Company: BTBT
Filing Date: 2025-03-14
Form Type: 10-K
Source: 0001013762-25-000307
Chunk: 515

Company: Bit Digital, Inc
Filing Date: 2025-03-14
Form: 10-K
Item: Item 1A
Chunk 515
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 important to respond to potential growth and scalability challenges.

The Ethereum Blockchain
may Temporarily or Permanently Fork and/or Split

The Ethereum network’s
software and protocol are open source. When a modification is released by the developers and a substantial majority of participants consent
to the modification, the change is implemented and the Ethereum network continues uninterrupted. However, if a change were activated with
less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software prior
to its modification, the consequence would be what is known as a “hard fork” (i.e., a split) of the Ethereum network (and
the blockchain). One blockchain would be maintained by the pre-modification software and the other by the post-modification software.
The effect is that both blockchain algorithms would be running parallel to one another, but each would be building an independent blockchain
with independent native assets.

A hard fork could present
problems such as two copies of a token for the same non-fungible tokens (NFTs).  It could also present a problem for a customer having
to choose to provide services with respect to digital assets resulting from a fork. In addition, digital asset loan agreements often dictate
when and how each of the lender or the borrower of a digital asset pledging a certain digital asset gets the benefit of forked coins in
the event of a hard fork. Similarly, derivative counterparties using ISDA-based contractual documentation may be subject to hard fork-related
termination events.

Although forks are likely
to be addressed by a community-led effort to merge the two groups, such a fork could still adversely affect ETH’s viability.

Risk if a Person
Gains a 33% or More Share of the Ethereum Validators

According to Ethereum.org,
the likelihood of successful attacks on the Ethereum network increases as the proportion of staked ETH controlled by the attacker increases.
If an attacker controls 33% or more of the total stake, they can prevent the chain from finalizing by having 33% or more of the staked
ETH maliciously attesting or failing to attest. If an attacker controls about 50% of the total stake, they could theoretically split the
chain into two equally sized forks and then simply use their entire 50.1% stake to vote contrarily to the honest validator set, thereby
maintaining the two forks and preventing finality. If an attacker controls 66% or more of the total stake, they simply vote for their
preferred fork and then finalize