Bitcoin transactions need the Internet to be completed, so crypto investors might be curious about the consequences of such a catastrophe. Well dear crypto trader, worry not. The simple answer to this question is NO. Bitcoin will still be functional even if the Internet goes down. To fully answer this question, keep reading as I explain.
Although the whole Internet is unlikely to crash, there have been cases of region-wide or even countrywide coverage shut-downs. Events such as natural disasters or government restrictions can cause the Internet to go down. So how does this affect Bitcoin?
An Internet shutdown is just one of the reasons Bitcoin might collapse. Bitcoins are digital assets and are transacted over the Internet. This means the web is necessary for them to be used as a means of exchange or as digital money. Because the Internet is the basis of Bitcoin’s worth, there are some risks involved with downtime.
Risks to Bitcoin If the Internet Goes Down
After much research, our crypto experts have narrowed down several risks associated with an Internet crash. Bitcoin and other cryptocurrencies will be affected in the following ways:
Network Shutdown & Trading Disruptions
Crypto networks including Bitcoin confirm transactions on ledgers across thousands of computers or nodes. But while the Internet is down, the ledgers also shut down and stop recording new transactions.
Traders will not be able to buy or sell digital assets or monitor any market movements. The blockchain will also not update or synchronize any new transactions. Thankfully, this is not permanent – these ledgers will not be affected and once the Internet is back, the nodes will verify any new transactions on the ledger for consistency.
Reduced Global User-confidence & Perception
If Bitcoin transactions are unavailable, traders may lose confidence in the coin’s ability to be used as a means of exchange. They will not rely on it as a reliable store of value and as they lose faith, the demand hence the price of Bitcoin will decrease.
Bitcoin traders, need to perform transactions as well as manage their accounts and if they cannot complete these transactions, there will be an overall negative public perception.
Increased Price Volatility
As we all know, cryptos are already very volatile assets. An Internet shutdown will increase this volatility as traders tend to panic. Savvy traders will have the know-how to buy or sell cryptos during periods of uncertainty. Some may win, some may lose but their activities result in extreme price fluctuations that affect the whole industry.
Crypto prices vary across different exchanges and this presents arbitrage opportunities. Traders can buy cheap currency from one exchange and sell at a higher price on another exchange. If the Internet is shut down, arbitrage strategies are disrupted, and they may miss out on profit-making opportunities.
Disrupted Secure Mining Operations
Cryptocurrencies go through a mining process for creation that requires a constant Internet connection. An Internet shutdown would negatively impact overall mining operations as they would stop and slow down transaction processing speed within the blockchain.
Another major risk we should not forget is the negative effect on network security. The nodes that ensure secure mining activities and verification connect via the Internet so when they can’t connect and mine, the risk of a security breach increases.
Reduced Access to Crypto Wallets
If you are a user with an online wallet; an Internet shutdown will restrict access to your funds. You will not be able to make transactions or manage your currencies – a major problem.
Reduced Adoption Rates
Internet shutdowns could deter potential investors from making investments. Users may doubt the stability and reliability of cryptos. This will result in a reduced adoption rate and an eventual negative effect because newer currencies will have a tough time breaking through the market successfully.
Alternatives to Bitcoin’s Internet-Reliance
These risks to cryptocurrency can be a scary thought, but I have given you some alternatives that can let you perform offline transactions. Below are some methods of how to use Bitcoin while offline and explain how it would work even if the Internet goes down.
Cold Storage and Offline Wallets
Cold storage is a way of storing cryptocurrencies on a secure USB flash drive or a similar hardware device. A key feature is that these devices are not connected to the Internet. You can be sure your crypto assets are safe in the case of an Internet shutdown.
One thing you must remember is to keep your private keys safe and away from prying eyes. You can store the USB drive on your person, safe, or in a bank deposit box and use it only when you need to make transactions. Paper wallets are another way to provide offline storage for cryptocurrencies.
SMS-based technologies have made it possible for Bitcoin to be sent and received via mobile phone. This innovative technology is popular in African countries with no Internet or unreliable connections.
It is usable on the most basic mobile devices and all a Bitcoin trader needs to do is dial a specified country code. After dialing the code, the user will receive a menu with options for sending or receiving Bitcoin. You can also view transaction history.
An example of this SMS technology is Machankura which is currently used in eight African countries. Another example is Pony Direct, a product of Samourai Wallet that allows users to transmit Bitcoin transactions via SMS.
This is an alternative for you to use for online Bitcoin transactions. It allows for the processing of transactions without Internet access. The blockchain is verified offline and at the same time, Bitcoin data is broadcast across a given area using a single SAT node.
First used in 2019, radio waves were used to perform a Bitcoin transaction from Canada to America. This was seen as proof that radio technology could be used to boost the resilience of the network.
Krypradio is another innovation that is used to transact BTC over one-way digital broadcast networks. It is used to transmit low-bandwidth information over a digital audio and video broadcast (DVB-T) network used worldwide.
The radio technology connects to the blockchain and converts block transactions into a data stream. The stream is broadcasted and the receiver can retrieve it by DVB-T. The use of radio waves for sending Bitcoin may be restricted by regional or countrywide laws. If you are interested in this method, it is important to confirm the rules surrounding radio technology.
Blockstream Satellite is a product from a Canadian-based blockchain company that makes it possible to send Bitcoin while offline. It is made up of six satellites that are positioned in space to cover all major land masses.
The satellites read the Bitcoin blocks or network via ground stations called ‘teleports’. The devices then beam this network back to Earth allowing users to make transactions and verification without an Internet connection.
Mesh networks bounce transaction messages from device to device until they reach one with Internet connectivity. This network is made up of a group of devices that act as a single network.
As long as the devices are within range of each other, they can communicate without the need for a router. This allows for fast and efficient data transmissions of Bitcoin data. This is quite an interesting concept so I’ve provided some advantages of using mesh networks.
Advantages of using mesh networks include:
- Flexibility: Users can add or remove access points to improve or reduce coverage. For additional coverage, traders using mesh networks can increase points with Internet access.
- Resilience: Mesh networks are self-healing in that if one point goes offline, the communication will be redirected to another point. Just be aware that if the primary point goes offline, the whole network will go down. You will however receive a notification that will alert you of the network going offline.
- Direct path: Data has several options when moving from point A to B because all the points are connected. Any data that is transmitted will choose the best and easiest path between points A to B.
As I have explained, if the Internet crashes, Bitcoin will still be in existence – it will not disappear. But remember, there will be some negative implications such as reduced trading, mining, and overall adoption. Cryptos are designed to be resilient but they are still at risk of Internet crashes which may affect their price and usage.
The transactions however can be moved offline and although it may require some specialized equipment, the coins will still hold value.
So fellow investors…worry not. Bitcoin is here to stay – EVEN if the Internet goes down.
There are methods of transacting Bitcoin offline including SMS, Satellites, and Radio. All of these innovations only serve to increase the robustness of the Bitcoin network and make it more flexible. You do not have to worry about the blockchain disappearing as it is transformed into transferable data streams that can be placed back online once the Internet is back.
*Disclaimer: This article is not intended to provide any investment advice. It is for informational and entertainment purposes only.