Core Scientific, Inc.

Business Model Core Scientific is a leading blockchain infrastructure service provider in the United States, focusing on Bitcoin mining, digital asset custody, and high-performance computing (HPC). Its business model can be divided into three core segments: Self-Mining (Digital Asset Self-Mining) Model: The company deploys its own mining machines (such as Bitmain Antminer, MicroBT Whatsminer, etc.) to participate in the Bitcoin network's hash power competition, profiting through block rewards and transaction fees. Advantages: Scaled operations reduce the unit computing power cost, directly benefiting from the rise in Bitcoin prices. Hosted Mining (Digital Asset Hosted Mining) Model: Provide mining machine hosting services for third-party clients (such as institutional investors and miners), including: Hardware Deployment: After the customer purchases the mining machine, the company is responsible for installation and operation maintenance. Power and Operations: Provide low-cost electricity (prioritizing deployment in electricity price valleys such as Texas and Kentucky in the United States), cooling systems, and 24/7 technical support. Charging method: based on computing power or fixed management fee + electricity fee sharing. High-Performance Computing Hosting (HPC Hosting) Model: Utilizing data center infrastructure to provide computing power rental services for AI training, cloud computing, and other needs (partially transformed from Bitcoin mining machines). Target customers: AI startups, research institutions, and other enterprises that require large-scale GPU/ASIC computing power.

Profit Model The sources of income for Koyi Science mainly include the following four categories: Income Type Source Description Proportion (Reference) Self-operated mining revenue Bitcoin block rewards + transaction fees (affected by currency price and overall network hash rate fluctuations) ~ 50% - 60% Custody service fee Fixed custody fee or profit sharing paid by the client (such as electricity price difference) ~ 20% - 30% Mining machine sales
Selling new/used mining machines to customers (e.g., Bitmain cooperative distribution) ~ 10% - 15% HPC computing power leasing High-performance computing service charges (mainly long-term contracts) ~ 5% - 10% Key profit drivers: Bitcoin price: directly determines self-mining income and customer custody demand. Electricity costs: The company reduces costs by signing long-term low-price electricity agreements (such as $0.03 - $0.05 /kWh). Computing power efficiency: Continuously upgrade mining machines (such as adopting new models with an energy efficiency ratio of <30J/TH) to maintain competitiveness.

The role and significance at the enterprise level

1. Diversified income structure to reduce operational risks

Function: By leveraging four main sources of income—self-operated mining, hosting services, mining machine sales, and HPC computing power leasing—reduce dependence on a single business. Meaning: When the price of Bitcoin fluctuates, custody services (fixed fees) and HPC business (long-term contracts) can provide stable cash flow. In 2022, during the Bitcoin crash, the company relied on its custody business to maintain operations, avoiding the vulnerability of being completely dependent on self-mining. 2. Maximize asset utilization and improve ROIC (Return on Invested Capital) Function: By sharing infrastructure (such as data centers and power resources) to serve different clients, it reduces the cost per unit of computing power. Meaning: The same data center can operate self-owned mining machines as well as host customer equipment, thereby diluting fixed costs (such as cooling systems and operation and maintenance teams). The scale of electricity procurement (such as signing long-term low-price agreements with Texas Wind Power Company) further compresses marginal costs. 3. Flexibly adjust the business focus to adapt to market changes Function: Dynamically adjust the ratio of self-operated and custodial services based on Bitcoin market conditions and regulatory environment. Meaning: During the Bitcoin bull market, expand self-operated mining scale to obtain higher returns (for example, in 2021, self-operated income accounted for over 70%). In a bear market or during regulatory tightening, shift towards custody and HPC business (for example, in 2023, the proportion of custody revenue increased to 35%). 4. Enhance customer loyalty and build long-term cooperative relationships Function: Lock in customers through full lifecycle services (mining machine procurement → deployment → operation and maintenance → profit optimization). Meaning: Custodial clients typically sign contracts for 1-3 years to ensure medium to long-term income. Bundling mining machine sales with hosting (such as "buy a mining machine and get 1 year of hosting for free") creates a closed-loop business model. 2. The Role and Significance at the Industry Level

1. Promoting the Industrialization and Professionalization of Bitcoin Mining

Function: Provide standardized and scalable mining infrastructure services, lowering the participation threshold for individuals and small institutions. Meaning: Promote the centralization of computing power to enhance the security of the Bitcoin network (Koyi Science accounts for about 2% of the total network computing power). Reduce mining machine downtime through professional operations and maintenance (the company claims an operational efficiency of 98%). 2. Exploring the collaborative model of "mining + AI computing power" Function: Utilize Bitcoin mining machine infrastructure to be compatible with AI computing power requirements (such as GPU clusters). Meaning: Provide the industry with examples of transformation during a bear market (for example, in 2023, some mining farms were converted into AI data centers). Optimize energy usage efficiency (the same power resources serve different computing power demands). 3. Verify the feasibility of clean energy mining Function: Prioritize the layout of renewable energy sources such as wind power and hydropower (for example, Texas wind power accounts for over 50%). Meaning: Responding to environmental controversies, striving for policy support for the industry (such as the U.S. "Crypto Climate Accord"). Reduce carbon tax costs and improve ESG ratings (attract institutional investors).

Direct impact: Bitcoin ( BTC )

1. Hash Rate Supply and Bitcoin Network Security

Impact Mechanism: Koyi Science operates about 2-3% of the total Bitcoin network hash rate (2024 data), and its mining machine deployment directly affects the hash rate distribution and security of the Bitcoin network. If the company reduces its mining scale due to profitability issues (such as some mining machines being shut down during the bankruptcy restructuring period in 2022), it may lead to a short-term decrease in computing power, affecting network stability. Market Impact: Hash rate fluctuations → Bitcoin mining difficulty adjustment (adjusted every 2016 blocks) → Affect miners' revenue expectations. Long-term hash power growth → Enhancing the Bitcoin network's resistance to attacks (the cost of a 51% attack increases). 2. Selling pressure in the Bitcoin market (realization of mining output) Impact Mechanism: The company produces hundreds of bitcoins through self-operated mining each month (**2023 average monthly output is about 500-800 BTC), and needs to sell some to cover operating costs such as electricity bills and debts. If a large-scale sell-off occurs (such as the forced liquidation during the 2022 bankruptcy), it may temporarily suppress the BTC price. Market Impact: Institutional-level sell-off → Increases market liquidity, but may trigger panic selling among retail investors. The impact is greater during a bear market (for example, when Bitcoin fell to $16,000 in 2022, the selling by mining companies intensified the decline). 3. Miner Holdings (HODL Strategy) Affect Market Supply and Demand Impact Mechanism: Some mining companies (such as Marathon) choose to hold Bitcoin for the long term, while Core Scientific tends to liquidate regularly due to debt issues. If the company adjusts the HODL ratio (for example, reducing sales after the 2024 restructuring), it may alleviate market selling pressure. II. Indirect Impact: Other Cryptocurrencies

1. Forked coins such as Bitcoin Cash (BCH) and Bitcoin SV (BSV)

Impact Mechanism: Koyi Science once supported the mining of some forked coins (such as BCH), but in recent years has focused on BTC, leading to a outflow of hash power for these coins. If the company reallocates computing power in the future (such as BCH mining machines being compatible with BTC mining), it may temporarily affect the network security of the forked coins. 2. Cryptocurrencies that rely on the same mining machines (such as LTC, DOGE) Impact Mechanism: Koyi Science once operated Litecoin mining machines. If its mining machines switch to BTC mining (such as from Scrypt to SHA-256), it may affect the hash rate competition of LTC and DOGE. 3. AI computing power-related tokens (such as RNDR, AKT) Impact Mechanism: The company is expanding its HPC business (such as AI computing power leasing), which may compete for GPU resources and indirectly affect the supply costs of decentralized computing projects (such as Render Network and Akash Network).