CRYPTOCURRENCY MINING RIG STANDARD HOSTING TERMS

 

Version Updated July 27, 2018

 

These CRYPTOCURRENCY MINING RIG STANDARD HOSTING TERMS (these “Standard Terms”) apply to any mining rig hosting provided by Austin Binary Research, LLC d/b/a CryptoGulch, a Texas limited liability company or its affiliates (collectively “Provider”), and is used with and is deemed incorporated into and a part of the Cryptocurrency Mining Rig Hosting Agreement, if any, either entered into on paper or through Provider’s website form thereof setting forth the basic hosting terms or with any other writing (including an email) documenting the basic hosting terms of the Provider (the “Agreement Terms”) with an owner of a hardware/software system owned by a party availing itself of Provider’s hosting services or a party who has provided one or more advance payments (an “Advance Payments”) in respect of the party’s intent or request to become an owner of a hardware/software system to be owned by such party and to avail itself of Provider’s hosting services (“Owner”, and together with Provider, the “Parties”, and each, a “Party”). In the event that no separate written agreement is entered into with an Owner, these Standard Terms shall nonetheless govern the arrangements with Owner. These Standard Terms, any Agreement Terms, the Acknowledgement and Acceptance Agreement referred to below, the Cryptocurrency Mining Considerations attached hereto (the “Considerations”), and any other written agreements entered into by the Parties in connection with the Services (as defined below) are collectively referred to as the “Agreement.” These Standard Terms may be modified by Provider at any time, which modification shall be effective upon the day the modified Standard Terms are posted on Provider’s website.

 

Provider is in the business of, among other things, mining cryptocurrencies for itself and providing co-location facilities and assistance to persons who wish to co-locate their separately owned cryptocurrency mining hardware or rigs (“Rigs”) at Provider’s location all at the sole direction of the owners of such Rigs.

 

Owners from time to time determine which Rigs and other hardware and related software therefor, including hardware and software add-ons that may be included therewith from time to time, with which to mine cryptocurrency (collectively, “Owner’s Property”) and which Owners wish to co-locate at Provider’s facilities (each a “Co-Location Facility”). Owners make available to Provider, either acquired through Owner’s own means or through purchase from Provider or an affiliate of Provider, the hardware and software comprising Owner’s Property. If Owner purchases the hardware and software comprising Owner’s Property from Provider or an affiliate of Provider, Provider and/or any affiliate of Provider will retain title to such property until Owner makes payment in full to Provider of the amounts indicated as then due in the Agreement Terms. If Owner acquires Owner’s Property through Owner’s own means Owner must prove and/or allow Provider to verify (at Owner’s cost, including the hourly fee of Provider then in effect in respect of the effort to undertake such verification), at Provider’s option, that Owner’s Property does not harbor any malicious code before Provider provides any Services (as defined below) regarding such Owner’s Property. Co-Location Facilitates may be owned, leased or subleased by Provider or its affiliates, or be under any other arrangement established by Provider or its affiliates where Owner’s Property may have access to the means to mine cryptocurrency, including joint ventured co-location facilitates with providers similar to Provider. Owner releases Provider from any damages relating to any attempt, lawful or otherwise, by any induvial, other than Provider, to claim an interest in Owner’s Property. OWNER PURCHASES THE EQUIPMENT, BOTH HARDWARE AND SOFTWARE, INCLUDED WITHIN OWNER’S PROPERTY AS IS AND, NOT BEING THE MANUFACTURER OF THE EQUIPMENT, THE MANUFACTURER’S AGENT OR THE SELLER’S AGENT, PROVIDER MAKES NO AY OR REPRESENTATION WHATSOEVER, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN OR CONDITION OF THE EQUIPMENT, OR INTELLECTUAL PROPERTY RIGHTS WITH RESPECT TO THE EQUIPMENT. Owner shall have all applicable manufacturer warranties, to the extent any equipment is purchased by Owner from such manufacturer. All transferrable manufacturer and supplier warranty rights are, to the extent such rights have been obtained to Provider, hereby assigned without representation or warranty by Provider to Owner, which warranties Owner is authorized to enforce.

 

Provider shall set up Owner’s Property at such Co-Location Facilities as Provider may determine, provided that the initial location of Owner’s Property shall be as indicated in the Agreement Terms. Owner shall pay a monthly fee as set forth in Agreement Terms (Owner’s Monthly Fee). Owner’s Monthly Fee may include (or be solely a) a “Shared Mining Fee” (as hereafter defined). If Owner is subject to the “Shared Mining Fee” (as hereafter defined) then Owner’s Property shall mine the cryptocurrency as Owner may direct in its sole discretion for a number of hours each day as set forth in Agreement Terms (“Owner’s Mining Period”), with Owner allowing Provider to mine cryptocurrency with Owner’s Property for the remainder of each day (the “Shared Mining Fee”). If no Agreement Terms are entered into the standard Owner’s Mining Period shall be 16 hours. Owner’s Monthly Fee may include (or be solely a) prepaid monthly fee (in United States Dollars – herein “Dollars”) payable on the first of each month in advance for that month (the “Cash Fee”). The Cash Fee will be as set forth in the Agreement Terms, but if not set forth therein or of that Cash Fee no longer applies the Cash Fee shall be as set forth in the Provider’s standard fees as set forth in the Provider’s website for the type of equipment represented by the Owner’s Property or, if greater, the Provider’s then effective charge per kilowatt hour of electricity consumed by Owner’s Property. At any time, by notice of Provider to Owner, Owner’s Monthly Fee and/or Owner’s Mining Period may be prospectively (but not retrospectively) modified effective the date set forth in such notice. Such notice may be via email or via Provider’s website (including in written, audio of video form). Owner may terminate the Services on written notice within ten (10) days after Provider’s notice of modification of Owner’s Monthly Fee. If Owner fails to give such notice of termination within such time the Services shall continue as provided herein at the new Owner’s Monthly Fee, subject to the General Termination Rights (as defined below). There shall be no Owner termination right (other than the General Termination Rights) if any Owner’s Monthly Fee modification does not increase the gross fees of Owner payable to Provider or if it is ever modified to a gross fee equal or lower to than the Owner’s Monthly Fee ever charged Owner. Calculations of such gross fees for the purposes of the preceding sentence shall be made by Provider converting all fees to Dollars at then applicable conversion rates and such calculations shall be dispositive for all purposes absent manifest error or purposeful miscalculation.

 

If the Owner’s Property is subject to downtime not caused by a Force Majeure Event (as defined below), Provider may, in its sole discretion, make up such unexcused downtime in such manner as Provider deems reasonable.

 

Beginning on the date of delivery of Owner’s Property to the Co-Location Facility as determined by Provider, Provider shall provide the Services (as defined below). For purposes of the Agreement, “Services” shall include installing, hosting, maintaining and repairing Owner’s Property, and providing the networking interconnectivity, electricity and associated facilities and staffing necessary to allow the Owner’s Property to operate to mine such cryptocurrency as Owner’s Property is capable to mine and as Owner may direct from time to time in the manner set forth below. Owner is undertaking the task of cryptocurrency mining on Owner’s own behalf only, at Owner’s own risk and for Owner’s own benefits. Owner acknowledges that Owner must make significant choices outside the scope of its arrangements with Provider that will determine the profitability of Owner’s decision to undertake the task of cryptocurrency mining (“Owner’s Choices”) including but not limited to deciding whether or not to mine cryptocurrencies with Owner’s Property through Owner’s own means, whether or not to use the Services or to accomplish the tasks that constitute the Services with another provider, what type of cryptocurrency mining equipment to purchase, what cryptocurrency to mine, whether or what mining pool to use, when, where, how, and to whom to sell any mined cryptocurrency, and whether or not to convert any mined cryptocurrency to another cryptocurrency or to fiat currency and how to effect such conversion. Owner understands that some of Owner’s Choices may be limited by the software of Provider and/or Owner’s Property and/or other factors. However, Owner may communicate to Provider Owner’s desire, if any, to make a decision regarding any of Owner’s Choices that is not readily available under Provider’s current interface. In such case, Provider will inform Owner if it will change its interface or otherwise accommodate Owner’s choice. Afterwards, Owner may either give Provider a reasonable time to accommodate Owner accordingly or make the decision to not engage the Services or to engage the General Termination Rights (as defined below), as the case may be. Owner must conduct Owner’s own research when making a decision regarding Owner’s Choices and any communication with Provider regarding any of Owner’s Choices is a matter of noting options or providing opinion and not a recommendation.

 

To initiate the Services hereunder, in addition to providing to Provider at the initial Co-Location Facility(ies) Owner’s Property, Owner shall make a payment to Provider of the amounts indicated as then due in the Agreement Terms and/or pursuant to these Standard Terms.

 

Owner may make one or more Advance Payments in order to enhance the priority in Provider’s queue for Rig co-location availability. Nonetheless, Provider always has full and absolute discretion as to the order in which it adds Owner’s to Provider’s co-location arrangements. Advance Payments also help enable Provider to plan for and make economic arrangements in preparation for acquiring prospective Owner’s Property and arranging for the infrastructure required to co-locate such prospective Owner’s Property. Notwithstanding this, and notwithstanding anything to the contrary in any agreement or communication from or with Provider and Provider shall not be required to segregate and is not required to segregate and does not hold in trust or in any sort of fiduciary manner any Advance Payments, all of which are general trade obligations of Provider the proceeds of which may be used for any enterprise purpose.

 

The cryptocurrency mined by the Owner’s Property for the benefit of Owner will be deposited directly into wallet(s) indicated by Owner as set forth in the Agreement Terms or as otherwise communicated to Provider by Owner in accordance herewith (collectively, “Owner’s Digital Currency Wallet”). Cryptocurrency mined during other times will be deposited into such wallet(s) as Provider may choose. Provider does not operate Owner’s Digital Currency Wallet. Owner is solely responsible for maintaining and controlling Owner’s Digital Currency Wallet. For the avoidance of doubt, Provider’s only obligation in respect of Owner’s Digital Currency Wallet is to undertake reasonable efforts to program Owner’s Property to deposit cryptocurrency mined by Owner’s Property into Owner’s Digital Currency Wallet as provided herein and Provider has no liability for any failure of the mined currency to be received into any Owner’s Digital Currency Wallet or any operation of, failure of, or attack upon Owner’s Digital Currency Wallet.

 

Owner acknowledges and agrees that the arrangements in respect of Owner’s Property and the Services are not an investment contract or any other type of security under the United States securities laws. As such, Owner acknowledges and agrees that Owner is not entitled to the protections afforded those transacting in securities under such securities laws. Because the Services may entail financial risks on both Owner and Provider, Provider may at any time require Owner and each of its owners shall sign the Provider’s then applicable form of Acknowledgement and Acceptance Agreement.

 

Owner shall not use Owner’s Property, the Services or the content or information delivered through the Services to conduct any business or activity or solicit the performance of any activity for any illegal, fraudulent, unauthorized or improper purposes. Owner shall comply with all applicable constitutions, laws, ordinances, principles of common law, codes, regulations, statutes or treaties and all applicable orders, rulings, instructions, requirements, directives or requests of any courts, regulators or other governmental authorities in connection with Owner’s Property and Owner’s use of the Services. Owner agrees that Owner shall not attempt to: (a) access any software or part of the Services without consent from Provider; (b) access the Owner’s Property without notice to Provider; or (c) interfere in any manner with the provision of the Services or Provider’s software, or otherwise abuse the Services or Provider’s software. Notwithstanding the foregoing, Owner is entitled to physical access to view the Owner’s Property with reasonable notice to Provider and return of Owner’s Property as set forth herein.

 

The Agreement does not transfer to Owner any ownership or proprietary rights in the Technology (as defined below) or any work or any part thereof, and all right, title and interest in and to the Technology will remain solely with Provider. Owner is not purchasing title to any Technology. Owner is permitted to use Technology to the extent and for the sole purposes of enabling Owner to benefit from the Services in the manner permitted by the Agreement. Owner’s rights under the Agreement are not transferable to any other person absent Provider’s prior express written consent. Owner shall not in any manner duplicate the Technology or use the Technology independently other than as set forth above, and Provider grants no license, whether express or implied, in any copyright, patent or any other intellectual property rights embodied in the Technology. For purposes of the Agreement, “Technology” shall mean the computer programs Provider uses, literary works, audiovisual works, all other original works of expression, methods, apparati and processes that Provider publishes, distributes, uses or otherwise exploits to facilitate Owner’s use of the Services, and includes without limitation any software, software tools, user interface designs, and any derivatives, improvements, enhancements or extensions thereof developed or provided by Provider and used in the provision of the Services.

 

The decision of which cryptocurrency to mine or pool to mine with is solely Owner’s responsibility. It is Owner’s responsibility to research and track the results and behavior of any pools in which Owner’s Property may participate. Owner absolves Provider of any responsivity for the terms or behavior of any pools or their administrators. Owner knows and acknowledges that there may be theoretical or practical competition between Owner and Provider respecting cryptocurrency mining and cryptocurrency holding and trading. Owner hereby waives any and all potential and existing conflict of interest that Provider may have in providing Services pursuant to the Agreement or otherwise.

 

By making any Advance Payment and/or accepting the Services Owner agrees to the entirety of these Standard Terms and hereby represents and warrants to Provider as follows:

 

(a) Owner is a person with capacity and full legal right or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Agreement and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Agreement and performance by Owner have been duly authorized by Owner. The Agreement constitutes the valid and legally binding obligation of Owner, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b) Owner is a sophisticated investor and is able to bear the economic risk associated with cryptocurrency mining. Owner has prior investment experience, and has read and evaluated, or has employed the services of an investment advisor, attorney or accountant to research, read and evaluate, the opportunity of becoming a miner of cryptocurrencies and has investigated for Owner’s benefit all of the information, materials and relevant documents applicable to the risks and benefits of acquiring mining equipment and mining and hodling cryptocurrencies. Owner’s overall commitment to Owner’s investments in the mining equipment, are not disproportionate to Owner’s net worth, and no such investment will cause such overall commitment to become excessive. Owner has adequate means of providing for Owner’s current needs and personal and family contingencies and has no need for liquidity in Owner’s investment in the cryptocurrency mining equipment. Owner is financially able to bear the economic risk of becoming a cryptocurrency miner, including bearing losses should the results of mining not recoup its costs.

 

(c) Owner acknowledges receipt and careful review of the Agreement, including the Considerations, these Standard Terms, and the Agreement Terms, and has been furnished with all information regarding the Provider hosting Owner’s Property which Owner has requested or desires to know; and Owner has been afforded the opportunity to ask questions of and receive answers concerning the terms and conditions of the such hosting arrangements and any additional information which the Individual has requested.

 

(d) Owner acknowledges that cryptocurrency mining, holding and transacting may involve tax consequences to Owner and that the Provider has proffered no tax advice to Owner which may be relied upon. Owner acknowledges that Owner must retain Owner’s own professional advisors to evaluate the tax and other legal implications of cryptocurrency mining, holding and transacting.

 

PROVIDER MAKES NO WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE SERVICES OR THE OWNER’S PROPERTY, AND PROVIDER EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR NEED, ACCURACY, NON-INFRINGEMENT OF THIRD PARTY RIGHTS AND TITLE, AND ALL WARRANTIES THAT MAY ARISE FROM COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE OF TRADE. NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE CONTRARY. WHILE PROVIDER SHALL IMPLEMENT AND USE COMMERCIALLY REASONABLE PRACTICES TO IDENTIFY, SCREEN AND PREVENT THE INTRODUCTION OF, AND SHALL NOT KNOWINGLY INTRODUCE ANY, VIRUSES, TROJAN HORSES, WORMS, SPYWARE, BACK DOORS, EMAIL BOMBS, MALICIOUS CODE OR SIMILAR ITEMS (COLLECTIVELY, “MALWARE”) INTO OR THROUGH OWNER’S PROPERTY, PROVIDER MAKES NO REPRESENTATION OF WARRANTY THAT MALWARE WILL NOT INFECT OR AFFECT OWNER’S PROPERTY AND PROVIDER SHALL HAVE NO LIABILITY IN RESPECT OF ANY MALWARE, INCLUDING LIABILITY BASED UPON PROVIDERS NEGLIGENCE, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

 

IN NO EVENT SHALL PROVIDER BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE, OR ENHANCED DAMAGES, LOST PROFITS OR REVENUES OR DIMINUTION IN VALUE, ARISING OUT OF, OR RELATING TO, OR IN CONNECTION WITH THE AGREEMENT, REGARDLESS OF (A) WHETHER SUCH DAMAGES WERE FORESEEABLE, (B) WHETHER OR NOT PROVIDER WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, (C) THE LEGAL OR EQUITABLE THEORY (CONTRACT, TORT OR OTHERWISE) UPON WHICH THE CLAIM IS BASED, AND (D) THE FAILURE OF ANY AGREED OR OTHER REMEDY OF ITS ESSENTIAL PURPOSE.

 

IN NO EVENT SHALL PROVIDER’S AGGREGATE LIABILITY ARISING OUT OF OR RELATED TO THE AGREEMENT, WHETHER ARISING OUT OF OR RELATED TO BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OR OTHERWISE, EXCEED THE AGGREGATE AMOUNTS PAID TO PROVIDER FOR THE SERVICES PROVIDED HEREUNDER OR $10,000, WHICHEVER IS LESSER.

 

Owner is in compliance with and shall comply with all applicable laws, regulations, and ordinances.

 

Owner shall indemnify, defend and hold harmless Provider and its owners and their respective officers, directors, employees, agents, affiliates, successors and permitted assigns (collectively, “Indemnified Party”) against any and all losses, damages, liabilities, deficiencies, claims, actions, judgments, settlements, interests, awards, penalties, fines, costs, or expenses of whatever kind, including reasonable attorneys’ fees, fees and the costs of enforcing any right to indemnification under the Agreement and the cost of pursuing any insurance providers, incurred by Indemnified Party relating to any claim of a third party or Provider arising out of or occurring in connection with the provision of the Services from Provider to Owner or Owner’s negligence, willful misconduct or material breach of the Agreement. Owner shall not enter into any settlement without Provider’s or Indemnified Party’s prior written consent.

 

The term of the Services for any item of Owner Property that conducts Mining Operations (as defined below) shall commence on the first date of Mining Operations that Provider gives notice to Owner that such portion of Owner’s Property is installed at Provider’s applicable co-location facility and shall continue for the Minimum Term, as provided in the Agreement Terms or, if not set forth in any Agreement Terms, one year from the first date of Mining Operations with any such item of Owner’s Property. Upon the expiration of the preceding term the Services shall be renewed for the same period, and for successive terms thereafter, unless either Party gives written notice at least fifteen (15) days before the end of the then applicable period of Services. Such initial term with any such successive periods referred to herein as the “Term.” The Services may be terminated before the end of the Term in accordance with the below provisions. Provider shall give notice to Owner of such first date of Mining Operations in respect of such item(s). For clarity, it is understood that over time Owner may add additional graphics cards or other computing items that may mine cryptocurrency in addition to existing Owner’s Property and the Term of Services applies to each such item. “Mining Operations” means the installation and operation of Owner’s Property to mine cryptocurrency.

 

The Services may be terminated at any time prior to the expiration of the Term (the “General Termination Rights”): (1) by mutual written agreement of Owner and Provider; or (2) upon material breach of the Agreement by the non-breaching Party, after the non-breaching Party gives notice to the breaching Party and the breaching Party fails to cure the breach within ten (10) business days after such notice; or (3) on at least fifteen (15) days’ prior written notice by either Party to the other Party specifying the date of termination not more than thirty (30) days after the date of such notice; or (4) by Owner upon notice as provided above after Provider gives notice of a reduction of Owner’s Mining Period.

 

Any termination of Services will be for good cause (“Good Cause”) if: Owner has repeatedly attempted to direct the activities of Provider that encompass the Services; or Owner threatens breach of these Standard Terms, the Agreement or any other agreement entered into by Owner or its owners or their respective affiliates in connection herewith; or Owner threatens litigation.

 

Upon any early termination by Owner or by Provider for Good Cause or for Owner’s breach of any agreement with Provider (a termination before the expiration of the Term therefor), Owner shall pay all due and owing fees and the remaining Owner’s Monthly Fees under the Term up to a maximum of 4 months’ worth, and compensate Provider with Dollars equal to the highest value of cryptocurrency mined in any month on each item of Owner’s Property on behalf of Provider multiplied by the number of months, and portions thereof, remaining in the Term for such item as reasonably determined by Provider. Whenever the Services are terminated, whether on expiration of the Term or earlier termination and whether or not for Good Cause, Owner shall pay the Owner Property uninstall fee set forth in the Agreement Terms, if any, plus the costs of one-week shipping of Owner’s Property to Owner, as reasonably determined by Provider. Until Owner provides any above-provider payments, after any termination, Provider shall retain all of Owner’s Property and Provider may mine cryptocurrency with such Owner’s Property entirely for Provider’s own behalf in its sole discretion.

 

Upon any failure of Owner to pay any fees to Provider, Provider may immediately cease all mining with such Owner’s Property for Owner’s benefit and may mine cryptocurrency with such Owner’s Property entirely for Provider’s own behalf in its sole discretion until all such fees are fully paid. Mining proceeds during such period shall be entirely for the benefit of Provider and Provider may credit but is not obligated to credit such mining proceeds to amounts owed Provider by Owner. Furthermore, Owner grants Provider a security interest in Owner’s right, title and interest, now existing and hereinafter arising, in all of Owner’s Equipment and any other rights to payment arising out of this Agreement. This security interest shall secure the payment of Owner’s obligations under this Agreement, including any obligations to pay any fees to Provider under this Agreement and the payment and performance of all other liabilities and obligations of Owner to Provider of every kind and description, direct or indirect, absolute or contingent, due or to become due, and now existing or hereafter arising. Owner appoints Provider as Owner’s attorney-in-fact to file such financing statements, amendments and any other instruments related to this Agreement without further consent of Owner.

 

Owner may avoid the payment of shipping costs set forth above if it notifies Provider in writing that it wishes to abandon the Owner’s Property in which case Provider may nonetheless ship the Owner’s Property to Owner at Provider’s expense or dispose of the Owner’s Property in Provider’s sole discretion. In this case Provider may sign documents to transfer or dispose of the Owner’s Property on behalf of Owner as Owner’s agent or attorney-in-fact and Owner shall indemnify and hold Provider harmless from all claims and consequences of so acting.

 

Notwithstanding anything to the contrary herein, the indemnification, termination, confidentiality and payment obligations hereunder, and under the Agreement Terms, the Acknowledgement and Acceptance Agreement, and other written agreements applicable to the Services (including any early termination payment or Owner Property uninstall fee or shipping expenses) shall survive the termination and expiration of the Agreement.

 

Upon the expiration of the Term or early termination as provided herein, and the making of any required payment by Owner, Provider shall immediately cease the operation of the Owner’s Property for Owner’s benefit and commence uninstallation and disconnection of the Owner’s Property from the internet network and electrical power. If Owner’s wrongful activity or violations of these Standard Terms or the Agreement entitle or potentially entitle Provider to damages or Owner otherwise has unpaid obligations or potential obligations to Provider at the time of termination, then Provider is permitted to retain and sell any of Owner’s Property necessary as a setoff against those damages and other obligations.

 

All non-public, confidential or proprietary information of Provider, including, but not limited to, specifications, samples, patterns, designs, plans, drawings, documents, data, business operations, customer lists, pricing, discounts or rebates, disclosed by Provider to Owner, whether disclosed orally or disclosed or accessed in written, electronic or other form or media, and whether or not marked, designated or otherwise identified as “Confidential,” in connection with the Services is confidential, solely for the use of performing the Services and may not be disclosed or copied unless authorized by Provider in advance in writing. Upon Provider’s request, Owner shall promptly return all documents and other materials received from Provider. Provider shall be entitled to injunctive relief for any violation of this paragraph. This first sentence of this paragraph shall not apply to information that is: (a) in the public domain; (b) known to the Owner at the time of disclosure; or (c) rightfully obtained by the Owner on a non-confidential basis from a third party. Owner may not use Provider’s name, trademarks, brands, patents, other types of intellectual property or Confidential Information.

 

These Standard Terms and the other documentation that comprises the Agreement, including and together with any related exhibits, schedules, attachments and appendices, constitutes the sole and entire agreement of the Parties with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, regarding such subject matter.

 

All notices, requests, consents, claims, demands, waivers and other communications under the Agreement must be in writing and to the other Party at its email address or address that the receiving Party may designate from time to time under the Agreement. Unless otherwise agreed, all notices may be delivered by personal delivery, nationally recognized overnight courier, certified or registered mail, or email. Except as otherwise provided in the Agreement, a notice is effective only (a) on receipt by the receiving Party, and (b) if the Party giving the notice has complied with the applicable notice requirements.

 

If any term or provision of the Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of the Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon a determination that any term or provision is invalid, illegal or unenforceable, the Parties shall negotiate in good faith to modify the Agreement to effect the original mutual intent of the Parties as reflected in the documents comprising the Agreement closely as possible in order that the transactions contemplated thereby be consummated as so originally contemplated to the greatest extent possible.

 

No amendment to or modification of or rescission, termination or discharge of the Agreement is effective unless it is in writing and signed by each Party except as otherwise set forth in the Agreement.

 

No waiver by any party of any of the provisions of the Agreement shall be effective unless explicitly set forth in writing and signed by the Party so waiving. Further, no extension of the Owner’s Property to mine Cryptocurrency beyond Owner’s Mining Period shall be deemed to create any precedent to provide for any such extension in the future. Except as otherwise set forth in the Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from the Agreement shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

All rights and remedies provided in the Agreement are cumulative and not exclusive, and the exercise by either Party of any right or remedy does not preclude the exercise of any other rights or remedies that may now or subsequently be available at law, in equity, by statute, in any other agreement between the Parties or otherwise.

 

Owner shall not assign, transfer, delegate or subcontract any of its rights or obligations under the Agreement without the prior written consent of Provider. Provider may at any time assign, transfer, delegate or subcontract any or all of its rights or obligations under the Agreement. Any purported assignment, transfer, delegation or subcontract in violation of this paragraph shall be null and void. No assignment, transfer, delegation or subcontract shall relieve Owner of any of its obligations hereunder.

 

The Agreement is binding on and solely inures to the benefit of the Parties to the Agreement and their respective permitted successors and assigns and nothing in the Agreement, express or implied, confers on any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of the Agreement.

 

The Agreement, including all exhibits, schedules, attachments and appendices attached to the Agreement and thereto, and all matters arising out of or relating to the Agreement, are governed by, and construed in accordance with, the laws of the State of Texas, United States of America, without regard to the conflict of laws provisions thereof to the extent such principles or rules would require or permit the application of the laws of any jurisdiction other than those of the State of Texas. Each Party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Travis County, Texas for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein to the extent not subject to binding arbitration as provided below, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each Party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such Party at the address in effect for notices to it under the Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either Party shall commence an action, suit or proceeding (including an arbitration, as provided below) to enforce any provisions of the Agreement, the prevailing Party in such action, suit or proceeding shall be reimbursed by the other Party for its reasonable attorneys’ fees and other costs and expenses incurred in connection with the investigation, preparation and prosecution of such action or proceeding unless the Parties have a specific arrangement in that regard in a settlement thereof.

 

Any controversy or claim arising out of or relating to the Agreement, or the breach thereof, shall be determined by final and binding arbitration administered by the American Arbitration Association (“AAA”) under its Commercial Arbitration Rules and Mediation Procedures (“Commercial Rules”).

 

(a) The award rendered by the arbitrator shall be final, non-reviewable, non-appealable and binding on the Parties and may be entered and enforced in any court having jurisdiction. Judgment on the award shall be final and non-appealable.

 

(b) There shall be one arbitrator agreed to by the Parties within twenty (20) days of receipt by respondent of the request for arbitration or in default thereof appointed by the AAA in accordance with its Commercial Rules.

 

(c) The seat or place of arbitration shall be Austin, Texas. The arbitration shall be conducted and the award shall be rendered in the English language.

 

(d) The arbitrator will have no authority to award punitive damages, consequential damages, or compensatory damages, collectively, exceeding the aggregate amount of payments made by the Owner under the Agreement.

 

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THE AGREEMENT, INCLUDING EXHIBITS, SCHEDULES, ATTACHMENTS AND APPENDICES ATTACHED TO THE AGREEMENT, IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THE AGREEMENT, INCLUDING ANY EXHIBITS, SCHEDULES, ATTACHMENTS OR APPENDICES ATTACHED TO THE AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

The Agreement Terms or any other document within the Agreement that is to be separately signed may be executed in counterparts, each of which is deemed an original, but all of which together are deemed to be one and the same agreement. A signed copy of any such document delivered by facsimile, email or other means of electronic transmission is deemed to have the same legal effect as delivery of an original signed copy of such document.

 

Any delay or failure of Provider to perform its obligations under the Agreement will be excused to the extent that the delay or failure was caused directly by an event beyond such Party’s control, without such Party’s fault or negligence and that by its nature could not have been foreseen by such Party or, if it could have been foreseen, was unavoidable (which events may include natural disasters, embargoes, explosions, riots, wars, acts of terrorism, strikes, labor stoppages or slowdowns or other industrial disturbances, and shortage of adequate power or transportation facilities), any such event referred to as “Force Majeure Event.

 


 

CRYPTOCURRENCY MINING CONSIDERATIONS

 

The following is a list of matters one is advised to consider when undertaking mining of cryptocurrencies. The list does not purport to be a complete enumeration or explanation of the considerations involved and it is your responsibility to fully investigate the pros and cons of cryptocurrency mining.

 

There are substantial risks to be aware of when mining and holding cryptocurrencies, including:

 

A cryptocurrency wallet could be lost by locking yourself out by forgetting your password (e.g., your “private key”), accidentally or intentionally revealing your password to a bad actor who empties your wallet, or by physically losing the wallet via a broken hard drive or if your online wallet provider goes out of business.

 

It is possible that a talented hacker can break into any entry point into the cryptocurrency ecosystem and redirect or abscond with a party’s cryptocurrency. For instance, a hacker can break into a wallet or a mining pool and empty any of the users’ wallets or hack into Provider’s website or other similar environment and change the wallet address listed for you such that existing or newly mined cryptocurrency is forwarded to the hacker’s wallet. In addition, it is possible for cryptocurrency-mining malware to infect mining machines. Such malware steals the resources of infected machines, significantly affecting their performance and increasing their wear and tear and could involve other costs, like increased power consumption.

 

Cryptocurrencies are subject to significant price fluctuation and may drop in value and any anticipated profits from mining such cryptocurrencies or the recovery of your initial investment could be lost. The price (cryptocurrency exchange rates) of any cryptocurrency may fall sharply and may even fall to zero.

 

Substantially because of cryptocurrencies being either unregulated, difficult to regulate or there being uncertainties as to how regulation will be applied to them, and because of their fully or partially decentralized nature, their value is not insured by any legal entities. The value of any amount of any cryptocurrency is subject to change due to many factors out of a miner’s control. These factors include but are not limited to changes of mining difficulty and/or other mining parameters/properties, fluctuating cryptocurrency exchange rates, obsolescence of hardware and amortization of hardware. The value of any amount of mined cryptocurrency may lose any amount, up to all its worth, at any moment of time due to the nature of cryptocurrencies.

 

It is possible that a competing cryptocurrency becomes more successful than the cryptocurrency that a miner chooses to mine or that somebody somehow finds a major flaw in the system or protocol that is the basis of the mined cryptocurrency. These would likely have a negative effect on the value of the affected mined cryptocurrency.

 

It is possible that a particular cryptocurrency will be forked which would require you to follow the appropriate procedure to maintain the full value of such cryptocurrency and its forked cryptocurrency.

 

Mining pools are commonly used to smooth out the acquisition rate of cryptocurrencies and improve mining efficiency. The operators of mining pools charge a fee for their use and it is difficult or impossible to verify that the actual fee charged is consistent with the amount of the fee that is disclosed. It is also difficult or impossible to determine the effect of using a pool will have on mining efficiency; for example, mining efficiency can be affected by the miner’s physical proximity to the physical location of the pool.

 

It is also possible for mining pools to experience periods where they are not operational for example, due to DDoS attacks, or a pool’s decision to stop supporting a particular cryptocurrency or to go out of business for any period of time or entirely. During such period participants in the pool will not be able to mine cryptocurrency using that pool.

 

It is also possible that particular mining pool may be or become incompatible with CryptoGultch’s software. In this case a miner will be required to change the miner’s pool or mining choices in order to further mine cryptocurrency. These circumstances or any delay in adjusting to them would be materially adverse to a miner.

 

It is also possible for the operators of mining pools to refuse to distribute cryptocurrency in their possession to you in contravention of your agreement with them.

 

It is possible that the hardware or software used for mining may be or become defective or damaged, halting or limiting mining.

 

Cryptocurrencies are sometimes used or exploited in ways that are prohibited by the laws or regulations. Failure to comply with laws affecting cryptocurrencies may result in civil or criminal penalties, including large fines and monetary liability and jail time.

 

Transactions with cryptocurrencies may be unconfirmed for a period of time. Some cryptocurrency transactions may never be confirmed. Cryptocurrency transactions which are unconfirmed are not completed. In this case the party attempting to affect the transaction will not gain the intended benefit of that transaction.

 

Transactions with cryptocurrencies are generally irreversible – if you send any amount of any cryptocurrency to the wrong person, for example, you may be unable to recover those funds.

 

It is possible for bad actors to manipulate you using social engineering or otherwise into transferring cryptocurrency or information that could compromise your cryptocurrency.

 

Entering an erroneous wallet address can also result in the irreversible loss of cryptocurrency, which can occur from a mere typographical error up to a malicious interference, in which case any cryptocurrency mined during that period of time would be irreversibly lost.

 

Unknown technical defects inherent in cryptocurrencies may exist.

 

New regulation or unexpected and aggressive application of existing regulation have been and are likely to continue to be applied to cryptocurrencies which can negatively impact cryptocurrencies and their value.

 

The loss or destruction of a private key required to access a cryptocurrency may be irreversible. Any loss of access to your private keys or any data loss relating to your cryptocurrencies could have a material adverse effect on you. Cryptocurrencies are controllable only by the possessor of both the unique public key and private key relating to the local or online digital wallet in which the cryptocurrencies are held. Any loss of private keys relating to digital wallets used to store your cryptocurrencies could have a material adverse effect on you.

 

The further development and acceptance of the cryptocurrency network, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of the cryptocurrency network would have an adverse material effect on our business.

 

Cryptocurrencies may be used, among other things, to buy and sell goods and services; they are a new and rapidly evolving industry of which the bitcoin network is a prominent, but not unique, part. The growth of the cryptocurrency industry in general, and the bitcoin network in particular, is subject to a high degree of uncertainty. The factors affecting the further development of the cryptocurrency industry, as well as the bitcoin network and other cryptocurrency networks, include, without limitation:

 

·         continued worldwide growth in the adoption and use of cryptocurrencies;

 

·         government and quasi-government regulation of cryptocurrencies and their use, or restrictions on or regulation of access to and operation of the bitcoin network or similar cryptocurrencies systems;

 

·         the maintenance and development of the open-source software protocol of cryptocurrencies systems;

 

·         changes in consumer demographics and public tastes and preferences;

 

·         the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using digital or fiat currencies; and

 

·         general economic conditions and the regulatory environment relating to cryptocurrencies.

 

A decline in the popularity or acceptance of the bitcoin network or similar cryptocurrencies systems would adversely affect a cryptocurrency miner’s business.

 

The price of cryptocurrency is extremely volatile. Fluctuations in the price of cryptocurrencies could materially and adversely affect a miner’s business.

 

The price of cryptocurrency is a significant uncertainty for a miner’s business. The price of cryptocurrencies is subject to dramatic fluctuations. Using an exponential moving average and volume weighting of transaction data, the price of cryptocurrency is quoted by several publicly-available indexes, including the Coindesk price index, which derives from the transaction prices on electronic market places where exchange participants may use fiat currency to trade, buy and sell cryptocurrencies based on bid-ask trading (“Cryptocurrency Exchange”). Though the methodology may change in the future, these indexes use US Dollar-denominated trading data from qualified Cryptocurrency Exchanges with high trading volume in cryptocurrencies. The price of cryptocurrencies (the “Spot Price”) has fluctuated widely over the past several years. Several factors may affect index spot price, including, but not limited to:

 

·         Global cryptocurrency supply;

 

·         Global cryptocurrency demand, which is influenced by the growth of retail merchants’ and commercial businesses’ acceptance of cryptocurrencies as payment for goods and services;

 

·         The ability to trade and convert cryptocurrency, which may require reliable online Cryptocurrency Exchanges, which are affected by their regulation, the willingness of governments to permit their ability to operate, their ability to connect to the global financial system and their security, among other things;

 

·         The usefulness and security of holding cryptocurrency in digital wallets and through other means, the perception that the use and holding of cryptocurrencies is safe and secure, and the lack of regulatory restrictions on their use;

 

·         Investors’ expectations with respect to the rate of inflation;

 

·         Interest rates;

 

·         Currency exchange rates, including the rates at which cryptocurrencies may be exchanged for fiat currencies;

 

·         Fiat currency withdrawal and deposit policies of Cryptocurrency Exchanges and liquidity on such Cryptocurrency Exchanges;

 

·         Interruptions in service from or failures of major Cryptocurrency Exchanges;

 

·         Investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in cryptocurrencies;

 

·         Monetary policies of governments, trade restrictions, currency devaluations and revaluations;

 

·         Regulatory measures, if any, that affect the use of cryptocurrencies as a form of payment or the purchase of cryptocurrencies on the Cryptocurrency Market;

 

·         The maintenance and development of the open-source software protocol of the cryptocurrency network;

 

·         Global or regional political, economic or financial events and situations; and

 

·         Expectations among cryptocurrency economy participants that the value of cryptocurrencies will soon change.

 

Currently, it is believed there is a relatively limited use of cryptocurrencies in the retail and commercial marketplace in comparison to relatively extensive use by speculators, which contribute to price volatility that could adversely affect a miner’s business.

 

Cryptocurrencies and the cryptocurrency network have only recently begun to be accepted as a means of payment for goods and services by many major retail and commercial outlets, and use of cryptocurrencies by consumers to pay such retail and commercial outlets remains limited. Further, some of these retail and commercial outlets have ceased acceptance of cryptocurrencies. Conversely, a significant portion of cryptocurrency demand is generated by speculators and investors seeking to profit from the short-term or long-term holding of cryptocurrencies. A lack of expansion by cryptocurrencies into retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in the Spot Price, either of which could adversely impact our business.

 

Many cryptocurrencies, such as bitcoin, have core developers (“Core Developers”), individuals willing to take on the responsibilities of the cryptocurrencies’ software updates and bug fixes, timely code releases, answering questions from users and developers, and generally setting a vision for the cryptocurrency. The Core Developers or other programmers could propose amendments to the cryptocurrency network’s protocols and software that, if accepted and authorized by the cryptocurrency network’s community, could adversely affect a miner’s business.

 

Cryptocurrency networks are based on math-based protocols that govern the peer-to-peer interactions between computers connected to the cryptocurrency network. The code that sets forth the protocol is often informally managed by a group of Core Developers. The members of the Core Developers may evolve over time, largely based on self-determined participation in the resource section dedicated to cryptocurrency on Github.com. In many cryptocurrency networks Core Developers can propose amendments to the network’s source code through one or more software upgrades that alter the protocols and software that govern the cryptocurrency network and the properties of cryptocurrencies, including the irreversibility of transactions and limitations on the mining of new cryptocurrencies. To the extent that a significant majority of the users and miners on the cryptocurrency network install such software upgrade(s), the cryptocurrency network would be subject to new protocols and software that may adversely affect a miner’s business.

 

The open-source structure of the many cryptocurrency network protocols means that their Core Developers and other contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol. A failure to properly monitor and upgrade the protocol could damage the cryptocurrency network, which may harm a miner’s business.

 

Cryptocurrency network protocols that are open source are not licensed or sold and its use does not generate revenues for its development team, and, as such, the Core Developers are generally not compensated for maintaining and updating those cryptocurrency networks’ protocols. To the extent that material issues arise with the network protocol, and the Core Developers and open-source contributor community are unable to address the issues adequately or in a timely manner, the network and a miner’s business may be adversely affected.

 

If a malicious actor or botnet obtains control in excess of 50 percent of the processing power active on a distributed cryptocurrency network, it is possible that such actor or botnet could manipulate the distributed ledger (blockchain) and its protocol in a manner that adversely affects a miner’s business and its ability to operate our business as planned.

 

If a malicious actor, a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers referred to as a botnet obtains a majority of the processing power dedicated to mining on a distributed cryptocurrency network, it may be able to alter the distributed ledger (blockchain) and its protocol on which the network and all the related cryptocurrency transactions rely by constructing alternate records (blocks). In such alternate blocks, the malicious actor or botnet could control, exclude or modify transaction information. Using alternate blocks, the malicious actor could “double-spend” its own cryptocurrencies (i.e., spend the same cryptocurrencies in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintains control. To the extent that such malicious actor or botnet does not yield its majority control of the processing power on a distributed cryptocurrency network or the related community does not reject the fraudulent blocks as malicious, reversing any changes made to the blockchain may not be possible. Such changes could adversely affect a miner’s business or the ability of a miner’s business to operate.

 

The award of cryptocurrencies for maintaining the cryptocurrency’s distributed ledger (solving blocks) and transaction fees for recording transactions may diminish, thereby diminishing a miner’s profits. Further, if these amounts are not sufficiently high to incentivize other miners, miners may cease expending processing power to solve blocks and confirmations of transactions on the blockchain could be slowed. A reduction in the processing power expended by miners on a cryptocurrency network could increase the likelihood of a malicious actor or botnet obtaining control in excess of 50 percent of the processing power active on the cryptocurrency network or the blockchain, potentially permitting such actor or botnet to manipulate the blockchain in a manner that adversely affects a miner’s business or ability to operate.

 

If the award of new cryptocurrencies for solving blocks declines and transaction fees are not sufficiently high, the direct effect on a miner’s business may be material and adverse. Moreover, other miners may not have an adequate incentive to continue mining and may cease their mining operations. Miners ceasing operations would reduce the collective processing power on the cryptocurrency network, which would adversely affect the confirmation process for transactions (i.e., temporarily decreasing the speed at which blocks are added to the blockchain until the next scheduled adjustment in difficulty for block solutions) and make the network more vulnerable to a malicious actor or botnet obtaining control in excess of 50 percent of the processing power on the network. Significant reductions in processing power on the network could result in material delays in block solution confirmation time. Any reduction in confidence in the confirmation process or processing power of the network may adversely impact a miner’s business.

 

As equipment and software improves, as the number of miners increases, and as the difficulty involved in solving a block increases the number of cryptocurrencies awarded for solving a block in the blockchain decreases. As a result, existing technology could become obsolete and Provider and its Services could become obsolete.

 

As the number of cryptocurrencies awarded for solving a block in the blockchain decreases, the incentive for miners to continue to contribute processing power to the network will transition from a set reward to transaction fees. Either the requirement from miners of higher transaction fees in exchange for recording transactions in the blockchain or a software upgrade that automatically charges fees for all transactions may decrease demand for the related cryptocurrencies and prevent the expansion of its network to retail merchants and commercial businesses, resulting in a reduction in the price of cryptocurrencies that could adversely impact a miner’s business.

 

In order to incentivize miners to continue to contribute processing power to a distributed cryptocurrency network, the network may either formally or informally transition from a set reward to transaction fees earned upon processing transactions (or solving for a block). This transition could itself have a material and adverse effect on a miner’s business by lowering the total revenue derivable from mining activities. Whether this process is accomplished either by miners independently electing to record in the blocks they solve only those transactions that include payment of a transaction fee or by the network adopting software upgrades that require the payment of a minimum transaction fee for all transactions, if transaction fees paid for cryptocurrency transactions become too high, the marketplace may be reluctant to accept those cryptocurrencies as a means of payment and existing users may be motivated to switch from such cryptocurrencies to other cryptocurrencies or back to fiat currency. Decreased use and demand for cryptocurrencies may adversely affect their value and result in a reduction in their price and materially and adversely affect a miner’s business.

 

To the extent that any miners cease to record transactions in solved blocks, transactions that do not include the payment of a transaction fee will not be recorded on the blockchain until a block is solved by a miner who does not require the payment of transaction fees. Any widespread delays in the recording of transactions could result in a loss of confidence in the related cryptocurrency network, which could adversely impact a miner’s business.

 

To the extent that any miners cease to record transaction in solved blocks, such transactions will not be recorded on the blockchain. Currently, there are no known incentives for miners to elect to exclude the recording of transactions in solved blocks; however, to the extent that any such incentives arise (e.g., a collective movement among miners or one or more mining pools forcing cryptocurrency users to pay transaction fees as a substitute for or in addition to the award of new cryptocurrencies upon the solving of a block), actions of miners solving a significant number of blocks could delay the recording and confirmation of transactions on the blockchain. Any systemic delays in the recording and confirmation of transactions on the blockchain could result in greater exposure to double-spending transactions and a loss of confidence in the cryptocurrency network, which could adversely impact a miner’s business.

 

Third parties may assert intellectual property claims relating to the holding and transfer of cryptocurrencies and their source code. Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in cryptocurrencies or their networks’ long-term viability or the ability of end-users to hold and transfer cryptocurrencies may adversely affect a miner’s business. Additionally, a meritorious intellectual property claim could prevent end-users from accessing the cryptocurrencies or their networks’ or holding or transferring their cryptocurrencies, which could force miners to cease operations.

 

Exchanges on which cryptocurrencies trade are relatively new and, in most cases, largely unregulated and may therefore be more exposed to fraud and failure than established, regulated exchanges for other products. To the extent that the Cryptocurrency Exchanges representing a substantial portion of the volume in cryptocurrency trading are involved in fraud or experience security failures or other operational issues, such Cryptocurrency Exchanges’ failures may result in a reduction in the Spot Price and can adversely affect a miner’s business.

 

Exchanges on which the cryptocurrencies trade are new and, in most cases, largely unregulated. Furthermore, many Cryptocurrency Exchanges (including several of the most prominent US Dollar denominated Cryptocurrency Exchanges) do not provide the public with significant information regarding their ownership structure, management teams, corporate practices or regulatory compliance. As a result, the marketplace may lose confidence in, or may experience problems relating to, Cryptocurrency Exchanges, including prominent exchanges handling a significant portion of the volume of cryptocurrency trading.

 

Over the past four years, many Cryptocurrency Exchanges have been closed due to fraud, failure or security breaches. In many of these instances, the customers of such Cryptocurrency Exchanges were not compensated or made whole for the partial or complete losses of their account balances in such Cryptocurrency Exchanges. While smaller Cryptocurrency Exchanges are less likely to have the infrastructure and capitalization that make larger Cryptocurrency Exchanges more stable, larger Cryptocurrency Exchanges are more likely to be appealing targets for hackers and “malware” (i.e., software used or programmed by attackers to disrupt computer operation, gather sensitive information or gain access to private computer systems). A lack of stability in the Cryptocurrency Exchange market and the closure or temporary shutdown of Cryptocurrency Exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in cryptocurrencies or their networks’ and result in greater volatility in the Spot Price. These potential consequences of a Cryptocurrency Exchange’s failure could adversely affect a miner’s business.

 

Regulatory changes or actions may alter the nature of the cryptocurrency mining business or restrict the use of cryptocurrencies or the operation of the cryptocurrency networks in a manner that adversely affects a miner’s business.

 

Until recently, little or no regulatory attention has been directed toward cryptocurrencies or their networks by the U.S. federal and state governments, foreign governments and self-regulatory agencies. As cryptocurrencies have grown in popularity and in market size, the Federal Reserve Board, U.S. Congress and certain U.S. agencies, including the Securities and Exchange Commission (the “SEC”), the Commodities Futures Trading Commission (the “CFTC”), the Federal Trade Commission, the Financial Crimes Enforcement Network (“FinCEN”), the Internal Revenue Service (the “IRS”), among others, have begun to examine the operations of cryptocurrencies or their networks’, cryptocurrency users and the Cryptocurrency Exchange market. Local state regulators such as the Texas Securities Commission, the Massachusetts Securities Commission, the California Department of Financial Institutions and the New York State Department of Financial Services have also initiated examinations of cryptocurrencies, the cryptocurrency networks and the regulation thereof. Additionally, a U.S. federal magistrate judge in the U.S. District Court for the Eastern District of Texas has ruled that “Bitcoin is a currency or form of money”, two CFTC commissioners publicly expressed a belief that derivatives based on cryptocurrencies are subject to the same regulation as those based on commodities, the IRS released guidance treating cryptocurrencies as property that is not currency for US federal income tax purposes, and the SEC has issued several reports and statements questioning the legality of many uses of cryptocurrencies, Cryptocurrency Exchanges, wallets and cryptocurrency hedge funds for securities laws purposes, although there is no indication yet whether other courts or federal or state regulators will follow these asset classifications.

 

Cryptocurrencies currently face an uncertain regulatory landscape in not only the United States but also in many foreign jurisdictions such as the European Union, China and Russia. Various foreign jurisdictions have or may, in the near future, adopt laws, regulations or directives that affect the cryptocurrencies and their networks and users, particularly Cryptocurrency Exchanges and service providers that fall within such jurisdictions’ regulatory scope. Such laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptance of cryptocurrencies by users, merchants and service providers outside of the United States and may therefore impede the growth of the cryptocurrency economy.

 

The effect of any future regulatory change or cryptocurrencies is impossible to predict, but such change could be substantial and adverse to our business.