Cipher Mining Inc

Unless the context otherwise requires, references in this Annual Report to the “Company,” “Cipher,” “Cipher Mining,” “we,” “us” or “our” refers to Cipher Mining Inc. and its consolidated subsidiaries, unless otherwise indicated.

Business Overview

We are an emerging technology company that develops and operates industrial scale bitcoin mining data centers. Cipher Mining Inc., through itself and its consolidated subsidiaries, including Cipher Mining Technologies Inc. (“CMTI”), currently operates four bitcoin mining data centers in Texas. We are also developing an additional data center in Winkler County, TX (“Black Pearl” or the “Black Pearl Facility”) for up to 300 MW, and we expect to energize 150 MW in 2025. Bitcoin mining is our principal revenue generating business activity.

Our current intention is to continue to expand our bitcoin mining business by developing additional data centers, expanding capacity at our current data centers, developing our treasury management platform and entering into other arrangements, such as joint ventures, data center hosting agreements, or software licensing arrangements.

Our key mission is to expand and strengthen the Bitcoin network’s critical infrastructure. As of February 29, 2024, we operated approximately 80,000 miners, with an aggregate hashrate capacity of approximately 8.4 exahash per second (“EH/s”), deploying approximately 267 megawatts (“MW”) of electricity, of which we owned approximately 70,000 miners, with an aggregate hashrate capacity of approximately 7.4 EH/s, deploying approximately 236 MW of electricity. For further details on our joint ventures, see “—Business Agreements—Joint Ventures.”

Revenue Structure

Our revenue is primarily derived from mining bitcoin. Specifically, we purchase electrical power and use it to run miners that produce computing power. We contribute the computing power we produce to one or more mining pools verifying transactions on the Bitcoin blockchain in exchange for block rewards and transaction fees. In this way, we produce bitcoin. To the extent that we can produce bitcoin at a cost that is lower than the price of bitcoin, over the long term we expect to generate profits.

Block rewards are rewards paid in bitcoin that are programmed into the Bitcoin software and awarded to a miner, or a group of miners, for solving the cryptographic problem required to create a new block on the Bitcoin blockchain. Block rewards are fixed and the Bitcoin network is designed to reduce them periodically through halving. Most recently, in May 2020, the block reward was reduced from 12.5 to 6.25 bitcoin, and it will halve again, to 3.125 bitcoin, which is estimated to occur in April 2024.

Bitcoin miners also collect transaction fees for each transaction they confirm. Miners validate unconfirmed transactions by adding the previously unconfirmed transactions to new blocks in the blockchain. Miners are not forced to confirm any specific transaction, but they are economically incentivized to confirm valid transactions as a means of collecting fees. Miners have historically accepted relatively low transaction fees, but transaction fees vary and it is difficult to predict what transaction fees will be in the future.

We hold, sell or hedge the bitcoin that we mine as part of our normal treasury management processes. From time to time, we sell some or all of the bitcoin that we have mined to generate US dollars for operating expenses, capital expenditures, or other general corporate purposes. We may conduct those bitcoin sales transactions through OTC providers or exchanges or through one or more custodians. From time to time, we may also hedge a portion of the value of our bitcoin inventory or a portion of the value of our expected forward production. We generally store the majority of our bitcoin in cold storage, unless we transfer it to a trading account to be sold. We primarily use Coinbase Prime as our custodian to store our bitcoin, but also have accounts at Anchorage Digital Bank N.A. and Fidelity Digital Assets Services. We periodically re-evaluate these services and, in the future, we may also decide to use additional or other custodians. See “Risk Factors—Risks Related to Our Business, Industry and Operations—There is a potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof”and“Our limited insurance protection exposes us and our shareholders to the risk of loss of our bitcoin for which no person is liable.”

We use third-party mining pools, including the Foundry USA Pool (“Foundry”) and Luxor Technology Corporation (“Luxor”), to mine bitcoin. This means that we send our computing power, or hashrate, to the mining pool in exchange for a proportionate share of bitcoin mined by the pool. We have no immediate plans to establish our own mining pool. We intend to periodically re-evaluate this as part of our overall strategy going forward and, in the future, we may also decide to stop using mining pools.

We have a portfolio of electrical power that is designed to assist us in profitably mining bitcoin. We purchase a portion of the power in that portfolio at a fixed cost. To the extent that we do not use purchased electrical power to mine bitcoin, we seek to sell that electrical power back to the market. To the extent we can sell such surplus power at a price greater than our cost to purchase it, we expect to generate profits. Other parts of our electrical power portfolio do not have fixed costs, may be sourced from renewable sources, or may be purchased from the electrical grid applicable to the relevant data center. Additionally, from time to time, we may seek to hedge the cost of electrical power at data centers for which we do not have a fixed cost.

Bitcoin and Blockchain

Our business model centers on bitcoin mining.

Bitcoin is the oldest and most commonly used cryptocurrency today. As outlined by the seminal bitcoin whitepaper, Bitcoin: A Peer-to-Peer Electronic Cash System, bitcoin is a form of digital currency, or an “electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.” Bitcoin depends on a consensus-based network and a public ledger, known as a “blockchain,” which contains the record of every bitcoin transaction ever processed. Transactions listed on the Bitcoin blockchain are verified through a process called “mining.”

The miners we operate are highly specialized computer servers built to use application-specific integrated circuit (“ASIC”) chips that are designed specifically to mine bitcoin. These computer servers are referred to as “mining rigs,” “miners,” and “rigs.” With them we produce computing power, known as “hashrate,” with which we verify transactions on the Bitcoin blockchain. Bitcoin “mining” refers to the process of proposing and verifying transaction updates to the Bitcoin blockchain, which helps keep the Bitcoin network and its blockchain secure.

Data Centers

We currently operate four bitcoin mining data centers in Texas, including one wholly-owned data center and three partially-owned data centers that we acquired through investments in joint ventures, and are developing one additional data center.

Odessa Facility

Our largest data center is our Odessa data center (the “Odessa Facility”), which is our wholly-owned 207 MW facility located in Odessa, Texas. The Odessa Facility is an approximately 52 acre site, located next to a natural gas power production facility. We began bitcoin mining operations on this site in November 2022 and completed the buildout of the site in September 2023. As of February 29, 2024, the Odessa Facility is capable of producing approximately 6.4 EH/s through the operation of approximately 60,000 miners. We have developed, and continue to refine, proprietary technology to increase the efficiency of our mining activity and associated curtailment due to changes in local electrical power prices at the Odessa Facility. Our goal is to maximize the time our miners are mining bitcoin at favorable prices and, in contrast, to avoid consuming electrical power when the cost of that power is significantly higher than our anticipated bitcoin mining revenues.

The power at the Odessa Facility is supplied by Luminant ET Services Company LLC (“Luminant”) under a power purchase agreement, pursuant to which we have access, until at least 2027, to an average cost of electricity of approximately 2.7 c/kWh. For further details on our power purchase agreement with Luminant, see “—Business Agreements—Luminant Power Agreement.”

Alborz Facility

Our Alborz data center (the “Alborz Facility”) is located near Happy, Texas and is partially-owned through a joint venture with WindHQ LLC (“WindHQ”). We have a 49% membership interest in Alborz LLC, which owns the Alborz Facility.

We began mining bitcoin at the Alborz Facility in February 2022. In August 2022, we installed the last mining rigs to be delivered to the Alborz Facility. Alborz is currently a 40 MW facility that is not currently connected to the electrical grid. It is powered solely by Falvez Energy’s Astra Wind Project (the “Astra Wind Farm”), owned by an affiliate of WindHQ, next to which it is co-located. The Alborz Facility’s capacity is approximately 1.3 EH/s, of which we own approximately 0.64 EH/s under the WindHQ Joint Venture Agreement.

Because the sole source of electricity for the Alborz Facility is the nearby wind farm, operating the Alborz miners involves frequent adjustments to the hashing power because of changes in the wind. When there is not sufficient wind to generate enough electrical power for our miners, we curtail our mining activity. For certain related risks, see “Risk Factors—Risks Related to Our Business, Industry and Operations—Bitcoin miners and other necessary hardware are subject to malfunction, technological obsolescence and physical degradation.” We have developed, and continue to refine, proprietary technology to increase the efficiency of our mining activity and associated curtailment due to wind conditions at the Alborz Facility.

We may, with our joint venture partner, Wind HQ, seek to connect the Alborz Facility to the local electrical grid, if we are able to secure applicable regulatory approvals on favorable economic terms. There is no assurance that we will be able to secure such approval on acceptable terms, in a timely manner or at all. If we are able to do so, then our dependence on the wind power supplied by the Astra Wind Farm will be lower and, to the extent that we can supplement electrical power from the local grid at favorable cost, we anticipate being able to increasingly avoid curtailment time and increase the time spent mining bitcoin at the Alborz Facility. Separately, we may also have the opportunity to expand the capacity of the Alborz Facility up to 163 MW, subject to applicable regulatory approvals. See “Risk Factors—Risks Related to Our Business, Industry and Operations—Bitcoin miners and other necessary hardware are subject to malfunction, technological obsolescence and physical degradation.”

Bear Facility

Our Bear data center (the “Bear Facility”) is located near Andrews, Texas and is also partially-owned through a joint venture with WindHQ. We have a 49% membership in Bear LLC, which owns the Bear Facility. The Bear Facility is a 10 MW data center that is connected to the local electrical grid. It was completed in October 2022 and is capable of hashing at a rate of up to approximately 0.325 EH/s. Similar to the Odessa Facility, we have developed, and continue to refine, proprietary technology to increase the efficiency of our mining activity and associated curtailment due to changes in local electrical power prices at the Bear Facility. Our goal is to maximize the time our miners are mining bitcoin at favorable prices and, in contrast, to avoid consuming electrical power when the cost of that power is significantly higher than our anticipated bitcoin mining revenues.

The Bear Facility has approval to expand to 40 MW, and the capacity to expand up to 115 MW, subject to applicable regulatory approvals.

Chief Facility

Our Chief data center (the “Chief Facility”) is also located near Andrews, Texas and is also partially-owned through a joint venture with WindHQ. We have a 49% membership interest in Chief Mountain LLC, which owns the Chief Facility. The Chief Facility is a 10 MW data center that is connected to the local electrical grid. It was completed in October 2022 and is capable of hashing at a rate of up to approximately 0.325 EH/s. Similar to the Odessa and Bear Facilities, we have developed, and continue to refine, proprietary technology to increase the efficiency of our mining activity and associated curtailment due to changes in local electrical power prices at the Chief Facility. Our goal is to maximize the time our miners are mining bitcoin at favorable prices and, in contrast, to avoid consuming electrical power when the cost of that power is significantly higher than our anticipated bitcoin mining revenues.

The Chief Facility has approval to expand to 40 MW, and the capacity to expand up to 115 MW, subject to applicable regulatory approvals.

Black Pearl Facility

Our newest facility at which we plan to build a data center is called Black Pearl, which is located in Winkler County, Texas. The Black Pearl Facility has conditional ERCOT interconnection approval of up to 300 MW. We expect to energize 150 MW of the Black Pearl Facility in 2025. With interconnection up to 300 MW, we expect Black Pearl to be the largest of our sites.

In 2025, we anticipate operating approximately 37,396 Antminer T21 miners at the Black Pearl Facility, capable of generating approximately 7.1 EH/s. If we exercise the Bitmain Antminer T21 purchase option and build out the full 300 MW of the Black Pearl Facility’s electrical power capacity, we anticipate such facility will operate approximately 76,946 Antminer T21 miners, capable of generating approximately 14.6 EH/s. For further details on our miners, see “—Business Agreements—Miner Purchases—2023 Purchases.”

Business Agreements

Joint Ventures

On June 10, 2021, we and WindHQ signed a framework agreement for a joint venture for the construction, buildout, deployment and operation of one or more data centers in the United States (the “WindHQ Joint Venture Agreement”). We currently operate three data centers (the Alborz Facility, the Bear Facility, and the Chief Facility) that were built under the WindHQ Joint Venture Agreement, each of which is owned by a separate limited liability company in which WindHQ owns 51% of the membership interests and we own 49% of the membership interests.

WindHQ provides the power to the Alborz Facility, and certain construction and operations support. At the Bear Facility and the Chief Facility, Bear LLC and Chief LLC, respectively, purchase electrical power from a retailer at market prices. We manage each data center to mine bitcoin when the cost of electrical power in the relevant market is such that we think we can mine bitcoin profitably. In contrast, when the cost of electrical power is higher than we think makes it possible for us to profitably mine bitcoin, we curtail our mining operations at the data center. The Bear Facility and the Chief Facility do not currently have fixed price power purchase agreements. Depending on market conditions, we may enter into such agreements, but only if we are able to do so on favorable terms, which we cannot guarantee.

We procured the miners for the data centers and provide certain development and operations support. Under the WindHQ Joint Venture Agreement, WindHQ is required to use commercially reasonable efforts to procure energy for possible additional data centers (“Future Data Centers”) at the most favorable pricing then available. Similarly, we are required to use commercially reasonable efforts to procure the applicable equipment needed for Future Data Centers at the most favorable pricing then available. In the absence of any material breaches by either party, the WindHQ Joint Venture Agreement may only be terminated by mutual written consent of both parties.

On June 23, 2021, we entered into a power purchase agreement with Luminant for the supply of electric power to the Odessa Facility, which was subsequently amended and restated on July 9, 2021, and further amended on February 28, 2022, August 26, 2022 and August 23, 2023 (as amended, the “Luminant Power Agreement”), pursuant to which we have access, until at least 2027, to an average cost of electricity of approximately 2.7 c/kWh. The Luminant Power Agreement provides for a take or pay arrangement, whereby, Luminant will supply, and we are obligated to accept and pay for, a total electrical power capacity equal to at least 66.7% of the full 207 MW capacity each year at a predetermined MWh rate. The agreement also provides for certain curtailment events pursuant to which Luminant has a right to curtail the electrical power delivered in each contractual year.

Subject to certain early termination exceptions, the agreement provides for a subsequent automatic annual renewal, unless either party provides written notice to the other party of its intent to terminate the agreement at least six months prior to the expiration of then current term.

Miner Purchases

The substantial majority of our capital expenditures to date have been devoted to the development and construction of our bitcoin mining data centers and the acquisition of mining hardware. We have purchased miners from Bitmain, SuperAcme, and Canaan.

In January 2024, Bear LLC and Chief Mountain LLC each entered into agreements with Canaan to purchase 8,350 units of the latest generation Avalon A1466 miners for delivery in the second quarter of 2024. Both Bear LLC and Chief Mountain LLC plan to install 8,350 miners, representing an expansion of approximately 30 MW, or approximately 1.25 EH/s at each facility. Payment terms allow Bear LLC and Chief Mountain LLC to deliver up to 30% of the total consideration in the 90 days after delivery.

In December 2023, through our wholly-owned subsidiary Cipher Mining Infrastructure LLC, a Delaware limited liability company, we entered into a Future Sales and Purchase Agreement with Bitmain Technologies Delaware Limited to purchase 37,396 Antminer T21 miners (the “2025 Bitmain Miners”). This purchase represents approximately 7.1 EH/s of self-mining capacity, and we expect the miners to be delivered in one batch in April 2025. Pursuant to this agreement, we also have the option, but not an obligation, to purchase 45,706 additional Antminer T21 miners (the “2024 Optional Bitmain Miners”), which we may exercise in whole or in part, in one or more transactions, in 2024.

The purchase price for the 2025 Bitmain Miners under the agreement is $99,473,360, representing a $14/T unit price (the “2025 Miners Purchase Price”) with (i) 10% of the 2025 Miners Purchase Price paid on December 12, 2023 (ii) 40% of the 2025 Miners Purchase Price due 180 days prior to delivery, and (iii) the remaining 50% of the purchase price due 7 days prior to delivery. The purchase price for the 2024 Optional Bitmain Miners under the agreement is $121,577,960, representing a $14/T unit price (the “2024 Optional Miners Purchase Price”) with (i) 10% of the 2024 Optional Miners Purchase Price paid in December 2023 (ii) 40% of the 2024 Optional Miners Purchase Price of each batch due 180 days prior to each delivery, and (iii) the remaining 50% of the 2024 Optional Miners Purchase Price of each batch due 7 days prior to each delivery.

Separately, under our agreement of October 2023 with Bitmain Technologies Delaware Limited, we purchased approximately 1.2 EH/s worth of Antminer S21 miners, for a total commitment of $24.0 million to be paid in cash and coupons, or $16.8 million in cash after applying coupons (the “Bitmain S21 Agreement”).We expect the miners purchased under this agreement to be shipped in batches between January and June 2024. As of the date of this filing, approximately 1,760 of those miners have been delivered to us in Texas, and we have paid approximately $10.9 million of the total $16.8 million due.

Under our agreement of May 2023 with Canaan, we purchased a total of 11,000 A1346 model mining machines, all of which were delivered by June 2023 and have been installed at the Odessa Facility and we have no further payment obligations under that agreement.

Our Strengths

We believe we have strengths that give us a competitive advantage in the bitcoin mining business, including the following.

Scalable operations with attractive opportunities to deploy additional hashrate

We believe that scale can be a key factor in driving cost and margin improvements in the bitcoin mining business, as well as providing a degree of protection against the price volatility associated with bitcoin. As of February 29, 2024, we have deployed approximately 267 MW of electrical capacity across our four data centers, with a corresponding hashrate of approximately 8.4 EH/s, of which we owned approximately 7.4 EH/s. As further discussed in “—Our Strategy”, we plan to deploy an additional approximately 60 MW for a total of approximately 327 MW of electrical capacity by the end of 2024, and a corresponding hashrate of approximately 11.6 EH/s, of which we expect to own approximately 9.3 EH/s, with the remainder being owned by WindHQ, our JV partner. We also plan to deploy an additional 135 MW of rig capacity in 2025 for approximately an additional 7.1 EH/s in corresponding hashrate at our Black Pearl Facility.

In 2024 and 2025, we plan to expand deployment of electrical capacity at our existing data centers, at our new Black Pearl Facility, and potentially also at new, yet to be secured, sites. We plan to use cash flows that we expect to generate from our operations and potentially additional sources of financing, or joint venture or other arrangements, to fund the required capital expenditures associated with any potential expansion.

Cost leadership with reliable electricity supply and resilient business model with downside protection against drops in bitcoin prices

Our current portfolio of power for our data centers has an average cost that we believe to be among the lowest in the industry. For further details on those arrangements, see “Business—Business Agreements—Luminant Power Agreement.” We have access, until at least 2027, to competitive electricity costs, with an average cost of electricity of approximately 2.7 c/kWh. We believe that we operate one of the most efficient mining rig fleets in the global market by using leading technology and mining equipment to maximize computing power output per MW while attempting to minimize unintentional downtime and repair costs. Additionally, our strategy involves curtailing our mining operations, meaning we turn the miners on and off, for a variety of contractual, economic, weather related, business or other reasons. For further details, see “Risk Factors—Risks Related to Our Business, Industry and Operations—Bitcoin miners and other necessary hardware are subject to malfunction, technological obsolescence and physical degradation.”

The overall hashrate of the Bitcoin network is generally correlated with bitcoin price, and any significant fall in bitcoin price may force high-cost miners to cease their mining activities, which would typically result in a decrease of the network power. Because the number of blocks available to be mined is set by Bitcoin protocol irrespective of the network’s hashrate or bitcoin prices, in periods of low bitcoin prices, low-cost producers may have the opportunity to take the market share of less-efficient participants.

We believe that our controlled power costs, use of leading technology, and reliable operations and maintenance services will provide our mining operations with resilience against drops in bitcoin prices.

Key management’s track record with relevant expertise and capabilities

We have an experienced executive management team with many years of relevant experience and significant industry and technical knowledge. The executive management team has recruited talented employees with experience and expertise in finance, data science, data center construction and operation, power procurement, logistics, and computer science fields. Many of our employees have significant management experience, which complements our business model and talent management philosophy that favors a lean head count structure and the use of third-party vendors and contractors, as well as technology, to reduce fixed costs. We hope to leverage the talents and efforts of the entire team in developing and operating our bitcoin mining data centers and in sourcing new opportunities for the Company.

Strategic adjacencies with potential long-term opportunities

We believe we are strategically well positioned to continue developing and expanding our bitcoin mining business, and also to enhance it through other long-term opportunities in the Bitcoin ecosystem. Those opportunities could include, for example, potential partnerships with larger companies in energy, technology and financial services, as well as offering operational and data science services associated with bitcoin mining.

Our Strategy

Our strategy is to expand and strengthen the Bitcoin network’s critical infrastructure by developing and operating data centers at which we continue to expand the hashrate we contribute to the Bitcoin network. Key elements of this strategy include the following.

Establish our cost leadership and maintain strong relationships with our industry partners

We seek to structure relationships with our equipment and service providers, power suppliers and other potential partners as long-term relationships. We believe this approach will help us expand our operations in a cost-effective manner that will contribute to the operational stability of our bitcoin mining business. In addition, we aim to be one of the lowest cost producers of bitcoin. We believe that will serve us well in bull markets for bitcoin and protect us in bear markets.

Retain flexibility in considering strategically adjacent opportunities complimentary to our business model

As the Bitcoin ecosystem develops and our business, including our bitcoin inventory, grows, we aim to retain flexibility in considering and engaging in various strategic initiatives that may be complimentary toour bitcoin mining operations. For example, we have enhanced our treasury management platform by engaging market counterparties with which we can hedge some or all of the value of our bitcoin inventory or the value of our expected forward production, and we could consider initiatives such as: (i) lending out bitcoin as an additional line of revenue; (ii) engaging into strategic acquisitions or joint ventures; (iii) leveraging our expected bitcoin holdings to enter into strategic partnerships in the fintech space; (iv) engaging in asset management products; and (v) providing operational support or mining-as-a-service products, which may involve working with infrastructure investors on managed bitcoin mining deployments and other potential projects.

Use of mining pools

As part of our operations, we use third-party mining pools, including Foundry and Luxor, to mine bitcoin. This means that we send our computing power, or hashrate, to the mining pool in exchange for a proportionate share of bitcoin mined by the pool. In 2023, we incurred pooling charges of approximately $165,000.

We have no immediate plans to establish our own mining pool. We intend to periodically re-evaluate this as part of our overall strategy going forward and, in the future, we may also decide to stop using mining pools.

Use of custodians

We generally store the majority of our bitcoin in cold storage, unless we transfer it to a trading account to be sold. We primarily use Coinbase Prime as our custodian to store our bitcoin, but also have accounts at Anchorage Digital Bank N.A. and Fidelity Digital Assets Services. We periodically re-evaluate these services and, in the future, we may also decide to use additional or other custodians. As part of our regular treasury management, we consider market conditions and our financial obligations to determine if any portion of newly mined or stored bitcoin should be transferred to the hot wallet for liquidation. See “Risk Factors—Risks Related to Our Business, Industry and Operations—There is a potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof” and “Our limited insurance protection exposes us and our shareholders to the risk of loss of our bitcoin for which no person is liable.”

Focus on building our operations in the United States

Our operations are currently all within the United States. We believe that the North American market, and specifically the United States, represents a particularly attractive geographic region for bitcoin mining. Two key drivers for this are the attractive market dynamics and its stable regulatory environment. We believe that the strong bitcoin mining dynamics in the United States are particularly driven by low-cost energy and reliable power infrastructure, investor interest in bitcoin mining and access to capital markets, access to data center construction and operations talent markets, and potential opportunities to partner with energy industry participants on projects involving renewable energy sources. On the regulatory side, while crypto asset regulation in the United States, as in the rest of the world, is still in development (see “Business—Government Regulation”), we believe that the regulatory framework for bitcoin in the United States is sufficiently well established and accepted. Furthermore, we believe that the U.S. digital asset ecosystem is more tightly regulated and may attract more compliance-oriented investors, which is expected to contribute to the overall stability of the ecosystem. We may in the future consider establishing operations in other countries, depending on the business opportunity and the relative risks associated with the relevant jurisdiction.

Competition

Bitcoin is mined all over the world by a variety of miners, including individuals, public and private companies, and mining pools. We define our principal competitors as other publicly traded bitcoin miners because there is widely available information about their operations. Several public companies (traded in the United States and internationally), such as the following, may be considered to compete with us:

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Marathon Digital Holdings, Inc.

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Riot Platforms, Inc.

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CleanSpark, Inc.

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Hut 8 Mining Corp.

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Hive Blockchain Technologies Ltd.

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Bitfarms LTD.

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Iris Energy Limited

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Terawulf Inc.

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Core Scientific, Inc.

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Bit Digital, Inc.

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BitDeer Technologies Group

Our data centers are located in Texas, where we may face significant and increasing competition, because Texas, through its regulatory and economic incentives, has encouraged bitcoin mining companies, like ours, to locate their operations in the state. For further details, see “Risk Factors—Risks Related to Our Business, Industry and Operations—Delays or disruptions in the operation of our Texas sites could also materially and adversely affect our business, results of operations and financial condition.” There is also a possibility that, in the future, foreign governments may decide to subsidize or in some other way support certain large-scale cryptocurrency mining projects. See “Risk Factors—Risks Related to Regulatory Framework—Regulatory actions in one or more countries could severely affect the right to acquire, own, hold, sell or use certain cryptocurrencies or to exchange them for fiat currency.”

Thus, we compete against many companies and entities operating both within the United States and abroad. Equally important, as bitcoin price increases, additional miners may be drawn into the market. The corollary would mean that as bitcoin price decreases, miners that are less cost-efficient may be driven out of the market.

Government Regulation

We operate in a complex and rapidly evolving regulatory environment and we are subject to a wide range of laws and regulations enacted by U.S. federal, state and local governments, governmental agencies and regulatory authorities, including the SEC, the Commodity Futures Trading Commission, the Federal Trade Commission and the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, as well as similar entities in other countries. Other regulatory bodies, governmental or semi-governmental, have shown an interest in regulating or investigating companies engaged in the blockchain or cryptocurrency businesses.

Recently, on January 10, 2024, the SEC approved the listing and trading of spot bitcoin exchange-traded products (“ETPs”), the shares of which can be sold in public offerings and traded on U.S. national securities exchanges. The approved ETPs commenced trading directly to the public on January 11, 2024, with a trading volume of $4.6 billion on the first trading day. It is unclear how the approval of spot bitcoin ETPs will affect the price of bitcoin going forward. Regulations may substantially change in the future and it is presently not possible to know how regulations will apply to our businesses, or when they will be effective. As the regulatory and legal environment evolves, we may become subject to new laws and further regulation by the SEC and other agencies, which may affect our mining and other activities. For instance, various bills have been proposed in the U.S. Congress related to our business, which may be adopted and have an impact on us. Additionally, governmental agencies and regulatory authorities, such as the SEC, the Commodity Futures Trading Commission, the Federal Trade Commission and the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, may also enact regulations related to our business, which may have an impact on us. For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see “Risk Factors—Risks Related to Regulatory Framework.”

Furthermore, because we may strategically expand our operations into new areas, see “Business—Our Strategy— Retain flexibility in considering strategically adjacent opportunities complimentary to our business model,” we may become subject to additional regulatory requirements.

Intellectual Property

We use specific hardware and software for our bitcoin mining operations. In certain cases, source code and other software assets may be subject to an open source license, as much technology development underway in this sector is open source. For these works, we intend to adhere to the terms of any license agreements that may be in place.

We have patent applications pending for aspects of our bitcoin mining operations. We rely upon trade secrets, trademarks, service marks, trade names, copyrights and other intellectual property rights and license the use of intellectual property rights owned and controlled by others. In addition, we have developed and continue to refine certain proprietary software applications to enhance the efficiency of our bitcoin mining operations and may continue to develop those applications or others in the future.

Human Capital Management

As of the date of this filing, we have 35 full-time employees and officers. We believe our employee relations to be good. We aim to attract and retain talented and dedicated employees who contribute to the operation of our business model. As such, we have recruited employees with experience and expertise in the following areas: finance, data science, data center construction and operation, computer science, power procurement, and logistics. Currently, each of our employees is also an owner of the Company through equity awards under the Incentive Award Plan. We aim to instill an “ownership culture” in all areas of our business model, and our compensation and benefits philosophies are designed to retain our employees and recruit new employees as necessary.

Seasonality

Our annual and quarterly operating results have the potential to be significantly affected by seasonality related to weather and the related energy commodity price volatility. The price of electric power typically peaks during the winter and summer months, and more generally during extreme weather events, which can potentially impact the Company’s results. Additionally, extreme weather conditions may affect the efficiency and uptime of our mining operations which will have an impact on operating results.

Corporate Information

Cipher Mining Inc. was incorporated as a Delaware corporation on August 27, 2021 in connection with the closing of a transaction (the “Business Combination”) pursuant to which Good Works Acquisition Corp. (“GWAC”), a special purpose acquisition company, consummated the merger of a wholly-owned direct subsidiary of GWAC with and into Cipher Mining Technologies Inc. (“CMTI”). Following the Business Combination, the combined company was named Cipher Mining Inc. (“Cipher” or the “Company”). The Company comprises all of GWAC’s and CMTI’s operations.

Our principal executive offices are located at 1 Vanderbilt Avenue, Floor 54, Suite C, New York, NY 10017, and our telephone number is (332) 262-2300.

Available Information

Our website address is www.ciphermining.com. The contents of, or information accessible through, our website are not part of this Annual Report on Form 10-K. We make our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, as well as beneficial ownership filings available free of charge on our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC.

We may use our website as a distribution channel of material information about the Company. Financial and other important information regarding the Company is routinely posted on and accessible through the Investors sections of its website at https://investors.ciphermining.com.

The reference to our website address does not constitute incorporation by reference of the information contained on or available through our website, and you should not consider such information to be a part of this Annual Report on Form 10-K.