Calculating Bitcoin’s Energy Use — Accounting for the ASIC Supply Chain

Hass McCook
3 min readJan 9, 2019

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In my recent 10-part article series study on The Cost & Sustainability of Bitcoin, I opened with a piece on what my personal interpretation of “Energy” was so that I could set a context for my study. You could also take it as assumed reading (or watching on YouTube on 1.25 speed) so as to keep this piece as short as possible.

Video Playlist of August 2018 study

I argued that EVERYTHING was “Energy” in one manifestation or another, and I made a firm distinction between money and currency. I also made a distinction with capitalisations, showing that Energy is finite, but infinitely divisible into units of energy, just as Bitcoin is finite but infinitely divisible in units of bitcoin.

Taking creative liberty with the transitive property of algebra, I argued that Energy = Mass = Nature = Money, Money = Bitcoin, leading to Bitcoin = Energy and Bitcoin = Nature. As you can see, the deeper your philosophical and spiritual views on Energy, Nature, Life and “The way it is”, the quicker you see the unimportance of the energy question. Bitcoin IS Energy. It is the global store of Monetary Energy. It runs as Nature wills.

But many people do question its energy use, and rightly so. It is an extremely difficult topic and philosophy to learn and understand. A lot of people also attempt to quantify energy use, and many hit the nail on the head in terms of electricity used to run mining rigs. Some even cover the full range of OPEX and include cooling consumption. But few mention CAPEX energy, and the manufacture of ASICs. Money is energy after all…

From my study, we saw that the manufacture of ASICs was more than half of all energy consumption of the Bitcoin network. This was reflected in the fact that the CAPEX component of the cost to mine is higher than the OPEX component — recall, energy = money, and more money spent on CAPEX means there is more “embedded energy” within the CAPEX. Energy is also mass, and each ASIC is about 7kg of raw material, alongside silicon componentry which requires huge amounts of energy to fabricate.

Every single thing in the ASIC supply chain costs money (and thereby costs energy) to procure — from the mining of base metals and fossil fuels, shipping, refinement, shipping, production, more shipping, assembly, and final delivery. This is all reflected in the ASIC’s final price. Since you need an ASIC to mine bitcoin, and you need to add to and replace them very frequently, it is only right that the energy (i.e. money) used to obtain them be included in modelling the network’s power use.

Updating my figures from July 2018, my model demonstrates that miners consume, directly AND indirectly, 100 MWh in total to produce a bitcoin. If you have a look at average power costs around the network of around 4 cents/kWh, this produces $4,000 — which is almost the exact market price of a bitcoin at time of publication. Embedded into this price are the costs and profits of every part of the supply chain, all the way to your wallet. If you see Bitcoin acting as the eventual arbiter of monetary energy value and driver of economic and environmental efficiency, then you will not find this coincidental.

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Hass McCook
Hass McCook

Written by Hass McCook

Bitcoin Evangelist. BEng MEngSc MBA

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