Hashing Power and Contracts

Hashing power, or hashrate is a way of measuring the amount of mining for bitcoins or other cryptocurrencies that is performed in a second. Bitcoin is designed to require an increasingly high h/s in order to solve more complex algorithms , and so verify transactions on the blockchain digital ledger. Bitcoin uses a SHA-256 algorithm, the SHA standing for 'secure-hashing algorithm'. The function will yield a result that is 256 bits long. Actually, Bitcoin runs the SHA-256 function twice.

A hashlet is a cloud-based digital miner which can be purchased. The owner does not actually acquire hardware, but instead gets a stake in computing power which can be automatically upgraded and easily sold online.

Businesses such as Genesis Mining allow customers to sign up to perform cloud-based Bitcoin mining.

Some digital mining companies have sold hashlet contracts for hashing power which did not actually exist. A complaint filed by the S.E.C. in 2015 states that, "[i]n reality, defendants sold far more Hashlets worth of computing power than they actually had in their computing centers. There was no computer equipment to back up the vast majority of Hashlets that defendants sold." D.I. 1, ¶ 3, Complaint, S.E.C. v. Homero Joshua Garza, No. 3:15-cv-01780 (D. Conn. Dec. 1, 2015).

These hashet contracts made news this week when a jury in a similar case found that hashlet contracts are not securities or investment contracts, and so the digital mining companies could not be charged with securities fraud. See, D.I. 330, Verdict Form, at 2, Audet v. Fraser, No. 3:16-cv-00940-MPS (D. Conn. Nov. 1, 2021)