Would Bitcoin ‘Function’ in a Societal Collapse?

The question is a large obstacle to the mass adoption of digital currencies and it should be addressed head-on. The audiences being targeted as adopters are also a problem. The question and a problem overlap.

Also read: A Decentralized Money Needs A Distributed Web for Maximum Freedom

Calls for mass adoption usually aim at the mainstream and often translate into some form of government approval. This approach alienates two significant categories of people who should be fellow travelers: “preppers” and “survivalists.” (For the differences between them, click here.

Preppers and survivalists are rigidly individualistic and anti-government. The crypto-community needs them to counterbalance the trend toward licenses, regulation, and state control.

There are two problems with outreach, however: some voices in the crypto-community are openly hostile or scornful to preppers and survivalists; many preppers and survivalists view bitcoin with skepticism. The later ask a reasonable question which is often shrugged off: will bitcoin survive a collapse of infrastructure which could include the electric grid?

I have no doubt that digital currencies will not only survive but also grow as they have in the chaos that is Venezuela. But, again, the question is reasonable and deserves a respectful response.

The Crypto-Community

Would Bitcoin 'Function' in a Societal Collapse?First, the indifference or hostility of some within the crypto-community.

Preppers and survivalists were once viewed as bizarre dissidents but this is an antiquated attitude. Many of their lifestyle strategies, such as stockpiling canned goods and precious metals, are now mainstream and don’t occasion a sideways glance. Nevertheless, sophisticated bitcoiners may feel alienated from people who actively espouse a less technical lifestyle. This is not a barrier with outreach to these groups, however, as much as it is a barrier to connecting with the vast majority of average people.

Not reaching out is one thing. Being openly hostile is quite another. Many within the digital community may not be blatantly antagonistic to preppers and survivalists. But, to the extent preppers and survivalists are addressed, it is often in a tone of contempt. For example, Jeff Berwick wrote about the subject at The Dollar Vigilante,

[T]hese people [“Shit Hits The Fan” people] have a subconscious hatred for bitcoin because a) Gold has not performed as well as bitcoin and b) because they missed out on the massive gains to date. To those people, you need to let go of your hatred. Your hatred manifests in your own body and people just really won’t even want to be around you as you shout at the TV every time they say bitcoin has hit a new all-time high. And, as well, your obsession with SHTF scenarios is also not healthy. As I said above, the scenarios are very real. But they also may not happen.

Berwick’s psychoanalysis of SHTF people is baffling. Nevertheless, he raises two points that spin into the next barrier raised against preppers and survivalists from adopting digital currencies.

• the scenarios of a possible collapse are “very real;”
• the scenarios may never occur.

A common reason why preppers and survivalists reject digital currencies is because it requires the internet and electricity, both of which could easily become unreliable or unavailable. A sack of gold beneath the woodpile can be easily accessed and exchanged for the necessities of life. Digital currency…not so much.

In Defense Of The SHTF People

Would Bitcoin 'Function' in a Societal Collapse?The scenarios of a collapse are “very real.” The economy is speeding toward a brick wall. Civil society has never been so contentious. And, then, there are global tensions. A key reason preppers and survivalists dismiss digital currencies is that they view them as overly dependent upon fragile infrastructure.

To take preppers and survivalists seriously, consider just one unfolding situation: North Korea. The leader Kim Jong-un is an egotistical madman who may soon have the nuclear capacity to reach American soil. He may currently be able to attack American military bases in the region as well as Japan.

A simplistic sketch of background. In March, Kim test-fired four missiles into seas off Japan. Recent U.S.-Japanese naval ‘exercises’ in the area were followed up by a stern warning from Secretary of State Rex Tillerson of a possible pre-emptive military strike, presumably to take out missile sites. North Korea counter-threatened with a nuclear strike if the Americans so much as fired one rifle and, then, it tested “a new…high-thrust rocket engine.” Another test occurred last Friday.

Meanwhile, Tillerson’s talks with Chinese leaders – the only nation able to rein Kim in – appear to have gone poorly. And the installation of a powerful American anti-missile system in South Korea could not have helped. Upcoming talks between Trump and China may be more productive but only if someone budges on profound disputes such as who owns the South China Sea Islands.

The preceding detail is offered as proof that worrying about your safety and your family’s is not hysterical. Not worrying may be the ridiculous position.

But will a nuclear war happen? I don’t believe so. Nuclear war is highly unlikely if only because it would devastate every nation in the region, including the initiator.

It is far, far more likely that the threats will continue and deepen the cold war that’s been spreading for decades: namely, computer attacks aimed especially at financial institutions and infrastructure.

A severe economic collapse seems inevitable, however

Whither Bitcoin During A Cold War?

The question remains. Even without nuclear war, would bitcoin be able to function during a collapse or a cold war?

Yes. Electricity and the internet may be less reliable or more expensive but they would be available. An increasing dependence on the blockchain would make it a top economic priority.

It would also be a top military priority. In October 2016, the Pentagon revealed it was actively exploring blockchain technology “to create tamper-proof military computer systems, including those used to control America’s nuclear weapons.” Other nations are undoubtedly doing the same.

Conclusion

The bad news: an economic collapse or a cold war would negatively affect the internet and the electrical grid.

The good news:
• Aspects of the internet were specifically designed to survive war by being decentralized.
• The blockchain will be essential to both societal and global functioning which means the internet will be given top priority.
• Local economies will be also be built on the blockchain. “Most of the technologies already exist. Distributed Identity (Blockstack, Bit ID, etc) combined with on chain issuance of assets (MSC, Counterparty, Colored Coins) combined with off chain transference and transactions of such assets (Hyperledger, Open Transactions, etc).”

‘Civil’ society and foreign policy will not be pretty in the next few decades. This is all the more reason to reach out to preppers and survivalists, who are generally “gold-bugs.” They should consider both precious metals and digital currency.

Phil Champagne, author of the “Book of Satoshi,” offered an excellent reason. Flexibility has a huge survival value which requires options. He wrote, “While gold and silver are in their natural form in the physical world, they require the trust in a 3rd party when transferred in the electronic world. With Bitcoin, it is just the opposite, it is in its natural form in the electronic world but requires the trust in a third party if it was exchanged in the physical world (think of a paper note representing bitcoins held in custody, or a physical coin with a private key embedded in it – where you have to trust the manufacturer). So to me, they are absolutely complementary and both should be considered. It is funny that I have sometimes a hard time to convince people in the Bitcoin community to make them consider buying gold and silver.”

As long as Champagne means “funny” as a synonym for “odd”…then agreed. Odd ducks should flock together.

What do you think about functioning in a Societal Collapse? Let us know in the comments below. 


Images via Pixabay, and the UScrow.org


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  • Billy Williams

    bitcoin will always prosper it is to great of a thing to die

    • I agree with you, especially due to the extraordinary interest in the blockchain. The real danger I see is the attempted usurpation by governments or central banks — a distinction without a difference, I know. The printing press was also too great an idea to die but a lot of books got burned, people imprisoned, heretics killed, etc. etc. because government wanted to control the technology’s output.

  • Night life

    Agreed.

    • Thanks for the comment. I’m a prepper myself and I’d love for these communities to draw closer together. A prepper girl friend has become an enthusiast after someone donated a bitcoin to her fund. When she found out how easily she could get Paypal, etc. for it, she converted.

  • ed

    I’d love to agree but look at what happened to Tay – was ‘she/it’ not too great of a thing to die?

    ‘We’ cant rely upon logic & reason while surrounded by the illogical & unreasonable.

    • Brad R

      If you’re referring to Tay the Microsoft chat-bot, then no, it was not a great thing, and it should have died quickly (and did). I’d say it was an incompetently-programmed AI…perhaps a useful lesson, but of little use otherwise.

      As to your second point, I’m inclined to agree. The illogical and unreasonable seem to have undue influence.

      • I have found that self-interest and the profit motive works wonders with the illogical and unreasonable. Otherwise phrased, don’t argue that you are correct in what you say. Instead, stress that what you say is in their self-interest. BTW, if you are referring to preppers and survivalists as illogical & unreasonable, then I disagree. But I do not want to put words in your mouth.

        • Brad R

          Sorry for the confusion; no, I wasn’t referring to preppers and survivalists. I was thinking of politicians and the people who vote for them. (Such as the Congressman who was worried that Guam would capsize. He was reelected.)

  • Frank Zeleniuk

    Money, at one time, was considered real wealth and a part of one’s total wealth. It was not simply a system of accounting and a symbolic representation of wealth. People came to accept that their money was not backed by anything but confidence in the issuing federal government and central bank. It seems to me that digital currencies and cashless societies are a natural progression of a centralized monetary system with a controlling issue authority. Bitcoin attempts to remove the central authority and make transactions invisible. But it still remains that digital currencies are simply methods of accounting and “money” has lost an historic characteristic of being real wealth tradeable on its own with no authority and in demand since its discovery. Paper has always been a money-substitute and contract to redeem for real wealth. Any problems with Bitcoin will be problems of accounting, not wealth, and will have to be solved as such.

    • Brad R

      A friend makes the distinction between money as a store of wealth, and money as a medium of exchange. Those are two different functions which have gradually been conflated over the centuries. One aspect of Bitcoin I find interesting is that it is focusing new attention on that distinction. I think there are many users who view Bitcoin primarily as a medium of exchange, but not so much as a store of wealth. (How many people keep their retirement savings in Bitcoin?)

      • The investment guru Doug Casey makes the same distinction of money/bitcoin as wealth and money/bitcoin as currency…or a medium of exchange as you put it. Bitcoin is certainly currency and will remain so for as long as someone accepts it. Almost anything can be a currency. As an economist friend of mine likes to say “if a dog eats it, then its dog food.” I think bitcoin can be viewed as wealth as well but not a stable form of wealth. The calculation of how much wealth it represents is what
        you can receive in return right then and there. The same can be said of any paper money that is not backed something akin to gold. And nothing is more akin to gold than gold itself.

        • Dimitri Andre

          Nothing backs gold, really anything can be money so long as it meants the properties of money…how those come bout whether made up like bitcoin or found like gold doesn’t matter so long as its fungible, degree of scarcity, unit of account, fairly recognizable, perceived/actual utility.

      • Frank Zeleniuk

        Hi Brad,

        If you define money solely as a medium of exchange there is no differentiation between the terms money and currency. Dropping the characteristic of money being a store of wealth changes the historic definition of money and we are left with a currency. Bitcoin is not yet a currency but seems to be quickly advancing to fit that definition. We might as well just eliminate the word money from the language since its definition has been lost and digital “currencies” are, as I stated earlier, simply methods of accounting and mere symbols of wealth.

        • Brad R

          Hi Frank, if “money” means “store of wealth” then yes, I agree. The problem as I see it is that, in most public discourse, there is indeed no differentiation between money and currency. I think that’s an important distinction that has been lost. But now, with Bitcoin, people are starting to notice the difference again. I agree that Bitcoin is quickly advancing to “currency”; I’m reluctant to call it “money” at this point.

  • Good morning all. I will be dropping by the commentary section today to chat.

  • Dr. Bubó

    Great topic.
    Jim Rickards wrote in his books (Currency Wars, The New Case For Gold, The Road To Ruin) that the most likely outcome for the next crisis is the emerge of SDR, which is just another fiat issued by the IMF. The second likely is a new gold standard in which case the price of gold should be set between 10,000 and 50,000 USD. Either way, it makes sense to accumulate both gold and BTC. About the food and weapons: I still can’t digest gold nor the blockchain…

    • Good morning, Dr. Bubó. Have you changed your avatar? Or am I confusing you with another Dr. who posts here? You are 1005 correct about not being able to eat gold or money which is why I am so very pleased that stockpiling gold, bitcoin, food and the means of self-defense go together like a pack of happy ducks.

  • cb75075

    This question more goes back to “what is money”? Money was originally a commodity like all other commodities but was just a convenient way to trade. Like using gold. Scarce, durable, desired.

    Bitcoin doesn’t fit the bill. Its not a commodity. It maybe scarce and not very easily duplicated but you can’t “use” bitcoin like you can bic lighters or antibiotics or bullets.

    Also in SHTF scenarios when do people trade? When they have to, not when they want to because trade is dangerous. You are at your most vulnerable. You have your money with you… prime target.

    Bitcoin just doesn’t fit the bill as a usuable commodity. I can’t “USE” a bitcoin.

    Also what collapse will occur? if its a dollar collapse then that will scare a lot of people off money altogether especially money they see as electronic like the money that destroyed their society. To them its monopoly money.

    • Brad R

      Sure, but how is any of that different from dollars? People started by trading commodities (e.g. salt). Then they began trading high-value, more portable commodities (e.g. precious metals) as a substitute. Then they started trading warehouse receipts for those commodities. Then they traded paper certificates that weren’t warehouse receipts (paper money). A dollar bill now is backed by nothing; it’s simply a promise to pay you another dollar bill.

      You can’t “use” a dollar — except for those situations in which it will be accepted by someone in exchange for goods. The question is, will there ever arise a set of circumstances in which BTC is more readily accepted than the local currency? (Think of Venezuela.)

      The second question is, will there ever arise a set of circumstances in which BTC fails to operate but the local currency can still be used? Dollar bills still work when the network is down. But think of the “cashless” societies like Sweden. (Heck, I’ve lost count of the number of times I’ve gone shopping and the merchant’s debit/credit machine was down.)

      I agree that a lot depends on what collapse actually occurs.

      • cb75075

        I think any collapse will really be a money collapse and the stigma will be that money is funny money including bitcoin. Its the loss of faith. So people will trade in commodities not money. Money is for luxury societies. So grain, bullets, bic lighters etc will be money.

        There is no such thing as a true collapse.We don’t run out of resources. Any collapse will be cause of fabricated debts and fabricated collected money in computers.I

        really see that computers will be stigmatized and any use of electronic currency will be rejected after such a collapse. we don’t run out of wood, we run out of fabricated fairy money.

        • Brad R

          So, if I may use LucSr’s btc-hedge categories, I take it you’re expecting between a level 2 (economic meltdown) and level 3 (scarcity of energy) scenario, with both dollars and BTC being worthless. Do you think that gold and silver will still be used for exchange, or will it be strictly trade for commodities (grain, bullets, bic lighters etc)?

          • cb75075

            Actually I’m not expecting those levels in the US, not for a long time. I suspect that the US is too large for one whole sale collapse. we saw Detroit collapse and plenty of cities in California. Chicago is probably next. But people can flee.So what i think will happen is a lot of fleeing while the current system still is accepted. It would take a lot ofr the US to be reduced to bic lighters as currency standards. More than likely the US would break up and people would simply not associate with the deadbeats.

            This is different than Venezuella where its small enough and surrounded by like minded countries that people cannot simply break up.

            Also degredation time is a huge factor IMHO. If it happens really slow over a long period with little pain then people just settle into it. That’s why I advocate quick, high pain as a shock.

            We saw on your blog about Venezuela now using bitcoin but that only works cause the outside system hasn’t collapsed.

            So in essence I don’t know. Would depend on speed of degredation, if peopl can flee, if the crash is because of th money itself, if the gov can force people to stay in th system. I don’t think that is possible with the US.

  • LucSr

    Interesting article. I think it depends on the severeness of the “Societal Collapse”. From 1 to 6, it may be economy downturn, economy meltdown, scarce of energy, scarce of food, war hot zone, comet hitting, and by the same ordering I will lose confidence in check, traditional currency, bitcoin, gold, bread, anything. It would be over-kill if I don’t use traditional currency for daily life when a temporary economy downturn and head-in-the-sand if I hope to get some food by bitcoin in a war hot zone; my grandma kept telling me how she could not exchange something to eat by her gold in WWII.

    The money in fact represents energy and is a natural extension of law of energy conservation so the best money is some kind of energy container; it never inflates like a fiat currency because “to boil 100 gram water requires the same amount of energy in the thousands years past and future”; it is also impossible to receive some energy without someone giving same amount of energy; it also feeds us in a war time. However, when the severeness is less than 5, a proof-of-work is enough to be a money and that is why we have gold (everyone understands there is no shortcut except digging to get 1 oz gold) and bitcoin (everyone understands there is no shortcut except brute force sha256 hash calculation to get a new block and collect the fee and new coins).

    Disclosure: I stole this concept from btc-hedge dot biz

    • Brad R

      “From 1 to 6, it may be economy downturn, economy meltdown, scarce of
      energy, scarce of food, war hot zone, comet hitting, and by the same
      ordering I will lose confidence in check, traditional currency, bitcoin,
      gold, bread, anything.”

      I like that categorization; I may adopt it myself. Was it that, or the energy concept, that came from btc-hedge? I’d like to credit it properly.

      • LucSr

        yes, it was from btc-hedge

  • MJR

    The question is an interesting one but does not address what Ms. McElroy sees as a societal collapse nor does she say how far down the ladder she thinks society would spiral.

    Like it or not the infrastructure that powers our society is very complex. Joseph A. Tainter author of The Collapse of Complex Societies defines a societal collapse as “a rapid shift to a lower level of complexity”. As I see it Tainter’s
    definition translates into no power/internet or, at best, a spotty power/internet with the internet when on line possibly reduced to local intranets. I can’t see the internet not being affected in a world reduced to however far you can drive (until the fuel runs out) or walk. This begs the question: how would you access your bitcoins? Consider even with the internet of today, if you are on a country drive the odds are high you will not able to make a purchase at a
    roadside fruit stand with your trusty Visa or debit card. So the question you have to ask yourself is, how are you going to use bitcoins to buy food in a society that has arrived at lower level of complexity in a drastic manner?

    In the article it’s pointed out that the internet was designed to be resilient but, at best, it would be spotty just like the power grid. In today’s cities around the world there’s a heavy reliance on JIT (just in time) delivery. With deliveries suspended how long would cities where servers are located function and how long would those servers function in hostile environments where people need resources like fuel? Even if this wasn’t an issue, everything runs out eventually so how long would the servers be able to stay on line and would you even be able to get online to reach them? Then later if systems started to come back there is no reason to think the electronic records of your Bitcoins would have survived.

    So my answer to this question is that while precious metals are not the be all and end all, at least they are a tangible asset not a bit or two of data on a server half a world away. For the short term maybe bitcoins would be
    useful as long as the power/internet was up but long term, I don’t think so. I think it would be bitcoins until the fall then barter until things started up again then precious metals.

    • Good morning MJR: I did not overly define a “collapse” except to indicate that I did not believe a nuclear one — that is, an apocalypse — was likely because I thought the general concept would be clear to people. Frankly, it was difficult enough to shoehorn in all the material I did, which made me go well over the word count of other bitcoin.com articles. Thanks for the post.

  • Fritz Knese

    Hi Wendy! I think in a bad societal collapse that you are overly optimistic about Bitcoin. But in nuanced collapse, which is most likely, Bitcoin should remain functional. But it is an upper middle class and up deal. Working class have no business getting away from staples of value like food, tools, seeds, or even a store of fuel.

    • Hey Fritz! You write, ” Working class have no business getting away from staples of value like food, tools, seeds, or even a store of fuel.” Frankly, oneof the things that bothers me a bit about bitcoin is that there is some truth in what you say. Anyone who invested in bitcoin while it was $10 or so has done very well, indeed, but the price is now so high that I think working class people are intimidated, if not actually priced out.

      The natural response (and a reasonable enough one) is that people can always buy a fraction of a coin, however small. But I can understand why someone would not feel excited about buying .001 of a bitcoin. Moreover, there are other costs: a computer, an internet connect, time to acquire knowledge of how set up a wallet and such, the opportunity cost of what you could otherwise do with the money, etc. The attendant costs are why I do not recommend you explore altcoins, which *are* still priced within range. I know you don’t have a computer situation that would make your wallet secure, even if you pursued cryptocurrencies.

      It is good to have you around, Fritz, because you offer a reality check. Take care, my friend.

      • Fritz Knese

        Thanks Lady. Being immersed in said “reality” of being poor gives me a viewpoint most folks who read this sort of thing simply do not have. I intentionally try to stay “grounded” as a realist. You help me by reminding me that my realism tends to cynicism.

  • Brad R

    I was asked this question elsewhere, and turn to those here more knowledgeable than I for an answer. What is the minimum infrastructure required to restore Bitcoin function after a large-scale network collapse? How much Internet function is required? What if national networks are running but international links are cut? Suppose an EMP event or Carrington event physically damages a large number of servers; how many functioning servers are required to reconstitute the blockchain? How well distributed, geographically, are the servers now?

  • Brad R

    Thanks for the link to bitcoinpaperwallet. I’m thinking more along the lines of copying my bitcoin keys to a USB stick, and then putting that stick in an RF-tight metal box. Though it occurs to me that I’ll probably want to put a spare laptop in a similar metal box, so as to be sure to have at least one functioning device that can read a USB stick. (Laptops are cheap.)

    However, I tend to think of EMP as a relatively low-probability occurrence. I’m actually more worried about a natural event such as a Carrington event (see my post from yesterday). I think a financial collapse is more likely. I also worry about escalating “cyber war”; state actors may move to disrupt or restrict the Internet. I see several scenarios leading to a situation such as you describe, where bitcoin is temporarily unusable, but becomes usable again when the infrastructure is restored. Though I do wonder what such a disruption would do to the exchange value of bitcoin. Bitcoin will survive, but could it drop to $10/BTC?

  • cb75075

    I am talking to a friend of mine/artist contractor who lives in Venezuela. I asked her about bitcoin. She said this is a luxary only for the rich. The common person does not have any liquidity to use bitcoin, they can’t even buy a bitcoin. Their total wealth is non-existant due to the inflation, They are literally only having wealth cause the state says they have wealth. What they have is totally propped up on IOUs and the promise their money is good but that only applies inside Venezuela.

    She was clear this was a niche inside of a niche that only the very wealthy could use. She was also upset that this Bitcoin issue is what’s being discussed vs the riots, the tear gas, the collapsing gov etc. Those plights are not reported by the MSM.