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If your recent dinner party conversations have been any similar to mine, I bet a certain someone from North Korea made it onto the agenda. Is it just me, or does it feel like reality is increasingly reminiscent of a sci-fi novel?
As a novice of both sci-fi and blockchain technology, the topic of Kim Jong Un’s threat to launch an Electromagnetic Pulse (EMP) attack on the United States raised a number of questions for me. Would people turn to Bitcoin as a solution when banking systems go down, or would the Bitcoin network itself be rendered inoperative? Questions I desperately wanted answers to.
And so, I turned to two of our in-house Bitcoin specialists for clarity. I invite you to join me as I pick the brains of Bitstocks’ Portfolio Managers, Antonio Shillingford and Adam Norrie.
Adam: Bitcoin is a global currency, it is not exclusive to the US. Therefore, provided the EMP attack is restricted to the US alone, it is not possible for an EMP blast to “make your Bitcoin disappear in an instant”.
There are thousands of different individuals mining and securing the network across the globe who would be unaffected. Even if the localised infrastructure in the US was impacted temporarily, the miners and nodes operating elsewhere will keep Bitcoin ticking over.
Adam: Yes, that is precisely the case. Also, what most people do not know, is that you do not actually need access to the Internet to perform a Bitcoin transaction. Although the Internet makes it far easier and quicker, Bitcoin would still be able to function the same way it does now.
If the power grid went down in the US, people would still be able to transact, it will just be a little more difficult. The reality is that you can send a Bitcoin transaction through radio frequency, Morse code, and even by smoke signal if you really needed to, and it would be treated in exactly the same manner as an Internet based transaction. Even better is that we now have the Blockstream satellite available.
In the short term, the price of bitcoin will more than likely drop. If it does, however, it will not be because Bitcoin’s infrastructure is damaged, but rather because people would fear that Bitcoin’s infrastructure is being destroyed and that they will not be able to access it. Despite such fears, the blockchain is flexible enough to adapt its utility to the scenario.
In the period following an EMP attack, I would imagine that many would revert back to a barter based system. The stock market would collapse, the banking system would be down, and most companies would go out of business. The natural response would be to barter with basic amenities to survive.
The blockchain will fit in perfectly with such a scenario. Instead of trading gold in exchange for a power generator or fuel, you would be able to use digital gold, or bitcoin. The fact that it is digital does not necessarily mean it is online. It could just as easily be adapted to be traded through a local node. People could hold offline copies of the blockchain to keep it up to date as transactions are taking place. The local nodes’ ledgers would be publicly available to the rest of the world, allowing unaffected areas to extract files.
Adam: Yes, there would be the potential for double spending to occur. Then again, there's the Blockstream satellite orbiting us out in space from where you can download a working Bitcoin node that is capable of storing the network's entire transaction history. All you need is some battery power on your device, a small satellite dish, and a USB or some hardware to connect your device to the satellite.
There is also the fact that the miners who are securing the network are mostly based in China and East Asia. These miners would still be underpinning the Bitcoin network and keeping the blockchain up to date if an attack had taken place in the West.
Another possibility would be for the US to open local economies with a single Internet connection from where they can update the blockchain.
Antonio: In the case of a direct attack on a bank, everyone who has money held in that bank would be affected. This would have a positive effect on Bitcoin as more people will come to see it for the safe haven that it is. And as we know, the more people who get involved with Bitcoin because of socio-political uncertainty, the higher the price will climb.
Adam: For example, if a bank gets attacked and brought down, by something like an EMP and lose access to their online data, they would have to wait for the Internet connection to be restored so they can reboot from their backups. Until the system is restored, you would not even be able to use your debit or credit card.
If Bitcoin is adopted as an alternative, the amount of bitcoin available in that region would have to be spread very thin to meet the increased demand. This is likely to cause a significant rise in the purchasing power of bitcoin. Without access to traditional banking systems, I imagine we’re likely to see the emergence of a mixed economy where gold and silver would be used alongside
Antonio: On the hardware side of things, a global attack would require the world to start building hardware from scratch which would coincide with huge data losses. The more probable scenario is for an EMP attack to be targeted to a specific location or region.
And the thing with Bitcoin is that the ledger is kept on every computer that is running a full node, which means the entire blockchain can be downloaded from a single device in an instant.
And there you go. My ignorance exposed for the sake of fellow Bitcoin greenies. (You are welcome). If there are any of your questions that remain unanswered, I invite you to get in touch via Facebook, LinkedIn or Twitter (#BitcoinvsEMP).