Bitcoin fragility

So, how does Bitcoin's open, permissionless and decentralized nature render it antifragile?

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Let's take a closer look. A common misconception is that, because Bitcoin runs on computer systems, it must be possible to shut it down. This fortifies the system; increases levels of redundancy to better guarantee longevity; strengthens it against future attacks and causes it to continuously evolve. None have impacted the functioning of the network.

Instead, each has bolstered Bitcoin.

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Bitcoin is antifragile, it gains from disorder, it gains from chaos. For instance, an early hack on Bitcoin exchange Mt. Gox led users to question the wisdom of keeping their funds on exchanges. It incentivized innovation, expediting the development and popularity of secure hardware wallets so that people could be responsible for their own keys which are needed to unlock funds.

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Not your keys, not your coins. Bitcoin is a monetary system with a market consensus mechanism at its foundation, as opposed to any kind of centralized control. Instead of a central authority, its consensus rules can be verified and enforced by the participants in the network, each of whom is incentivized to act for the good of the whole.

Ultimately, a spontaneous order emerges out of disorder and strengthens as each exogenous system shock is absorbed. A number of influential stakeholders—Bitcoin custody and exchange service providers and large miners—joined forces in order to change the consensus rules, to allow for larger block sizes, and to boost network transaction capacity. But they were foiled by a user-led effort. For a detailed history, see here. It was a pivotal moment, demonstrating that Bitcoin was decentralized enough to prevent any one body from controlling the network without the agreement of an overwhelming majority.

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Confidence in Bitcoin increased as a result. Bitcoin has spawned over a thousand imitators, but no competitor has yet outpaced Bitcoin, and no government has been able to shut it down. On the contrary, the competition has been good for Bitcoin; each attempt at imitation has stress-tested the original cryptocurrency and served to underline its superiority.

In India, the central bank tried to ban banks from servicing Bitcoin companies, in an effort to restrict the sector. Similarly, China clamped down on Bitcoin exchanges and mining in , but people continued using Bitcoin through over-the-counter trading, and exchanges and miners simply decamped to more hospitable climes. The network was further strengthened as a result. Devoid of circuit breakers and other interference, Bitcoin would falter without volatility to hold the market in check.

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