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The last few days it has been very restless in Kazakhstan. In an attempt to restore calm, the government even blocked access to the internet for some time. Not only were communication programs unusable for some time, but the financial system was also problems by this blockage. Banks could no longer transact and the stock market in the country came to a standstill. That immediately raises questions. How secure are cryptocurrencies like Bitcoin when the internet goes down?
One of the arguments for choosing Bitcoin over precious metals is that the virtual currency is digital. Because it is in the blockchain, it is independent of a physical location. A wallet with crypto coins can be accessed from anywhere in the world and sent to another address with the push of a button. This is a lot more difficult with precious metals, which are located in a physical location. Moving it takes more time and money than a transaction in Bitcoin.
This advantage of Bitcoin can also become a disadvantage in certain scenarios. Consider, for example, the situation in Kazakhstan, where the government has blocked access to the internet. All miners who have come to Kazakhstan because of low energy prices are without internet Shut down from the network. Also, it is not possible to make a transaction without access to the internet. Your Bitcoin are safe in the blockchain, but without internet access, you can't really do anything with them. If you have crypto coins on an exchange, you will not be able to access them if the internet goes down.
The internet went down in Kazakhstan on Wednesday (Source: Netblocks)
Of course, there are detours to trade crypto coins in the event of a power outage or internet blockade. In this way, it is possible to connect the network of satellites of Starlink to access the Internet. In principle, this system of satellites works together with base stations on the ground, but if they do not have an internet connection either, the satellites can also transmit data to each other. This way, you can still access the digital highway via various satellites.
Another option to send Bitcoin in case of internet failure is by using SMS technology. There are companies, such as 37Coins, that make it possible to pass transactions via SMS. As long as the network of telephone masts remains operational, this can be an alternative to sending crypto coins. But this type of data traffic can be intercepted and blocked more easily.
Thus, the value of cryptocurrencies depends on the availability of electricity and a reliable internet connection. Under normal circumstances, we don't even think about it, because we are used to this infrastructure always working. But in countries with a less stable political climate, the loss of internet connectivity can be a risk. Power outages can also hinder the use of cryptocurrencies.
In this extreme scenario, precious metals such as gold and silver are more attractive because they are not dependent on this infrastructure. They can be traded at any time and under any circumstances. In addition, gold and silver do not leave a data trail like Bitcoin. As asset manager Ray Dalio said earlier, gold is much harder to trace. In a world with increasing financial repression, this is an advantage.
This contribution comes from Geotrendlines
