase Data Centres from time to time at specified prices by delivering a purchase order to Bitfury. The Purchase Agreement provides the Company with a right of first refusal over any Data Centres that Bitfury intends to sell within North America. Similarly, the Purchase Agreement provides Bitfury with a right of first refusal to provide any Data Centres that the Company intends to acquire within North America. Bitfury's right of first refusal with respect to Data Centres does not prevent the Company from procuring silicon chips from other suppliers to upgrade its Data Centres unless Bitfury can provide similarly efficient Hut 8 Mining Corp. (British Columbia) Hut 8 Holdings Inc. (British Columbia) Hut 8 Asset Management (Barbados) Hut 8 Finance Ltd. (Ontario) 100% 100% 100%7 equipment at the same or better cost on equivalent delivery terms. The Purchase Agreement is for a term of three years, with two consecutive automatic renewal terms of one year each. Concurrent with the Purchase Agreement, on February 12, 2020, the Company entered into an Amended and Restated Master Service Agreement with Bitfury (the "MSA"). In accordance with the MSA, Bitfury shall provide the management, maintenance, support, logistics and operational services (the "Services") required to run the Data Centres. The MSA is for a term of three years, with two consecutive automatic renewal terms of one year each. The Company transferred the employees at its facilities in both Medicine Hat and Drumheller from Bitfury to Hut 8 and took over the management of employees, with continued support from Bitfury regarding support, logistics, and other operational services. On September 1, 2019, the Company entered into a custodial services agreement with Bitgo (the "Bitgo Custodial Agreement"), pursuant to which Bitgo provides the Company with various custodial and wallet services. The Company pays fees for these services pursuant to a fee schedule that may be revised by Bitgo on at least 30 days' notice during which the Company may elect to terminate the agreement and services at no additional charge. The Bitgo Custodial Agreement has an initial term of 16 months, after which it will automatically renew for successive one-year periods unless either party notifies the other party of its intention not to renew at least 60 days prior to the expiration of the then-current term. The Bitgo Custodial Agreement replaced the services agreement the Company had with Xapo GmbH ("Xapo"). On March 2, 2018, the Company entered into an investor rights agreement (the "Investor Rights Agreement") with Bitfury. Pursuant to the Investor Rights Agreement, Bitfury has the right to participate in offerings of the Common Shares, or securities convertible or exchangeable into or giving the right to acquire Common Shares, to the extent necessary to maintain its proportion of the total voting rights (on a fully diluted basis) associated with the outstanding Common Shares. In accordance with the Investor Rights Agreement, Bitfury may designate two nominees to the board of directors of the Company (the "Board") if its beneficial ownership of the outstanding Common Shares is 20% or more and will decrease to one if its beneficial ownership of the outstanding Common Shares falls to between 10% and 20%, in each case on a non-diluted basis. The Investor Rights Agreement will terminate after the first continuous 30-day period during which Bitfury beneficially owns less than 10% of the issued and outstanding Common Shares on a non-diluted basis. If the size of the Board were to increase to 7 or more members, Bitfury would in certain circumstances be entitled to designate a greater number of directors in proportion to its beneficial ownership of the outstanding Common Shares. On November 20, 2019, the Company entered into a master loan agreement (the "Genesis Credit Agreement") with Genesis Global Capital, LLC ("Genesis") pursuant to which Genesis advanced a term loan in the amount of US$15,000,000 to the Company. The proceeds of the Genesis Credit Agreement were used, together with cash on hand, to refinance the Company's previously existing credit agreement with Galaxy Digital Lending Services LLC. On March 15, 2018 and March 20, 2018, the Company entered into definitive agreements with the City of Medicine Hat ("CMH") for the supply of electricity, and the lease of land upon which Hut 8 has constructed its mining facilities. For electricity, an Electricity Supply Agreement ("ESA") was executed, whereby CMH will provide electric energy capacity of approximately 67 MW in operation in Drumheller, will allow Hut 8 to operate at 107 MW in total. The ESA and the land lease have a concurrent term of 10 years. The minimum payments on the land lease are $1,395 per month from May 1, 2018 to December 31, 2027.