Pledged collateral
Eligible collateral can include posted BTC reserves, pledged hashrate and block rewards, ASIC hardware, infrastructure, energy contracts, and other approved property. The primary collateral is the mining fleet itself. Because Prime Lending is a BTC-denominated loan, the package is valued in BTC. The borrower posts BTC collateral as part of the package, typically around 30% of principal, and the combined package targets roughly 150% coverage of the loan. Financing is structured through a ring-fenced program vehicle with first-lien security over pledged program assets, perfected through UCC-1 filings. Pledged ASICs are not credited at full market value. They are assessed at a discount of roughly 30% to 50% to current market value before entering the package, so $1 million of ASICs supports about $500,000 to $700,000 of assessed collateral value, which is then denominated in BTC. Efficient machines retain operating usefulness and secondary-market demand deeper into a downturn, while older machines experience faster economic obsolescence. The decisive credit issue is the price realized during stress, which is why the hedge is designed to create value during the same BTC decline that compresses ASIC prices.Why hardware is credited as collateral
Crediting the fleet changes the composition of the collateral package, not the level of coverage. A BTC-only facility reaches roughly 150% coverage entirely in Bitcoin. A Mezzamine program reaches comparable coverage with about 30% of principal in posted BTC and the assessed value of the fleet behind it, under a first-lien claim. Four conditions have historically kept lenders from crediting mining hardware. Each is addressed by a specific mechanism.
The second row is the load-bearing one. Without it, hardware is an asset a lender would be seizing at its weakest price for the same reason the loan defaulted, which is why the market has priced it at zero borrowing capacity.
Pledged hashrate
Pledged hashrate is controlled by routing the fleet’s block rewards to a monitored program address. This gives the program a controlled, verifiable production stream rather than an unsecured claim on the operator’s output. The mechanics of controlled receipts and the operating waterfall are described in Cash-Flow Control.Hedge value
Hedge positions, margin, and profits are pledged to the program but are excluded from opening LTV unless otherwise specified in the facility terms. During the life of the program, hedge profits accrue to the lender and may, with lender approval, support debt service during adverse conditions. In default, hedge margin and realized hedge profits are liquidated and transferred to the lender as part of collateral recovery.LTV and coverage maintenance
The target LTV is 60% to 70%, which corresponds to roughly 150% collateral coverage, measured as:LTV = outstanding loan value / eligible pledged collateral value
Recovery waterfall
If a scheduled payment remains uncured after the cure period, an event of default is triggered and recovery moves from liquid and controlled assets toward less liquid physical assets:1
Controlled BTC and mining receipts
BTC reserves and controlled mining receipts are applied first. Controlled BTC receives a small realization haircut for transfer and execution costs.
2
Hedge proceeds and margin
Hedge margin and realized hedge proceeds are liquidated next, subject to an execution and transfer haircut.
3
ASICs and other pledged assets
Remaining shortfalls are recovered through liquidation of pledged ASICs and other real-world assets, using a modeled secondary-market value net of liquidation and sale costs.
Reference recovery in severe stress
The severe combined stress scenario is the reference tail case, combining a BTC decline from $80,000 toward the mid-$30,000s within eight months, 35% annual network growth, 90% uptime, higher power cost, exhausted borrower liquidity, and an additional haircut on ASIC recovery. It shows how the recovery layers stack.
The unhedged structure carries the only modeled principal loss in this tail case. Each hedged structure closes the gap through a different combination of delayed default, banked hedge value, and reduced dependence on a forced hardware sale.