Bitcoin and the wider cryptocurrency market has stagnated over the last year as prices fall across the board, plans for long-awaited institutional investment stalled or were put on hold, and mainstream bitcoin and crypto adoption withered in the face of ubiquitous electronic payments and digital efforts from the traditional financial services industry—however, banking outages at the likes of Wells Fargo have convinced the bitcoin faithful that crypto is the future.
Wells Fargo last week suffered a major services outage, with the bitcoin and crypto community claiming it as a sign of things to come.GETTY
Last week, Wells Fargo customers were last week left unable to access their accounts via ATMs, their computers or their smartphones for days. Though Wells Fargo, which is the fourth largest U.S. bank by assets, said the problem was largely resolved by Friday after beginning on Thursday, customers continued to complain of problems over the weekend. The bank suffered an unrelated outage a week earlier.
“We’re experiencing system issues due to a power shutdown at one of our facilities, initiated after smoke was detected following routine maintenance,” the bank said in a statement. “We’re working to restore services as soon as possible. We apologize for the inconvenience.”
The story is becoming a typical one for banks and traditional retail banking services around the world as they struggle to upgrade aging systems to support an on-demand, digital world.
The latest outage follows a string of high profile banking system failures, with the cracks beginning to show in banks and payments processors across the U.S. and Europe.
Last year Spanish-owned British bank TSB suffered a major meltdown that dragged on for days, leaving many unable to access their accounts and which cost the bank some $425 million.
A few months later payments processor Visa went down, with some five million transactions across Europe failing over the course of a 10-hour outage. In 2017, Bank of America’s systems went offline for a number of hours nationwide.
Whenever a major bank goes down, those who expect bitcoin and crypto to one day replace or at least outgrow the banking industry see it as proof the current system doesn’t work.
A sticker with a bitcoin logo is seen on a street lantern in the center of Bucharest, Romania in October last year.GETTY
“There was certainly a loud response on social media in response to the outage and the crypto community definitely joined in the chorus,” said Mati Greenspan, senior market analyst at crypto broker eToro.
Bitcoin and cryptocurrency dedicated websites and blogs jumped on Wells Fargo’s outage immediately, claiming bitcoin could never be brought down by such antiquated problems. They argued that bitcoin is “impossible to be shut down. Even if a country turns off the internet for a few hours, there are other countries that can turn on their mining rigs and set up nodes to keep the network running. Moreover, if there is a problem, nodes can be set up via satellite, thus making it almost impossible to shut the whole network down.”
Bitcoin and cryptocurrencies are, however, largely untested on a scale anywhere near the likes of Wells Fargo and Visa. Visa and Mastercard combined process over 5,000 transactions per second with the capacity to do far more. The bitcoin network takes 10 minutes to clear and settle a single transaction, and while the likes of rival cryptocurrencies ethereum and litecoin can do more, quicker, they are still far from anywhere near being comparable.
Meanwhile, bitcoin and cryptocurrency businesses are dealing with their own unique set of challenges.
“There will inevitably be comment on cryptocurrency and bitcoin particularly as a viable alternative to traditional centralized financial methods when we see such events as the Wells Fargo blackout,” said David Thomas of cryptocurrency brokerage GlobalBlock. “All manners of sardonic posts have been seen on social media channels following the event with many finding it hard to believe that in this day and age the infrastructure could be quite so antiquated and vulnerable to a melt-down.”
The bitcoin price hit an eye-watering $20,000 in December 2017 after starting the year at under $1,000.COINDESK
Bitcoin, conceived in the midst of the 2008 global financial crisis, was in part designed as a way to remove traditional banks and money lenders from the process of exchange—why, in an age of technological trust, do we need to put our faith in the banks who have betrayed us, asked bitcoin and blockchain’s mysterious creator Satoshi Nakamoto.
For those already convinced bitcoin and cryptocurrencies are going to eventually replace the established financial system, banking failures signal the world is on the brink of a cryptocurrency revolution.
For those who remain skeptical of bitcoin and crypto’s eventual dominance, these outages will be seen as a spur to the banks that they need to do more to make sure bitcoin does not replace them.