Cryptocurrency is understood as natively digital: everything happens virtually, without ever interacting with the physical world. Now a semiconductor shortage is undermining that narrative. Bitcoin’s infrastructure is tangible material: miners, wallets, modems, switches, and everything depends on semiconductors currently severely affected by a global supply shortage.
Scaling Bitcoin depends on physical production capacities. As it goes global, the demand for everything related to Bitcoin has increased, be it for commodities, computer parts or specially designed products like hardware wallets and refrigeration plates. When global supply chains falter, as they have over the past two years, every aspect of Bitcoin’s presence in the physical world is affected.
Hardware wallets are now more in demand than ever before, a trend that is only expected to increase between now and the expected end of the shortage in 2023. With one-year lead times for critical electronic components, the challenge now is to plan for the ever-growing interest in auto-custody and be prepared to provide new users with access to security even if chips and other assets are affected by further disruptions in supply.
The supply of semiconductors has been tight for two years now, a ripple effect of a workforce affected by a global pandemic. As a highly centralized industry, there are only three advanced semiconductor producers in the world. Biggest TSMC expects phenomenal result 24% increase in turnover this year after raising prices to compensate for supply chain disruptions and increased demand.
Due to the shortage, many consumer industries are severely affected. Automobile manufacturers have been forced to stop operations, while phone makers – the biggest consumers of semiconductors – struggle to secure as much production capacity as possible.
There are several aspects at the origin of supply problems, but ultimately this is due to a ripple effect of total economic shutdown at the onset of the pandemic and rapid changes in demand caused by fear and uncertainty. The wait time for delivery of an order for semiconductor chips is now around a year, and with the freight and shipping industries having their own issues, supply will take time to return to its normal state. old rhythm.
There is no easy solution to the shortage of supplies. Chip foundries require large investments and take time to plan and build. While new production plants are expected to be built in the coming years, the the shortage should be corrected before they can be built, as orders become more predictable and the order book begins to shrink.
The chip shortage was to be expected. Demand is skyrocketing as we become more reliant on technology. Crypto is a particularly extreme case, with mining becoming more popular on GPUs and ASICs, with more and more people running dedicated nodes and switching to hardware wallets, and the exponential scaling of new technology to come into the world.
Crypto depends on semiconductors in many ways. Without access to the hardware, network growth would begin to stagnate and more people would risk losing access to their parts. While there is no need to panic just yet, it serves as a warning not to assume that the critical infrastructure needed to scale bitcoin will still be available.
How the shortage affects hardware wallets
The exceptional circumstances of the past two years have already caused disruption, with couriers experiencing significant delays. Wait times for hardware wallets increased earlier this year, and current industry conditions are expected to lead to another period with longer delivery estimates.
For those considering a hardware wallet to protect their coins, it may be a good idea to place their order earlier to ensure delivery is not affected by further disruptions. Trezor is committed to providing access to security for all and will adapt as the situation evolves to ensure that hardware wallets continue to be widely available.
Hardware wallet chips
Trezor was designed to be truly open source, so anyone can build it themselves with standard parts. This means that the chips used are easy to find and usually in abundance.
From the Trezor GitHub repository, you can download the schematics of the Trezor Model One and Trezor Model T hardware wallets. Take a look at this schematic:
The image above is an excerpt from the Trezor model T drawings. The specific model number and architecture of the STM32F4 microcontroller chip are shown here, which can be obtained from standard electronics distributors around the world.
The advantage of using a standard chip is that anyone with an electronics background can create their own Trezor, keeping access to security open.
Chip production has long followed a trend known as Moore’s Law, where double the amount of transistors can be produced every two years. This means that prices should come down over time, but if you’ve been following recent news cycles, you haven’t: average component costs are. up 15% in 2021, reflecting the pressure on supply chains and production.