Why Bitcoin Didn’t Fail When the Rest of the Internet Did

Why Bitcoin Didn’t Fail When the Rest of the Internet Did

It may come as a surprise to you…

But over the course of nearly a decade of covering cryptocurrencies, the most frequent question I get asked about bitcoin is not about its price.

The most frequent question I get is what happens if the power grid fails?

The question is usually phrased like this:

“Hey Big T, what happens to bitcoin if a hostile actor uses an electromagnetic pulse (EMP) to take down the national grid?”

“Or what happens if a natural disaster knocks out the grid? Or if aliens attack? If there’s no power, how can we access digital assets like bitcoin?”

My typical answer to this question would be along the lines of, “If the power grid goes down, you’ll have bigger problems than worrying about accessing your bitcoin.”

I know that may sound like I’m being dismissive. But if an EMP pulse or a solar flare knocked out the entire electrical grid, I don’t think your biggest concern will be bitcoin.

Still, let’s examine the question anyway since it’s on the minds of so many folks.

Blockchain technology is an evolution of how to use the internet. Remember the internet is built on centralized servers. Blockchains are built on decentralized servers.

Since there are many blockchains, let’s focus on the blockchain that houses the most value, the bitcoin blockchain.

Using the bitcoin blockchain, you can send almost anything of value as a tokenized asset to other people. That means everything from commercial property rights, home deeds, vehicle titles, to financial securities and collectibles.

It bears repeating, the main difference between the internet and the bitcoin blockchain is that the internet is largely centralized and the bitcoin blockchain is decentralized.

To access services over the traditional internet, consumers must go through websites controlled by “gatekeepers” like Google, Apple or Facebook.

The bitcoin blockchain doesn’t require “permission” to use. There are no gatekeepers. No central authority can block access to the bitcoin network.

The bitcoin blockchain also doesn’t require “trust” to use. That means you don’t need a third-party trust provider like a bank to approve or deny transactions.

Because the current gatekeepers like Google and Facebook collect vast amounts of data and the blockchain does not, the blockchain does a better job protecting user privacy.

Of course, you need to connect to the internet to use the bitcoin blockchain.

So again, it’s a legitimate question to ask what happens to the value of your digital assets when the internet goes down.

Fortunately, last week we got a real-world test case of what happens to bitcoin when the internet fails. And unsurprisingly, bitcoin passed with flying colors.

The Biggest Tech Failure in History

Last Friday, the world experienced the biggest information technology (IT) failure in history.

It all started when a botched software update from cybersecurity firm CrowdStrike crashed countless Microsoft Windows computer systems globally.

And when I say this was the world’s biggest IT failure, I’m not exaggerating.

According to news reports, airport hubs from New York to Berlin struggled with delays, cancellations and stranded passengers. FlightAware said more than 21,000 flights were delayed around the world.

The London Stock Exchange Group had to temporarily halt the bourse from publishing news on its website. Major banks like JPMorgan Chase, Bank of America and Japanese investment house Nomura Holdings were forced to revert to backup systems.

The disruptions also impacted critical infrastructure, including emergency services.

Doctors in the United Kingdom couldn’t access scans, blood tests and patient histories. And hospitals in Europe and the United States reported having to close clinics and cancel procedures. The outage even affected 911 and emergency systems.

Shares of CrowdStrike dropped as much as 15% on Friday, wiping about $7.4 billion off its market value. U.S. stocks fell 1% over worries of a global IT outage.

That may not seem like a lot. But 1% of the S&P 500 is roughly $450 billion.

You’d think with all the uncertainty and volatility caused by this global outage, bitcoin would have failed miserably. After all, bitcoin is considered exceptionally volatile and is wholly dependent on the internet.

Yet, bitcoin bounced nearly 5% on the news. Other major cryptos like Ethereum and Solana were up 3% and 7%, respectively.

So what gives?

Why didn’t bitcoin crash when most of the internet failed last Friday for thousands of companies and affecting billions of people around the world?

The Simple Reason Bitcoin Didn’t Fail When Everything Else Did