By Thomas Granier | Published on 1 November 2026
In Blockstream and Others v. Innosilicon, three entities concluded agreements for the purchase of Bitcoin mining equipment from Innosilicon.
The mining equipment underperformed because defective chip components prevented it from achieving the computing capacity required under the agreements.
The claimants sought compensation for the bitcoins which they said they ought to have obtained had the purchased equipment complied with the standards set out in the agreements (i.e., a combined computing capacity (“hash rate”) of 232.88 PH/s).
The tribunal quantified the claimants’ lost mining rewards at 1,871.61 BTC, with the corresponding monetary damages determined in USD in the final award.
Blockstream Corp. (“Blockstream”) is a Canadian-registered industry leader in Bitcoin and blockchain technology providing crypto-related solutions.
Thigmotropism LLC (“Thigmotropism”) is a US-registered company.
Adam Back (“Mr. Back”, together with Blockstream and Thigmotropism, shall be referred to collectively as the “Claimants”) is the CEO of Blockstream and also mines Bitcoin for personal and commercial use.
The Claimants each concluded an agreement (together, the “Agreements”) with Innosilicon Technology Ltd (“Innosilicon”), a company registered in China, for the purchase of Bitcoin mining equipment. The Agreements provided :
- Blockstream agreement: contract price of USD 10,000,000, based on 113.6 PH (petahash) at USD 88/TH (terahash);
- Thigmotropis agreement: contract price of USD 10,000,000, based on 113.6 PH at USD 88/TH; and
- Mr. Back’s agreement: contract price of USD 50,000, based on 5.68 PT at USD 88/TH.
Taken together, the Agreements represented a value of USD 20.5 million (paid in full by the Claimants) and a hash rate of232.88 PH/sec. A hash rate measures the number of cryptographic calculations which a mining equipment can perform per second; one petahash per second (PH/sec) equals one quadrillion such calculations per second.
Delivery took place from 12 February 2018 to September2018. The contractual delivery date was 25 May 2018.
In May 2018, the Claimants complained that the miners delivered by the Respondent were defective. They argued that the aggregate hash rate was 121.27 PH/s (i.e. just above 52% of the aggregate rate under the Agreements).
Innosilicon knew from March 2018 that there was an issue with the miners’ chips. It addressed the issue with its supplier. It gave the Claimants assurances that it would fix the issue and send workers for on-site repairs, but such repairs never occurred.
On this basis, on 30 December 2020, the Claimants initiated arbitration proceedings requesting payment of:
- The market value of BTC 530.6 at the date of the award plus USD 6,169,975 in lost hosting fees for Blockstream;
- The market value of BTC 1,736.4 as of the date of the award less USD 16,266,011 in incremental electricity costs for Thigmotropism;
- The market value of BTC 64.4 as of the date of the award, less USD 397,943 in incremental electricity costs.
Two main issues were central to these proceedings: (i) whether Innosilicon had breached the Agreements; and (ii) whether Innosilicon was liable for the Claimants’ consequential or, alternatively, direct losses. As explained below, the tribunal found in favour of the Claimants.
The tribunal found that Innosilicon had breached the Agreements on three grounds.
First, Innosilicon breached the Agreements by delivering defective miners and power supply units (“PSUs”).
Under the laws of Hong Kong, there is an implied undertaking as to the quality or fitness of goods sold in the course of a business. This undertaking applies to contracts governed by the laws of Hong Kong such as the Agreements (paras 162-163, 167).
Given that both the miners and the PSUs formed an integral part of the Agreements and were to be sold by Innosilicon to the Claimants, the tribunal found that Innosilicon had a quality and fitness obligation towards the Claimants (para. 167).
The tribunal therefore found Innosilicon liable for breaching the Agreements by supplying defective miners and PSUs to the Claimants.
Secondly, Innosilicon breached the Agreement by failing to deliver the miners and PSUs before the contractual deadline (para.177).
Thirdly, the Respondent breached its warranty obligation.
While the Parties disputed the meaning of “claimants’ claim validation” in the warranty clause, the tribunal found that the Respondent had breached its obligation on the following grounds:
- The Claimants informed the Respondent of the deficiencies numerous times;
- The Respondent confirmed the cause of the defect;
- The Respondent went on-site and told the Claimants that it would send assistance to fix the issue, but never did;
- The Respondent never suggested that the Claimants should ship the miners to it (para. 184).
The tribunal found the consequential losses (i.e. the Bitcoin mining rewards the Claimants would have earned and the feesBlockstream would have earned for hosting the mining equipment had it functioned properly) to be partially recoverable. Accordingly, it did not need to decide on the alternative claim relating to direct losses. The Claimants’ case was simple: had the miners functioned properly during their lifespan (3 years), they would have mined an additional BTC 2,331.7. Blockstream further claimed lost hosting service fees, less the incremental electricity costs for hosting.
To reach this conclusion, the tribunal addressed (i) causation; (ii) mitigation; (iii) remoteness; (iv) the date ofassessment of damages; and (v) nominal damages.
Innosilicon argued that the Claimants would have suffered the same damage had the miners complied with the contractual standards, as they lacked the electrical capacity to operate all the miners and there had been a drop in the profitability of Bitcoin mining, which would have caused the Claimants to stop operating the miners in any event (paras 229-231).
The Claimants responded that, had the miners been delivered without defects, they would have been “virtually certain” to receive the “lost Bitcoin” as a reward from what was then called Slush Pool. They added that they did not increase the electrical power before February 2019 as the miners were defective and the cause of the defect was unclear. Finally, on the profitability point, the value of Bitcoin increased between 2018 and 2020, and, in any case, the Claimants’ goal was to benefit from the increase in the long term, so a short-term decrease would not have affected them (paras 236-238).
The tribunal found that the Claimants had demonstrated sufficient causation between the defective miners and the lost Bitcoin mining rewards, and was persuaded that the Claimants had made all reasonable efforts to increase their electrical and hosting capacity before the scheduled delivery of the miners (para. 239).
Innosilicon argued that the Claimants did not mitigate their losses for two reasons: (i) they could have purchased the lost Bitcoin mining on the market and then claimed the difference as consequential loss; and (ii) they could have purchased replacement miners or returned the defective ones to Innosilicon (para. 240).
The Claimants reiterated that it was for Innosilicon to establish their failure to mitigate and the increased harmcaused by that failure. They added that they should not have been required to take unreasonable risks or incur unreasonable costs to obtain the additional miners they ought to have received from Innosilicon. Finally, had the Claimants been able to buy the lost Bitcoin mining on the market, this would not have mitigated their losses, given that, if the miners had been compliant, the Claimants would have had double the number of bitcoins (paras 241-243).
The tribunal rejected Innosilicon’s arguments as the Claimants had done everything they could to mitigate their losses: they complained to Innosilicon and asked whether the defective units could be replaced (para. 269). While they were told that personnel would come to fix the issue, this never materialised, and the proposed alternative miners were those of a third party. Accordingly, the tribunal rejected Innosilicon’s argument that the Claimants had to buy the lost Bitcoin mining on the market or purchase replacement miners or PSUs.
Innosilicon argued that the Claimants werepartly claiming lost profits from their own Bitcoin investment strategy andthat this loss was not recoverable because it was (i) too remote, (ii) not withinInnosilicon’s reasonable contemplation at the time the Agreements wereconcluded, and (iii) not a loss for which Innosilicon had ever assumed responsibility(para. 246).
The Claimants merely reiterated that the lossof Bitcoin was the only loss claimed and could not be too remote, since it wasthe obvious loss they would suffer if Innosilicon failed to fulfil itsobligations properly (para. 247).
The tribunal noted that the Claimants had onlypleaded the loss of Bitcoin (para. 272), but that valuing it at the date of theaward, as requested, could mean that the Claimants were, in fact, seekingcompensation for their investment strategy (para. 273). This is addressed below.
The Claimants argued that damages should be assessed at the date of the award, given their inability to find alternative means of mitigating their losses. Accordingly, the lost mining rewards should be valued at the Bitcoin price prevailing at the date of the award (paras 251-253).
Innosilicon initially submitted that damages should be assessed at the date of the breach. Yet, it later admitted that the assessment could also be made at the end of the miners’ lifespan (i.e. 3 years) (paras 254-255).
Given that, under Hong Kong law, the role of damages is to put the injured party in the position in which it would have been, had the damage not occurred, the tribunal noted that the valuation date should, in principle, be that of the breach. However, given that the miners would only have started operating on that date, the tribunal proceeded on the basis of the miners’ lifespan and found that, had the miners operated without defects, the Claimants would have mined an additional 2,331.6 BTC (paras 256; 258-259). This number should then be multiplied by the average daily closing price of BTC overthe period (para. 259).
Innosilicon argued that the Claimants had failed to plead the number of defective miners and that, as a result, only nominal damages could be awarded. While the Claimants relied on Slush Pool’s data to support their point on the hash rate, Innosilicon noted that this did not allow it to know how many of the miners were connected when the rate was measured (para.275).
The Claimants noted that this was irrelevant to their claim since the issue was that the aggregate hash rate was barely above 50% of what Innosilicon had promised them (para. 265), and that the only possible explanation for this was the miners’ deficiencies. The Claimants added that there was no reason for them not to connect all the miners (para. 275).
The tribunal was mindful of undisputed evidence confirming that, at one point, around 5,000 miners were not working (para. 277) and that not all miners had the same computing power. Accordingly, the tribunal found a failure rate of 38.46%, instead of the 47.9% submitted by the Claimants. Consequently, the amount of lost Bitcoin mining rewards was 1,871.61 (para. 280).
The tribunal ordered the Parties to provide it with the daily average price of BTC in USD over the relevant period. In its Final Award, the tribunal ordered Innosilicon to pay the Claimants the following amounts:
Blockstream: USD 5,875,968.12 (corresponding to BTC 425.98);
Thigmotropism: USD 19,225,939.26 (corresponding to BTC 1,393.79);
Mr. Back: USD 715,080.96 (corresponding to BTC 51.84).
Defective Bitcoin mining equipment can give rise to claims for lost mining rewards. In this case, the tribunal found contractual breaches concerning equipment quality, delivery and warranty obligations, and held that lost mining rewards were partly recoverable.
Operational evidence is central to proving and quantifying loss. The tribunal examined the claimants’ electrical and hosting capacity, mining performance and evidence of equipment failures
Mitigation does not necessarily require purchasing Bitcoin or replacement equipment. The tribunal rejected those arguments on the facts, taking account of the claimants’ efforts to obtain repairs or replacements.
The valuation date matters. Rather than using Bitcoin’s price at the date of the award, the tribunal adopted a valuation based on average daily closing prices over the relevant mining period, with monetary damages determined in the final award.
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