Category Archives: Bitcoin

The Math of Bitcoin III

Blunt Hammer has been looking at and working through the math of Bitcoin as it relates to data centers over the past several weeks and the more we dig, the more we see Bitcoin working the way it should and also how there are several cracks in the system. Many news stories, especially the one by Newsweek trying to relaunch itself – apparently into oblivion – have added more stories about Bitcoin that are for the ‘standing in the checkout line’ crowd vs. people who want to understand its potential as currency for their business.

‘The Face of Bitcoin’ story threw the media into a frenzy because they thought there was finally a man, one human, who was allegedly behind it and would have answers. It reminded me of the running segment in Forrest Gump when reporters are running next to him with cameras asking him why he does it, and people thinking he was some kind of messiah or had answers. Nope. Newsweek got Gumped. The math analogy here is Bitcoin = 1, Newsweek =0. In fact, had Newsweek done even some basic research they would have found what I did – a link to a bunch of quotes from Satoshi Nakamoto going back to January of 2009. More than 5 years ago. Take a look and you may see as I did, the guy created something, opened it up to a community of other smart people and left it to go do something else not knowing if what he had created would have the impact or value it does today.

The real math I was doing however in spite of the riveting OJ-esque white bronco chase was related to the additional load the Bitcoin and crypto mining in general will add to the current electrical system worldwide. The rigs have the same electrical draw of an entire 42 U cabinet. In 4u of space. The rigs are chips and fans, a board, and case. The power supplies don’t ship with most of them, so like we used to say – batteries not included. So data centers where 2.5 KW were taken up by entire cabinets, now will have that inventory sucked up by something 1/10th the size. Said another way – it’s a 10x rise in density. That is an incredible amount of heat to add to a data center, especially ones that can’t handle a 2-3x increase from 2.5 up to 10 Kw/cabinet

Satoshi Nakamoto posted this on Aug. 9, 2010: ‘If you’re using electric heat where you live, then your computer’s heat isn’t a waste. It’s equal cost if you generate the heat with your computer. If you have other cheaper heating than electric, then the waste is only the difference in cost. If it’s summer and you’re using A/C, then it’s twice. Bitcoin generation should end up where it’s cheapest. Maybe that will be in cold climates where there’s electric heat, where it would be essentially free.’

Satoshi knew that heat was the issue four years ago when rigs were no where near the power they are today. In fact the hash rate was at 3GH back in August when he made that statement, and now it is at 40.8 MILLION GH! The computing power and electricity required to sustain and grow the hash rate is the Achilles heel of the entire network’s profitability because of the heat. When we use A/C to manage it, the cost of Bitcoin production doubles, and that doesn’t take into account any efficiency factors in a data center. As we have said many times, computers turn electricity into heat which is great if you live above the Arctic Circle 12 months a year, however for most of civilization that is not the case and A/C will be used to manage the heat that is produced from mining rigs. If the power costs are higher than the ability to make money making Bitcoin, there is no profit.

Here is a real world example of costs for a 1.0 MW Bitcoin mining operation:

1 MW IT load = 1,000 Kw

Cost per Kw (rent) = $100/kw 

Cooling ‘uplift’ = 50% (assumes a PUE of 1.5) 

Cost of power = .10 per Kwh

1,000 Kw (load) * 730 (hours in a month) * .1 (price per Kwh) = $73,000 for IT load power. Add 50% for cooling

Power =$109,000 per month at full load plus $100,000/rent = $209,000 per month = $2,514,000 per year for a 1 MW mining operation.

 As hash rates go up and the math gets harder and reinvestment in faster rigs is required just to keep up, you MUST eliminate costs of mining, which is all about managing power costs. Cut power costs, find efficient ways of cooling, and buy the most efficient rigs you can find. This is an arms race for the next 16 years, and you cannot bring bullets to gunfights.

If you want us to help you model out a successful mining approach of your own, email mark AT We are working on several game changing technologies…


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