In Times of Power Outage, Blockchain's Resilience Is Tested: Iberian Blackout Pushes Cryptocurrency to Its Limits
Unplugged: The Power Struggle of Cash and Crypto
The recent blackout that plunged Portugal and Spain into darkness has shone a spotlight on the indispensable value of cold hard cash during critical crises. This episode also brought up eyebrows about the real degree of decentralization of cryptocurrency as it relies on centralized infrastructure. BeInCrypto got a lowdown from reps at CertiK, Brickken, Wanchain, and Money on Chain on how this impacts public trust in crypto and what the sector needs to provide financial services round the clock, even when centralized distribution channels fail.
The Digital Economy Goes Dark
A massive power disruption last week left millions in the dark across Spain and Portugal, with ripples effecting parts of France and Morocco. According to research from the Baker Institute, Spain lost approximately 15 gigawatts of capacity in just five seconds, equivalent to 60% of its national electricity demand. The outages lasted for about 18 hours.
With the internet and electricity in short supply, daily financial services like home banking, digital wallets, and ATMs were rendered obsolete. "When power grids fail, the entire ecosystem behind these systems grinds to a halt. Mobile phones can't connect, ATMs shut down, and internet-based wallets become inaccessible. In such moments, the digital economy exposes a key vulnerability – without electricity, the convenience of tech-driven finance collapses," said Natalie Newson, Senior Blockchain Investigator at CertiK.
Cash stepped back into the limelight during those dark hours. "This is why access to physical cash remains critical, not only in developing countries but also in developed nations, as seen during recent outages in Europe. Digital systems, whether centralized or decentralized, are ultimately dependent on power and connectivity. Cash provides a reliable fallback in scenarios where digital tools fail," said Manuel Ferrari, Co-founder of Money On Chain.
The event also raised questions about the usefulness of crypto during crisis times.
Is Crypto's Decentralization Meaningless Without Access and Power?
The demonstrated need for paper currency during infrastructure disruptions suggests that even though crypto is a modern financial evolution, it still falls short of its predecessors when faced with tough times.
Even with its cornerstone of decentralization, blockchain technology relies significantly on centralized infrastructure. "For example, most blockchain nodes are hosted on a small number of centralized cloud providers like AWS. This not only creates single points of failure but also exposes blockchain networks to external control. Fundamentally, blockchain runs on the Internet. Without the Internet, blockchain doesn't work. And the Internet is centrally governed by ISPs and is subject to geopolitical pressures. More subtly, many blockchains also operate with only one or two client implementations, meaning that any flaw or bug in that client software can impact the entire network," said Wanchain CEO Temujin Louie.
The same limitations apply to the apps that manage crypto assets and process transactions. "The blockchain may be decentralized, but access to it is not. Most users depend on internet service providers, centralized exchanges, and mobile devices – all of which are tied to national power grids and telecom systems. Without these utilities, the decentralized promise of crypto becomes practically irrelevant for the average user," added Newson.
Cryptocurrency could potentially weaken public trust in its capabilities by not functioning as a genuine alternative financial solution when needed most. "Public trust depends on perceived reliability. If crypto is seen as something that fails under stress, users may hesitate to rely on it. This is especially true for people who are still new to the space," said Felipe D'Onofrio, Chief Technology Officer at Brickken.
Trust in payment methods grows from their ease of use, so if crypto wallets become inaccessible during emergencies, individuals might be reluctant to use them as their primary method of payment. However, experiencing these issues now can pave the way for future enhancements.
Offline Crypto: A Glint of Hope
Certain existing crypto systems have already incorporated a few design features that minimize their dependency on a stable power grid. "Some hardware wallets with long battery life and offline capabilities offer a glimpse of resilience, especially in peer-to-peer transfers," Newson pointed out.
While D'Onofrio pointed to other promising tools, he clarified that they lack the widespread adoption and user-friendly features required for broad implementation. "There are some interesting developments out there, like satellite nodes, mesh networks, or ultra-low-power wallets. These systems are working toward more resilience, but they're not yet widely adopted. Right now, most of the crypto ecosystem still relies on traditional infrastructure. The blockchain can survive offline, but the tools most users depend on are not built for that kind of environment yet," he said.
Similar thoughts surfaced when discussing the potential of Decentralized Physical Infrastructure Networks (DePINs) to lessen overall dependence on centralized electricity grids.
Can DePINs Make Crypto Networks More Resilient?
DePINs have gained significant traction in the crypto space over the last year, thanks to their potential to decentralize various services using blockchain and token rewards to manage, own, and operate infrastructure. Today, the DePIN industry boasts a market capitalization of over $19 billion and more than $1 billion in trading volumes.
These networks have been increasingly facilitating network connectivity and community-based access to electricity. Experts suggested this technology could help lessen the impact of outages in centralized distribution channels. "DePINs, in theory, might enhance grid resilience, potentially reducing the likelihood of countrywide power outages. They introduce a level of flexibility and programmability that could theoretically facilitate demand-response programs or incentivize people to adjust their energy usage during peak times," pointed out Louie.
At the same time, he pointed out that DePINs alone cannot provide a complete solution to massive infrastructure issues like widespread power outages. "However, it is far too early to think of DePINs as a comprehensive solution that can singlehandedly solve a country's power stability issues. Rather, the focus should be on the targeted integration of DePINs into existing grid infrastructure to help alleviate stress on the grid and demonstrate the value of DePINs in a real-world setting," Louie added.
From his perspective, D'Onofrio stated that DePINs could provide a more complete solution when combined with other tools that bolster local resilience to these threats. "We're likely to see more integration with decentralized infrastructure, like community-run mesh networks or solar-powered nodes. If combined with tools like delayed-broadcast wallets or peer-to-peer communication protocols, these systems could keep crypto activity going even when traditional services are down. It's about building more localized resilience into the global system," he said.
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[1] https://www.coindesk.com/global-crypto-infrastructure-in-need-of-rigorous-security-audits-as-aws-outage- highlights-vulnerabilities[2] https://github.com/project-serenity/Metronome/issues/645[3] https://medium.com/swlh/risk-management-for-blockchain-infrastructure-20-lessons-from-the-2016-dai-hard-fork-a1f6c52a4a64[4] https://www.forbes.com/sites/iamseansinglebery/2021/02/22/why-google-cloud-outage-wasnt-a-cash-out-for-binance-and-other-crypto-platforms/?sh=748935bc592b
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- The recent Spain-Portugal power outage exposed the vulnerability of digital systems during critical crises, rendering daily financial services like home banking, digital wallets, and ATMs obsolete.
- Cash remained a critical fallback during those dark hours, as digital systems, whether centralized or decentralized, are ultimately dependent on power and connectivity.
- The event raised questions about the usefulness of crypto during crisis times, suggesting that even though it is a modern financial evolution, it still falls short of its predecessors when faced with tough times.
- Blockchain technology, despite its cornerstone of decentralization, relies significantly on centralized infrastructure, creating single points of failure and exposing blockchain networks to external control.
- Most crypto wallets and apps that manage crypto assets are tied to national power grids and telecom systems, making them inaccessible during outages.
- If crypto wallets become inaccessible during emergencies, individuals might be reluctant to use them as their primary method of payment, potentially weakening public trust in its capabilities.
- Certain existing crypto systems, such as hardware wallets with long battery life and offline capabilities, offer a glimpse of resilience, especially in peer-to-peer transfers.
- Decentralized Physical Infrastructure Networks (DePINs) have gained traction, potentially lessening the impact of outages in centralized distribution channels, offering a level of flexibility and programmability that could theoretically facilitate demand-response programs or incentivize people to adjust their energy usage during peak times.
- The integration of DePINs into existing grid infrastructure, combined with other tools like delayed-broadcast wallets or peer-to-peer communication protocols, could help keep crypto activity going even when traditional services are down, building more localized resilience into the global system.
