Exhibit
4.6


 





 


HUT 8 MINING CORP.


 


Management’s Discussion and Analysis





Amended and Restated


 


For the three and nine months ended September 30, 2020




    1 


     


    

Hut 8 Mining Corp.



Management’s Discussion and Analysis


Amended and Restated



For the three and nine months ended September 30, 2020


 


Introduction


 


This Management’s Discussion
and Analysis (“MD&A”) is dated November 12, 2020, and should be read in conjunction with the unaudited condensed
consolidated interim financial statements for the three and nine months ended September 30, 2020 (“Q3-2020”), the audited
consolidated financial statements for the year ended December 31, 2019, the annual MD&A for the year ended December 31, 2019,
and the annual information form dated April 3, 2020 of Hut 8 Mining Corp., each of which is available on SEDAR at www.sedar.com.


 


In this MD&A, unless the context otherwise requires,
all references to “we”, “us”, “our”, “Hut 8”, and “the Company” refer
to Hut 8 Mining Corp. and its subsidiaries, and all references to “Management” refer to the directors and executive
officers of the Company.


 


Unless otherwise stated, results
are reported in Canadian dollars, unless otherwise noted. The Company applies International Financial Reporting Standards (“IFRS”),
as issued by the International Accounting Standards Board and interpretations issued by the IFRS Interpretations Committee. In
the opinion of Management, all adjustments considered necessary for a fair presentation have been included. The results presented
in the MD&A are not necessarily indicative of the results that may be expected for any future period.


 


Cautionary Note Regarding Forward-Looking Information


 


This MD&A contains certain
forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to
herein as “forward-looking statements”). These statements relate to future events or the Company’s future performance.
All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward-looking
statements can be identified by the use of words such as “plans”, “expects”, “is expected”,
 “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”,
 “predicts”, “intends”, “anticipates” or “believes”, or variations of, or the negatives
of, such words and phrases, or state that certain actions, events or results “may”, “could”, “would”,
 “should”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated
in such forward-looking statements. The forward-looking statements in this MD&A speak only as of the date of this MD&A
or as of the date specified in such statement.


 


Inherent in forward-looking statements
are risks, uncertainties and other factors beyond the Company’s ability to predict or control. For a list of the factors
that could affect the Company, please make reference to those risk factors referenced the annual information form dated April 3,
2020. Readers are cautioned that such risk factors, uncertainties and other factors are not exhaustive. Actual results and developments
are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in
this MD&A.


 


Forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated
in such forward-looking statements. The forward-looking statements in this MD&A speak only as of the date of this MD&A
or as of the date specified in such statement. Specifically, this MD&A includes, but is not limited to, forward-looking statements
regarding: the Company’s ability to meet its working capital needs at the current level for the next twelve-month period;
management’s outlook regarding future trends; sensitivity analysis on financial instruments, which may vary from amounts
disclosed; and general business and economic conditions.


 


All forward-looking statements
herein are qualified by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking statements.
The Company undertakes no obligation to update publicly, or otherwise revise, any forward-looking statements, whether as a result
of new information or future events or otherwise,
except as may be required by law. If the Company does update one or more forward- looking statements, no inference should be drawn
that it will make additional updates with respect to those or other forward-looking statements, unless required by law.




    2 


     


    

Hut 8 Mining Corp.


Management’s Discussion and Analysis


Amended and Restated



For the three and nine months ended September 30, 2020


 



Non-GAAP Measures


 


This MD&A presents certain
non-GAAP (“GAAP” refers to Generally Accepted Accounting Principles) financial measures to assist readers in understanding
the Company’s performance. These non-GAAP measures do not have any standardized meaning and therefore are unlikely to be
comparable to similar measures presented by other issuers and should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with GAAP. Management uses these non-GAAP measures to supplement the analysis and evaluation
of operating performance.


 


Throughout this MD&A, the
following terms are used, which are not found in the Chartered Professional Accountants of Canada Handbook and do not have a standardized
meaning under GAAP.


 


EBITDA (Earnings before Interest, Taxes, Depreciation,
and Amortization)


 


		•	“EBITDA” represents net income or loss excluding net finance income or expense, income
tax or recovery, depreciation, and amortization.



 


		•	“Adjusted EBITDA” represents EBITDA adjusted to exclude share-based compensation, fair
value loss or gain on revaluation of digital assets, write-offs, and costs associated with one-time transactions (such as listing
fees).



 


		•	“Adjusted EBITDA Margin” represents Adjusted EBITDA as a percentage of revenue.



 


EBITDA, Adjusted EBITDA, and Adjusted
EBITDA Margin are used to show ongoing profitability without the impact of non-cash accounting policies, capital structure, and
taxation. This provides a consistent comparable metric for profitability.


 


“Mining Profit” represents
gross profit (revenue less cost of revenue), excluding depreciation. “Mining Profit Margin” represents Mining Profit
as a percentage of revenue. Mining Profit and Mining Profit Margin show the cash expenses against the revenue without the impact
of non-cash accounting policies such as depreciation.


 


“Cost per Bitcoin” represents cost of
revenue excluding depreciation, divided by the number of bitcoin mined in the period. This metric is commonly referenced in the
bitcoin mining industry and is important to gain an understanding of the profitability in reference to the price of bitcoin.




    3 


     


    

Hut 8 Mining Corp.



Management’s Discussion and Analysis



Amended and Restated



For the three and nine months ended September 30, 2020


 


Company


 


Hut 8 is a bitcoin mining company
with industrial scale operations in Alberta, Canada. Hut 8 provides investors with direct exposure to bitcoin through both its
bitcoin mining operation and by holding its bitcoin balance. By owning Hut 8, investors avoid the technical complexity or constraints
of purchasing the underlying cryptocurrency. Investors avoid the need to create online wallets, wire money offshore, and safely
store their bitcoin.


 


For its mining activities, Hut
8 utilizes the BlockBox Data Center AC (“BlockBox”) which is a modular, portable, and more easily upgradeable to the
next generation of silicon technology. The BlockBox is customizable to difference types of mining equipment.


 


The Company was incorporated under
the laws of the Province of British Columbia on June 9, 2011. Its registered office is located at Suite 1700, Park Place, 666 Burrard
St, Vancouver, BC, Canada V6C 2X8, and the headquarter of the Company is located at 130 King St. W, Suite 1800, Toronto, ON, Canada,
M5X 2A2. The Company’s financial year ends on December 31. The Company’s common shares are listed under the symbol “HUT”
on the Toronto Stock Exchange and as “HUTMF” on the OTCQX Exchange.




    4 


     


    

Hut 8 Mining Corp.



Management’s Discussion and Analysis



Amended and Restated


For the three and nine months ended September 30, 2020


 


Summary


 


Q3-2020 was the first full quarter
after the bitcoin halving where bitcoin production was cut in half while the network hash rate continued to rise, making it one
of the most difficult periods for bitcoin miners to operate. To put this into context, it became 140% more difficult to mine for
a bitcoin from just before the halving event in May 2020 to September 30, 2020, while the bitcoin price increased by 9% in that
same period. The economics of mining bitcoin have significantly improved subsequent to September 30, 2020.


 


Hut 8 has continued to find ways
to reduce costs in Q3- 2020 through a few successful initiatives in the quarter. On July 13, 2020, the Company re- negotiated its
credit facility terms with Genesis Global Capital, LLC (“Genesis) and successfully reduced the interest rate from 9.85% to
8.00% per annum saving approximately $500,000 per year.


 


During Q3-2020, Hut 8 transferred
the Clarke chips from its Drumheller facility to Medicine Hat which brought together Hut 8’s higher efficiency chips with
its best electricity pricing at Medicine Hat. Also, during Q3-2020, Hut 8 completed the transfer of the management of operations
of both the Medicine Hat and Drumheller facilities from Bitfury to Hut 8, providing savings of over $1.5 million per year. With
full control over the sites, Hut 8 will continue to streamline operations while maintaining the highest industry standards.


 


Hut 8’s strategy of mining
and holding bitcoin continued to pay off as there was a $5.6 million gain on the re -measurement of bitcoin holdings at the end
of Q3-2020. Additionally, by only strategically selling bitcoin at higher prices, Hut 8 recorded a $0.2 million gain on use of
digital assets.


 


Near the end of the quarter, Hut
8 completed the installation of 1,000 M31S and 1,000 M31S+ mining equipment at its Medicine Hat facility. The equipment collectively
increased Hut 8’s mining power by approximately 154 PH/s using 6.7 MW of power. The remainder of the equipment purchase,
which consists of 1,590 M30S units is expected to be shipped in November 2020 and provide an additional 140 PH/s using approximately
5.3MW to the Company’s current bitcoin mining fleet.


 


Hut 8 also achieved a milestone
when they became the first company to successfully exit the TSX SandBox which solidifies Hut 8 as a TSX listed issuer. Hut 8 was
also the first issuer to be listed to the TSX via the TSX Sandbox and has been trading on the senior TSX exchange since early October
2019.




    5 


     


    

Hut 8 Mining Corp.



Management’s Discussion and Analysis


Amended and Restated


For the three and nine months ended September 30, 2020


 


Selected Financial Information


 


	 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 
	 	 	2020	 	 	2019	 	 	2020	 	 	2019	 
	Revenue	 	$	5,754,732	 	 	$	26,749,874	 	 	$	27,724,292	 	 	$	67,132,276	 
	Site operating costs	 	 	(7,871,231	)	 	 	(11,353,029	)	 	 	(29,120,406	)	 	 	(34,372,623	)
	Mining profit	 	 	(2,116,499	)	 	 	15,396,845	 	 	 	(1,396,114	)	 	 	32,759,653	 
	Mining profit margin	 	 	-37	%	 	 	58	%	 	 	-5	%	 	 	49	%
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Depreciation	 	 	(3,545,173	)	 	 	(8,178,269	)	 	 	(17,512,599	)	 	 	(24,534,807	)
	Gross profit	 	$	(5,661,672	)	 	$	7,218,576	 	 	$	(18,908,713	)	 	$	8,224,846	 
	Gross profit margin	 	 	-98	%	 	 	27	%	 	 	-68	%	 	 	12	%
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Expenses	 	 	(787,965	)	 	 	(707,270	)	 	 	(2,694,002	)	 	 	(2,090,574	)
	Share-based compensation	 	 	(167,743	)	 	 	(670,136	)	 	 	479,892	 	 	 	(2,427,144	)
	Gain on use of digital assets	 	 	198,369	 	 	 	514,135	 	 	 	1,800,984	 	 	 	5,433,530	 
	Revaluation of digital assets	 	 	5,577,854	 	 	 	(10,050,642	)	 	 	13,713,962	 	 	 	8,243,089	 
	Net operating income (loss)	 	 	(841,157	)	 	 	(3,695,337	)	 	 	(5,607,877	)	 	 	17,383,747	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net finance expense	 	 	(567,787	)	 	 	(1,122,930	)	 	 	(1,909,354	)	 	 	(3,512,166	)
	Foreign exchange gain (loss)	 	 	508,606	 	 	 	(370,374	)	 	 	(772,714	)	 	 	703,347	 
	Gain on share issuance	 	 	-	 	 	 	-	 	 	 	-	 	 	 	951,059	 
	Net income (loss)	 	$	(900,338	)	 	$	(5,188,641	)	 	$	(8,289,945	)	 	$	15,525,987	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Adjusted EBITDA	 	$	(2,904,464	)	 	$	14,689,575	 	 	$	(3,548,032	)	 	$	30,669,079	 
	Adjusted EBITDA margin	 	 	-50	%	 	 	55	%	 	 	-13	%	 	 	46	%
	Net income (loss) per
    share - basic and diluted	 	$	(0.01	)	 	$	(0.07	)	 	$	(0.09	)	 	$	0.20	 




 


	Assets	 	 	 	 	 	 
	 	 	September 30,	 	 	December 31,	 
	 	 	2020	 	 	2019	 
	Total assets	 	$	72,209,794	 	 	$	71,237,244	 
	 	 	 	 	 	 	 	 	 
	Total non-current financial liabilities	 	$	-	 	 	$	19,807,075	 






    6 


     


    

Hut 8 Mining Corp.



Management’s Discussion and Analysis


Amended and Restated



For the three and nine months ended September 30, 2020


 


Discussion of Operations for the three months ended
September 30, 2020


 


During Q3-2020, the Company mined
372 bitcoin, resulting in revenue generation of $5.8 million, compared to the same period of the prior year of 1,965 bitcoin mined
with revenue of $26.8 million. The bitcoin halving occurred on May 11, 2020, effectively cutting down the bitcoin production for
every miner in half. This was the first quarter that every bitcoin miner, including Hut 8, experienced the full effect of the halving.
This led to a difficult quarter for Hut 8 financially, especially during significant transitions on site to increase revenue and
decrease costs. More than halfway through Q3-2020, Hut 8 installed 2,000 new generation bitcoin mining units and finalize the transfer
of site management which will increase the profitability of Hut 8’s operations.


 


Hut 8 also recognized $0.5 million
of hosting revenue after signing up its first client with 6MW of latest generation bitcoin mining equipment. This is a new revenue
stream for Hut 8 and provides consistent recurring revenue with its available electrical capacity and existing infrastructure.


 


Expenses
for Q3-2020 were $1 million, of which there were non-cash share- based payments of $0.2 million compared with the same period
of the prior year expenses of $1.4 million of which there were non-cash share-based payments of $0.7 million. Management has worked
to decrease quarterly expenses, especially after the halving occurred.


 


For Q3-2020,
Hut 8 had a revaluation gain of $5.6 million from adjusting the value of the digital assets held in inventory to the market value
on the reporting date. This gain is from the increase in bitcoin price from US$9,138 on June 30, 2020 to the September 30, 2020
price of US$10,788. Hut 8 also remained strategic at selling its bitcoin inventory for fiat currency, resulting in a realized gain
on use of bitcoin $198k for the three months ended June 30, 2020, compared to the Q3-2019 gain of $514k. In future quarters, the
Company would expect to see unrealized gains or losses based on the price of bitcoin on the reporting date, relative to the price
on the day mined, when revenue is recorded. Hut 8 recorded negative adjusted EBITDA of $2.9 million and net loss of $0.9 million
for Q3-2020 which was due to the worsening bitcoin economics.


 


Below is
a bitcoin price chart and mining difficulty for the nine months ended September 30, 2020 (reference https://coinmarketcap.com/currencies/bitcoin):





 


 






    7 


     


    

Hut 8 Mining Corp.


Management’s Discussion and Analysis



Amended and Restated



For the three and nine months ended September 30, 2020


 


Selected Quarterly Information


 


The following table summarizes the Company’s
financial information for the last eight quarters:


 


All amounts in 000’s, except for share figures                        




 


	 	 	Dec 31	 	 	Mar 31	 	 	June 30	 	 	Sep 30	 	 	Dec 31	 	 	Mar 31	 	 	June 30	 	 	Sep 30	 
	 	 	2018	 	 	2019	 	 	2019	 	 	2019	 	 	2019	 	 	2020	 	 	2020	 	 	2020	 
		 	Q4	 	 	Q1	 	 	Q2	 	 	Q3	 	 	Q4	 	 	Q1	 	 	Q2	 	 	Q3	 
	Revenue	 	$	12,995	 	 	$	12,102	 	 	$	28,280	 	 	$	26,750	 	 	$	14,858	 	 	$	12,740	 	 	$	9,230	 	 	$	5,755	 
	Net income (loss)	 	 	(116,569	)	 	 	(9,511	)	 	 	30,226	 	 	 	(5,189	)	 	 	(13,395	)	 	 	(10,230	)	 	 	2,840	 	 	 	(900	)
	Net income (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	basic	 	 	(2.18	)	 	 	(0.13	)	 	 	0.38	 	 	 	(0.06	)	 	 	(0.17	)	 	 	(0.11	)	 	 	0.03	 	 	 	(0.01	)
	diluted	 	 	n.a.	 	 	 	n.a.	 	 	 	0.38	 	 	 	n.a.	 	 	 	n.a.	 	 	 	n.a.	 	 	 	0.03	 	 	 	n.a.	 



 


See below for the calculation of Adjusted EBITDA for
the most recent eight quarters:


 


All amounts in 000’s, except per share figures                            




 


	 	 	Dec 31	 	 	Mar 31	 	 	Jun 30	 	 	Sep 30	 	 	Dec 31	 	 	Mar 31	 	 	June 30	 	 	Sep 30	 
	 	 	2018	 	 	2019	 	 	2019	 	 	2019	 	 	2019	 	 	2020	 	 	2020	 	 	2020	 
	 	 	Q4	 	 	Q1	 	 	Q2	 	 	Q3	 	 	Q4	 	 	Q1	 	 	Q2	 	 	Q3	 
	Net income (loss)	 	$	(116,569	)	 	$	(9,511	)	 	$	30,226	 	 	$	(5,189	)	 	$	(13,395	)	 	$	(10,230	)	 	$	2,840	 	 	$	(900	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Add/(deduct):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net finance costs	 	 	-	 	 	 	1,184	 	 	 	1,205	 	 	 	1,123	 	 	 	1,273	 	 	 	649	 	 	 	693	 	 	 	568	 
	Depreciation and amortization	 	 	18,037	 	 	 	8,178	 	 	 	8,178	 	 	 	8,178	 	 	 	8,519	 	 	 	7,009	 	 	 	6,958	 	 	 	3,545	 
	Stock-based compensation	 	 	1,138	 	 	 	1,102	 	 	 	655	 	 	 	670	 	 	 	478	 	 	 	(708	)	 	 	60	 	 	 	168	 
	Revaluation of digital assets	 	 	7,443	 	 	 	(1,043	)	 	 	(17,255	)	 	 	10,052	 	 	 	3,972	 	 	 	1,282	 	 	 	(9,418	)	 	 	(5,578	)
	Gain/loss on use of digital assets	 	 	4,273	 	 	 	253	 	 	 	(5,169	)	 	 	(515	)	 	 	1,288	 	 	 	(914	)	 	 	(689	)	 	 	(198	)
	Foreign exchange	 	 	927	 	 	 	(489	)	 	 	(585	)	 	 	370	 	 	 	(494	)	 	 	2,354	 	 	 	(1,073	)	 	 	(509	)
	Write-off	 	 	85,405	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	Other one-off items	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	197	 	 	 	-	 	 	 	542	 	 	 	-	 
	Other gains or losses	 	 	(89	)	 	 	(951	)	 	 	-	 	 	 	-	 	 	 	1,018	 	 	 	-	 	 	 	-	 	 	 	-	 
	Adjusted EBITDA(1)	 	$	565	 	 	$	(1,277	)	 	$	17,256	 	 	$	14,689	 	 	$	2,856	 	 	$	(558	)	 	$	(86	)	 	$	(2,904	)



 


(1) A non-GAAP measure defined above





    8 


     


    

Hut 8 Mining Corp.



Management’s Discussion and Analysis


Amended and Restated



For the three and nine months ended September 30, 2020


 


The bitcoin
mining industry does not typically have seasonality; however, the Company may have fluctuations at similar times in the year related
to its electricity prices. The Company’s operations are solely out of Alberta, Canada where 42MW of power is directly from
a power purchase agreement with the City of Medicine Hat and the remainder is from the Alberta electricity grid. Due to the changing
weather in Alberta and seasonal electricity needs, time periods of extreme cold or extreme hot weather may result in higher electricity
costs. Hut 8 manages electricity costs to avoid peak prices and is constantly monitoring its operations to maximize efficiency.


 


During the three months ended
September 30, 2020, the Company incurred $3.86 million in electricity cost for its City of Medicine Hat site and $2.58 million
for its Drumheller site. The below chart shows the effect on operations and profitability of the Company if the average cost of
electricity were to increase by 10%, 20%, and 30%.


 


		 	Jul 2020	 	 	Aug 2020	 	 	Sep 2020	 	 	Total	 
	Electricity Cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Drumheller	 	 	889,526	 	 	 	834,761	 	 	 	853,862	 	 	 	2,578,149	 
	City of Medicine Hat	 	 	991,847	 	 	 	1,373,016	 	 	 	1,494,140	 	 	 	3,859,003	 
	Total	 	 	1,881,373	 	 	 	2,207,777	 	 	 	2,348,002	 	 	 	6,437,152	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Sensitivity Analysis	 	 	Q3-2020 Actual	 	 	 	+10%	 	 	 	+20%	 	 	 	+30%	 
	Electricity cost	 	 	6,437,152	 	 	 	7,080,867	 	 	 	7,724,582	 	 	 	8,368,297	 
	Gross profit	 	 	(5,661,672	)	 	 	(6,305,387	)	 	 	(6,949,102	)	 	 	(7,592,818	)
	% change	 	 	 	 	 	 	-11	%	 	 	-23	%	 	 	-34	%
	Net loss	 	 	(900,338	)	 	 	(1,544,053	)	 	 	(2,187,768	)	 	 	(2,831,484	)
	% change	 	 	 	 	 	 	-71	%	 	 	-143	%	 	 	-214	%



 


Industry Overview


 


Bitcoin


 


Bitcoin is a digital currency
that allows peer- to-peer transactions globally over the internet. Bitcoin is independent of any central authority, such as a bank
or government. Instead, bitcoin is governed by a pre-programmed algorithm called Secure Hash Algorithm 256 (SHA-256) that is backed
by millions of computers across the world called “miners”. Bitcoin miners record transactions and check their authenticity.
While fiat currencies are controlled by central banks and governments, bitcoin miners are spread out across the world and store
transactions on the blockchain which is a digital public ledger that can be accessed by anyone. This global and transparent system
is referred to as decentralized control as the management of bitcoin does not have a central point of failure or attack.


 


Unlike fiat currencies, which
have an unlimited supply which is controlled by governments and central banks, the supply of bitcoin is controlled by the SHA-256
to keep its availability scarce and total supply fixed. To date, approximately 18.5 million bitcoin exist and only 21 million bitcoin
will ever exist. It is expected that all bitcoin will be mined by 2140. Due to the scarcity and computational power required to
mine bitcoin, it is often referred to as “digital gold”, as physical gold is also scarce and is costly to mine.


 


Blockchain


 


The bitcoin blockchain is a cloud-based digital public ledger where bitcoin transactions are grouped together and represented as a block in a network chain, containing
all relevant transaction details. The bitcoin blockchain is maintained by a community of miners. All transactions on the blockchain
are transparent and designed to make it impossible to add, remove or change data without being detected by users.



    9 


     


    

Hut 8 Mining Corp.


Management’s Discussion and Analysis



Amended and Restated



For the three and nine months ended September 30, 2020


 


Bitcoin Mining


 


Mining is the process of verifying
bitcoin transactions by solving a computationally difficult encrypted code, called a “hash”. The hash rate is the number
of attempts at solving the encryption code the equipment can process per second. Miners use equipment that produces a high hash
rate, as it results in more attempts at solving the encrypted code. The average hash rate for a two- week period determines the
network difficulty rate, which is set every two weeks. The network difficulty is a measure of how difficult it is to solve a block.
This computational process of decrypting the code through hashing is referred to as proof of work. Bitcoin miners use powerful
Application Specific Integrated Circuit (“ASIC”) computing chips to compete with each other to correctly solve the
encryption code.


 


The power and efficiency of the
ASIC chip to produce a high number of hashes is essential to successfully mining. When a miner is successful in solving the code,
a block containing transactions is validated and incorporated into the blockchain resulting in an economic incentive payment for
the miner in the amount of 6.25 newly minted bitcoins plus potential transaction fees. This incentive payment halves every four
years, the most recent of which occurred on May 11, 2020.


 


When mining Bitcoin, Hut 8 measures
the output to process in computer hash rates. For example, one PH/s processes one quadrillion hashes per second that constantly
attempts to solve the bitcoin cryptology code and receive the bitcoin incentive payment.


 


Hut 8 Custody of Bitcoin


 


For the protection of its bitcoin
on behalf of shareholders, Hut 8 does not self-custody its bitcoin. Instead, Hut 8 uses the services of BitGo Trust Company Inc.
(“BitGo”). BitGo has US$100 million of insurance backing its digital asset custody and one of the highest levels of
regulatory certifications in the market. BitGo is financially backed by Wall Street firms including Goldman Sachs. Hut 8 utilizes
both cold and hot storage for bitcoin with BitGo.


 


Hut 8 continues to explore new
ways to enhance the custody of its bitcoin and improve security for shareholders.


 


Significant Agreements


 


On November 29, 2017, the Company
entered into a Master Data Centre Purchase Agreement (the “MPA”) with Bitfury. The MPA governs the terms and conditions
for the purchase from Bitfury of certain equipment (the “Data Centres”) used for the purpose of running diverse cryptographic
hash functions in connection with the mining of cryptocurrency. The MPA is for a term of five years, with two successive renewal
terms of one year each.


 


Concurrent with the MPA, on November
29, 2017, the Company entered into a Master Service Agreement (the “MSA”) with Bitfury. In accordance with the MSA,
Bitfury shall provide the management, maintenance, support, logistics and operational services (the “Services”) required
to run the Data Centres. The MSA is for a term of five years, with two successive renewal terms of one year each.


 


On February 21, 2020, the Company
and Bitfury agreed to amend these key agreements, with the intent of reducing operating costs and providing more autonomy to Hut
8 in managing its operations. Hut 8 will have improved flexibility to work with outside equipment vendors and Bitfury will have
the ability to work with other miners in North America as well. On August 4, 2020 and September 2, 2020, Hut 8 completed the transfers
of its City of Medicine Hat and Drumheller sites, respectively, from Bitfury.


 


The Company entered into definitive
agreements with the City of Medicine Hat (“CMH”) for the supply of electric energy, and the lease of land upon which
Hut 8 is constructed its mining facilities. For electricity, an Electricity Supply Agreement
(”ESA”) was executed, whereby CMH will provide electric energy capacity of approximately 67 MW to the new Hut 8 facilities,
which in conjunction with the Company’s approximate 40 MW in operation in Drumheller, will allow Hut 8 to operate at 107
MW in total. The ESA and the land lease have a concurrent term of 10 years. The minimum payments on the land lease are $1,395 per
month up to December 31, 2027.




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Hut 8 Mining Corp.



Management’s Discussion and Analysis



Amended and Restated



For the three and nine months ended September 30, 2020


 



Liquidity and Capital Resources


 


As at September 30, 2020, the
Company had a working capital surplus of $15.4 million, (December 31, 2019 - $6.0 million) and shareholders’ equity of $41.1 million.


 


Net cash used in operating activities
was $2.9 million, which does not include the bitcoin mined but not yet converted to cash. Cash used in investing activities amounted
to $5.5 million which was mainly used for purchase of new mining equipment and electricity deposit at the Drumheller facility.
Cash provided by financing activities was $7.7 million, net of the proceeds from the Company’s public offering completed
on June 25, 2020.


 


As at September 30, 2020, the
Company had cash on hand of $2.3 million (December 31, 2019 - $2.9 million) and digital assets of $41.0 million (December 31, 2019
- $27.3 million).


 


The Company’s ability to
continue as a going concern and realize its assets and discharge its liabilities in the normal course of business is dependent
upon maintaining sustained profitability and maintaining the Company’s loans in good standing. There are various risks and
uncertainties affecting the Company’s operations including, but not limited to, the viability of the economics of bitcoin
mining, the liquidity of bitcoin, the Company’s ability to maintain its security of its digital assets and execute its business
plan. The Genesis loan requires bitcoin collateral. If the bitcoin price reaches a price where Hut 8 does not have the bitcoin
to sufficiently collateralize the loan, then after a cure period of 10 days, Genesis may be able to liquidate a significant portion
of Hut 8’s bitcoin, demand immediate repayment of the loan, or terminate the loan agreement.


 


The Company’s strategy to
mitigate these risks and uncertainties is to execute a business plan aimed at continued security, operational efficiency, revenue
growth, improving overall mining profit, managing operating expenses and working capital requirements, and securing additional
financing, as needed, through one or more of loans and equity investments. Given the volatility in the financial markets, it may
be difficult to raise financing when needed. Failure to implement the Company’s business plan could have a material adverse
effect on the Company’s financial condition and/or financial performance. Accordingly, there are material risks and uncertainties
that cast significant doubt about the Company’s ability to continue as a going concern.


 


On November 20, 2019, the Company
finalized a loan for $19,956,000 (US$15,000,000) to Genesis. The loan bears interest at 9.85% per annum, payable monthly, and matures
on May 21, 2021. 85% of the loan is collateralized with bitcoin that has been transferred to Genesis. If the collateralized value
of the bitcoin drops below 75% of the loan, additional bitcoin will be sent to Genesis to bring the collateral level back to 85%.
Conversely, if the collateralized bitcoin value goes over 95% of the loan, bitcoin will be returned to the Company as long as the
85% level remains satisfied. These funds were used to repay the loan with Galaxy.


 


On February 18, 2020, the Company
completed a loan extension with Genesis for $6,615,500 (US$5,000,000). The loan bears interest at 9.85% per annum, payable monthly,
and matures on Feb 18, 2021. 100% of the loan is collateralized with bitcoin that has been transferred to Genesis. If the collateralized
value of the bitcoin drops below 90% of the loan, additional bitcoin will be sent to Genesis to bring the collateral level back
to 100%. Conversely, if the collateralized bitcoin value goes over 110% of the loan, bitcoin will be returned
to the Company as long as the 100% collateral level remains satisfied. These funds were used to repay the loan with Bitfury.





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Hut 8 Mining Corp.



Management’s Discussion and Analysis



Amended and Restated



For the three and nine months ended September 30, 2020


 


On June 25, 2020, the Company
completed its public offering (the “Offering”), and, with the underwriters exercising their over-allotment option,
issued 5,750,456 units (“Unit”) at a price of $1.45 per Unit for gross proceeds of $8,338,161. Each unit comprises
of one common share (each a “Common Share”) and one Common Share purchase warrant of the Company (each a “Warrant”).
Each Warrant entitles the holder thereof to acquire one additional common share of the Company at an exercise price of $ 1.80 per
share at any time for a period of 18 months. The Warrants are determined at $2,635,544 under the related fair value approach using
the Black-Scholes Option Pricing model based on the following assumptions: expected life of 1.5 years, interest rate of 0.30%,
volatility of 128% and dividend yield of 0%. The Company paid commissions and fees totaling $843,541 and issued 345,027 broker
warrants with a fair value of $127,986. The broker warrants are determined using the Black-Scholes Option Pricing model based on
the following assumptions: expected life of 2 years, interest rate of 0.30%, volatility of 118% and dividend yield of 0%.


 


On July 13, 2020, the Company
successfully renegotiated key terms of the loans with Genesis. The interest rate on the full amount of the loan, US$ 20 million,
was reduced to 8.00% from 9.85% per annum. The bitcoin collateral required increased from 85% of the loan value to 95%. Additionally,
if the price of bitcoin drops below US$6,500, the bitcoin collateral will automatically drop to 80% of the loan value, while interest
rate adjusts to 10.00% per annum until the bitcoin price once again increases above US$6,500. The loan will continue indefinitely
with Genesis being able to call the loan with five months’ notice, while the Company will have the option to repay with one
month’s notice and no prepayment penalty.


 


Off-Balance Sheet Arrangements


 


As of the date of this MD&A,
the Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect
on the results of operations or financial condition of the Company including, without limitation, such considerations as liquidity
and capital resources that have not previously been discussed.


 


Financial Instruments and Business Risks


 


The Company’s risk exposures and
the impact on the Company’s financial instruments are summarized below.


 


Credit risk


 


Financial instruments that potentially
subject the Company to a concentration of credit risk consist primarily of cash and deposits and prepaid expenses. The Company
limits its exposure to credit loss by placing its cash with high credit quality financial institutions.


 


For the protection of its bitcoin
on behalf of shareholders, Hut 8 does not self-custody its bitcoin. Instead, Hut 8 uses the services of BitGo. BitGo has US$100
million of insurance backing its digital asset custody and one of the highest levels of regulatory certifications in the market.
BitGo is financially backed by Wall Street firms including Goldman Sachs.


 


Interest Rate Risk


 


Interest rate risk is the risk
that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Company’s exposure to interest rate risk is limited and only relates to its ability to earn interest income on cash balances
nominated in foreign currency at variable rates. Changes in short term interest
rates will not have a significant effect on the fair value of the Company’s cash account.





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Hut 8 Mining Corp.


Management’s Discussion and Analysis


Amended and Restated



For the three and nine months ended September 30, 2020


 



Liquidity Risk


 


Liquidity risk is the risk that
the Company will not be able to meet its financial obligations as they fall due. The Company currently settles its financial obligations
out of cash and cash equivalents and digital assets. The Company has a planning and budgeting process to help determine the funds
required to support the Company’s normal spending requirements on an ongoing basis and its expansionary plans.


 


As at September 30, 2020 the contractual
maturities of financial liabilities, including estimated interest payments are as follows:


 


	 	 	Carrying	 	 	Contractual	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	amount	 	 	cash
    flows	 	 	Within
    1 year		 	1
    to 2 years	 	 	2
    to 5 years	 	 	5+
    years	 
	Accounts
    payable and
    accrued liabilities	 	$	4,090,633	 	 	$	4,090,633	 	 	$	4,090,633	 	 	$	-	 	 	$	-	 	 	$	-	 
	Loans payable and
    interest	 	 	26,678,000	 	 	 	28,812,240	 	 	 	28,812,240	 	 	 	-	 	 	 	-	 	 	 	-	 
	Lease
    commitments	 	 	328,311	 	 	 	691,651	 	 	 	35,577	 	 	 	35,577	 	 	 	69,231	 	 	 	551,266	 
	 	 	$	31,096,944	 	 	$	33,594,524	 	 	$	32,938,450	 	 	$	35,577	 	 	$	69,231	 	 	$	551,266	 



 


Foreign Currency Risk


 


Foreign currency risk is the risk
that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Foreign currency risk arises
from financial instruments (including cash and cash equivalents) that are denominated in a currency other than Canadian dollars,
which represents the functional currency of the Company. The Company’s functional currency is the Canadian dollar and most purchases
are transacted in Canadian dollars. The Company has also transacted in US Dollars to purchase mining equipment from Bitfury and
with loans payable denominated in US Dollars. Management currently does not hedge its foreign exchange risk.


 


Concentration Risk


 


Concentration risk arises as a
result of the concentration of exposures within the same category, whether it is geographical location, product type, industry
sector or counterparty type. Currently, the Company has its investment highly concentrated in a single asset, bitcoin. The Company
tracks the market price of bitcoin, less the Company’s liabilities and expenses, by investing in the assets of the company
in bitcoin.


 


Price Volatility Risk


 


The Company is at risk due to
a wide fluctuation in the price of bitcoin, the speculative nature of the underlying asset, and negative media coverage. Downward
pricing of bitcoin may adversely affect investor confidence, and subsequently, the value of the Company’s bitcoin inventory,
its stock price, and profitability.


 


Security Risk


 


Bitcoins 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 bitcoins
are held. The bitcoin network requires a public key relating to a digital wallet to be published
when used in a spending transaction and, if keys are lost or destroyed, this could prevent trading of the corresponding bitcoins.





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Hut 8 Mining Corp.


Management’s Discussion and Analysis


Amended and Restated



For the three and nine months ended September 30, 2020


 



Security breaches, computer malware
and computer hacking attacks have been a prevalent concern in the bitcoin exchange market since the launch of the bitcoin network.
Any security breach caused by hacking could cause loss of bitcoin investments.


 


Bitcoin Network Risk


 


The open-source structure of the
bitcoin network protocol means that the core developers of the bitcoin network and other contributors are generally not directly
compensated for their contributions in maintaining and developing the bitcoin network protocol. A failure to properly monitor and
upgrade the bitcoin network protocol could damage the bitcoin network.


 


Digital Assets and Risk Management


 


Digital assets are measured using
level two fair values, determined by taking the rate from Coinmarketcap.com.


 


Digital asset prices are affected
by various forces including global supply and demand, interest rates, exchange rates, inflation or deflation, and the global political
and economic conditions. The profitability of the Company is directly related to the current and future market price of bitcoin;
in addition, the Company may not be able liquidate its inventory of digital assets at its desired price if required. A decline
in the market price for bitcoin could negatively impact the Company’s future operations. The Company has not hedged the conversion
of any of its sales of bitcoin.


 


Bitcoin has a limited history
and the fair value historically has been volatile. Historical performance of bitcoin is not indicative of its future price performance.
The Company’s digital assets currently solely consist of bitcoin.


 


Related Party Transactions


 


See the unaudited condensed consolidated
interim financial statements for the three and nine months ended September 30, 2020, for related party transactions with respect
to share issuances.


 


During the three and nine months
ended September 30, 2020, the Company was charged $325,884 (2019 - $5,419,253) and $ 2,259,087 (2019 - $15,475,339), respectively,
in site operating costs by Bitfury. The reduction in cost is the result of the Company taking over the site management from Bitfury.
As at September 30, 2020, $658,868 (September 30, 2019 - $166,814) was owed to Bitfury, which has been included in accounts payable.


 


The Company also made payment
to Andrew Kiguel, the previous CEO, through his numbered corporation 1138029 B.C. Ltd, a one-time $500,000 consulting fee to assist
with the transition to the Interim CEO.


 


These transactions were made on terms equivalent to
those that prevail in arm’s length transactions.





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Hut 8 Mining Corp.


Management’s Discussion and Analysis



Amended and Restated



For the three and nine months ended September 30, 2020


 


Critical Accounting Estimates and Accounting Policies


 


The following are the estimates and assumptions
that have been made in applying the Company’s accounting policies that have the most significant effect on the amounts in
the unaudited condensed consolidated interim financial statements:


 


i.       Fair
value measurement of stock options and broker warrants


 


The Company measures the cost of equity-settled transaction
by reference to the fair value of the equity instruments at the date on which they are granted. Estimating fair value requires
determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also
requires the determination of the most appropriate inputs to the valuation model including the expected life of the broker warrants,
volatility and dividend yield and making assumptions about them.


 


ii.       Revenue
recognition


 


The Company recognizes revenue from the provision
of transaction verification services within the bitcoin blockchain, and as consideration for these services, the Company receives
bitcoin. Revenue is measured based on the fair value of the bitcoin received. The fair value is determined using the closing bitcoin
price each day per Coinmarketcap. The Company is relying on the data available at Coinmarketcap to be an accurate representation
of the closing price for the digital assets.


 


iii.       Fair
value of digital assets


 


Digital assets, consisting solely of bitcoin, are
measured at fair value using the quoted price on Coinmarketcap. Management considers this fair value to be a level two input under
IFRS 13 Fair Value Measurement fair value hierarchy as the price on this source represents an average of quoted prices on multiple
digital currency exchanges. The bitcoin is valued based on the closing price obtained from Coinmarketcap at the reporting period
corresponding to the digital assets mined by the Company.


 


The Company’s determination to classify its holding
of bitcoin as current assets is based on management’s assessment that its bitcoin held can be considered a commodity and
the availability of liquid markets to which the Company may sell a portion or all of its holdings.


 


iv.       Non-monetary
transactions


 


Non-monetary transactions for the exchange of bitcoin
for various goods and services are measured at the fair value determined from the exchange amount. Fair value of the bitcoin is
determined at the time of transaction.


 


v.       Share
based transactions


 


Equity-settled share-based payment transactions with
parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot
be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date
the entity obtains the goods or the counterparty renders the service.


 


The Company issued broker warrants as part of brokered
private placement offering for common shares. Broker warrants are measured at fair value at the date of the offering and accounted
for as a separate component of shareholders’ equity. When the broker warrants are exercised, the proceeds received together
with the related amount allocated as a separate component of shareholders’ equity are allocated to capital stock. If the
broker warrants expire unexercised, the related amount separately allocated to shareholders’ equity is allocated to contributed
surplus.





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Hut 8 Mining Corp.


Management’s Discussion and Analysis


Amended and Restated



For the three and nine months ended September 30, 2020


 


vi.       Useful
life of mining equipment


 


Management is depreciating mining equipment using a
straight-line basis, with a useful life of:


 


	Seacan containers and supporting infrastructure	4 years




	Mining servers	2 years



 


The mining equipment is used to generate bitcoin.
The rate at which the Company generates digital assets and, therefore, consumes the economic benefits of its mining equipment are
influenced by several factors including, but not limited to, the following:


 


		•	The complexity of the mining process which is driven by the algorithms contained
within the digital assets open source software; and



 


		•	Technological obsolescence reflecting rapid development in the mining machines such that more recently
developed hardware is more economically efficient to run in terms of digital assets mined as a function of operating costs, primarily
power costs (ie., the speed of mining machines evolution in the industry) is such that later mining machine models generally have
faster processing capacity combined with lower operating costs and a lower cost of purchase.



 


Based on the Company and the industry’s limited
history to date, management is limited by the market data available. Furthermore, the data available also includes data derived
from the use of economic modelling to forecast future digital assets and the assumptions included in such forecasts, including
digital asset’s price and network difficulty, and derived from management’s assumptions. Based on current data available,
management has determined that the straight-line method of amortization best reflects the current expected useful life of mining
equipment. Management will review their estimates at each reporting date and will revise such estimates as and when data become
available. Management will review the appropriateness of its assumption related to residual value at each reporting date.


 


vii.       Taxes


 


Uncertainties exist with respect to the interpretation
of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. The Company has not recognized
the value of any deferred tax assets in its statements of financial position.


 


The Company recognizes the tax benefit from an uncertain
tax position only if it is more likely than not that the tax position will be sustained based on its technical merits. The Company
measures and records the tax benefits from such a position based on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement. The Company’s estimated liabilities related to these matters are adjusted in
the period in which the uncertain tax position is effectively settled, the statute of limitations for examination expires or when
additional information becomes available. The Company’s liability for unrecognized tax benefits requires the use of assumptions
and significant judgment to estimate the exposures associated with our various filing positions. Although the Company believes
that the judgments and estimates made are reasonable, actual results could differ and resulting adjustments could materially affect
our effective income tax rate and income tax provision.


 


The Company has earned bitcoin
from the commercial activity of bitcoin mining. The Company has followed the published Canada Revenue Agency (“CRA”)
view that bitcoin is a commodity and inventory of the business, the value of which is included in the calculation of taxable income
from the business. Bitcoin is valued in accordance with Section 10 of the Income Tax Act. Revenue from bitcoin mining is included
in taxable income when the bitcoin earned is sold or exchanged for cash or another asset. There is uncertainty regarding the taxation
of cryptocurrency and the CRA may assess the Company differently from the position adopted. This could result in additional current
taxes payable with equal offset to deferred tax expense.




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Hut 8 Mining Corp.



Management’s Discussion and Analysis



Amended and Restated



For the three and nine months ended September 30, 2020


 


Capital Management


 


The Company’s capital currently
consists of Common Shares. The Company’s capital management objectives are to safeguard its ability to continue as a going
concern and to have sufficient capital to be able to identify, evaluate and then acquire an interest in a business or assets. The
Company does not have any externally imposed capital requirements to which it is subject. The Company manages the capital structure
and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To
maintain or adjust the capital structure, the Company may attempt to issue new shares.


 


Management’s Report on
Disclosure Controls and Procedures and Internal Control over Financial Reporting


 


Management is committed to delivering timely and accurate
disclosure of all material information.


 


Disclosure controls and procedures
ensure that reporting requirements are satisfied, and that material information is disclosed in a timely manner. Due to the limitation
on the ability of the officers to design and implement cost-effective policies for disclosure controls and procedures and internal
control over financial reporting, the officers are not making representations that such controls and procedures would identify
and allow for reporting material information on a timely basis, nor are they representing that such procedures are in place that
provide reasonable assurance regarding the reliability of financial reporting.


 


However, as permitted for TSX
issuers, the CEO and CFO individually have certified that after reviewing the unaudited condensed consolidated interim financial
statements for the three months and nine months ended September 30, 2020 and this MD&A of the Company, there are no material
misstatements or omissions, and the filing materially presents the unaudited condensed consolidated interim financial position
and consolidated results of operations and cash flows for the three months and nine months ended September 30, 2020 and all material
subsequent activity up to November 12, 2020.


 


Share Capital


 


As of the date of this MD&A,
the Company has issued, and outstanding share capital comprised of 96,732,324 Common Shares, 795,000 stock options, 8,317,205 warrants,
and 406,667 restricted share units.


 


Additional information and other
publicly filed documents relating to the Company are available through the internet on the Canadian Securities Administrators’
System for Electronic Document Analysis and Retrieval (“SEDAR”), which can be accessed at www.sedar.com.





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