Power Outages Highlight Cash’s Importance and Crypto’s Limitations
The recent widespread power failures that affected Portugal and Spain have underscored the significant role cash plays in emergencies. These outages have raised important questions regarding the decentralized nature of cryptocurrency, especially as it depends on centralized electricity systems. In light of these events, BeInCrypto engaged with representatives from CertiK, Brickken, Wanchain, and Money on Chain to explore the implications for public confidence in cryptocurrency and the necessary advancements to ensure continuous financial services, even when conventional systems fail.
Financial Transactions Come to a Standstill
Last week’s significant power interruption left millions of people in Spain and Portugal without electricity, with ripple effects felt in parts of France and Morocco. Research from the Baker Institute indicates that Spain experienced a loss of around 15 gigawatts of electricity capacity in a mere five seconds, which accounted for 60% of the country’s electricity demand. The outages persisted for approximately 18 hours. During this time, traditional banking services, digital wallets, and ATMs became inoperative due to the lack of internet and power. Natalie Newson, a Senior Blockchain Investigator at CertiK, noted, “When power grids fail, the entire ecosystem behind these systems comes to a standstill: mobile phones can’t connect, ATMs shut down, and internet-based wallets become inaccessible. In such moments, the digital economy reveals a crucial vulnerability—without electricity, the benefits of technologically driven finance evaporate.” In the absence of digital options, cash regained its status as the preferred payment method. Manuel Ferrari, Co-founder of Money On Chain, emphasized the importance of physical cash, stating, “This illustrates why access to cash is vital, not just in developing nations, but also in industrialized countries, as evidenced by the recent outages in Europe. Digital systems, whether centralized or decentralized, ultimately rely on power and connectivity. Cash remains a dependable alternative when digital tools fail.”
The Question of Cryptocurrency Usability in Crises
The necessity for physical currency during power outages raises concerns about the effectiveness of cryptocurrency as a financial solution in crises. Despite its modern attributes, cryptocurrency still falls short compared to traditional payment methods during challenging times. Even though decentralization is a core principle of blockchain, it is heavily reliant on centralized infrastructures. Wanchain CEO Temujin Louie pointed out, “Most blockchain nodes are hosted on a limited number of centralized cloud providers, such as AWS. This not only creates potential single points of failure but also subjects blockchain networks to external control. Fundamentally, blockchain operates on the Internet. Without it, blockchain is non-functional, and the Internet itself is governed centrally by ISPs, which are influenced by geopolitical factors.” He further explained that many blockchains operate with only one or two client implementations, meaning any defect in that software can affect the entire network. Newson added that the same limitations apply to the applications managing crypto assets and transactions. “Although the blockchain might be decentralized, access to it is not. Most users rely on internet service providers, centralized exchanges, and mobile devices, all of which are linked to national power grids and telecommunications. Without these utilities, the decentralized promise of cryptocurrency becomes largely irrelevant for the average user.”
Blackouts: A Test for Public Confidence in Crypto
The failure of cryptocurrency to serve as a functional financial alternative during traditional system breakdowns, such as power outages, could undermine public trust in its long-term viability. Felipe D’Onofrio, Chief Technology Officer at Brickken, remarked, “Public trust hinges on perceived reliability. If cryptocurrency is perceived to fail under pressure, users may hesitate to depend on it, particularly those who are new to the space.” The ease of use of payment methods fosters trust, meaning that if crypto wallets become inaccessible in emergencies, individuals might be hesitant to adopt them for everyday transactions. However, these challenges could pave the way for future improvements. D’Onofrio noted, “These incidents can reveal weaknesses that lead to enhanced solutions. Just as the early internet had to navigate outages, cryptocurrency is still evolving to meet real-world demands.”
Exploring Offline Capabilities in Crypto
Some current cryptocurrency systems have begun to integrate features that reduce dependence on stable electrical grids. Newson pointed out, “Certain hardware wallets, equipped with long battery life and offline functionality, provide a glimpse of resilience, especially in peer-to-peer transactions.” D’Onofrio mentioned other promising tools but acknowledged that they lack broad adoption and user-friendliness. “There are intriguing developments, such as satellite nodes, mesh networks, or ultra-low-power wallets. While these innovations aim for increased resilience, they have yet to achieve widespread implementation. Currently, most of the crypto ecosystem still relies on traditional infrastructure. Blockchain can function offline, but the tools most users rely on are not yet designed for such environments.”
Evaluating Decentralized Physical Infrastructure Networks (DePINs)
DePINs have gained traction in the crypto sector over the past year due to their potential for decentralizing services through blockchain technology and token rewards. The DePIN industry currently boasts a market cap exceeding $19 billion, with trading volumes surpassing $1 billion. Experts suggest that these networks can enhance connectivity and provide community-driven access to electricity. Louie remarked, “In theory, DePINs could improve grid resilience, potentially reducing the frequency of nationwide power outages. They provide a level of flexibility and programmability that could facilitate demand-response programs or incentivize individuals to adjust their energy consumption during peak periods.” However, he cautioned that DePINs alone cannot resolve the significant challenges associated with widespread outages. “It’s premature to consider DePINs as a comprehensive solution for a country’s power stability issues. The focus should be on integrating DePINs within existing grid infrastructures to alleviate stress on the grid and showcase their practical value.” D’Onofrio added that DePINs could contribute to a more complete solution when used in conjunction with other tools that enhance local resilience against such threats. “We are likely to see greater integration with decentralized infrastructure, such as community-managed mesh networks or solar-powered nodes. When combined with tools like delayed-broadcast wallets or peer-to-peer communication protocols, these systems could sustain crypto activity even during traditional service outages. It’s about infusing localized resilience into the global framework.”
Policy Recommendations for a Resilient Digital Economy
The recent power outages in the Iberian Peninsula have highlighted the enduring significance of cash as a financial safety net in crises. As global economies increasingly rely on digital finance, experts stress the need for policymakers to develop sustainable strategies that ensure infrastructure resilience and preparedness for emergencies. Newson concluded, “Policymakers must prioritize infrastructure resilience as the foundation of digital finance. This includes diversifying energy sources, supporting local microgrids, incentivizing offline crypto solutions, and ensuring regulatory frameworks accommodate these technologies. In times of crisis, access becomes more crucial than innovation—preparing in advance guarantees that digital systems remain operational when they are most needed.” Looking ahead, the strength of the digital economy will hinge on its physical infrastructure, and emphasizing this could position cryptocurrency for long-term success.
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