Bank of Italy Outlines Ethereum Infrastructure Collapse Scenario

Ethereum's collapse could freeze $800 billion in assets, says Bank of Italy.

A collapse in the market value of Ethereum could disrupt the blockchain’s settlement mechanism and freeze assets worth over $800 billion. This conclusion was reached by economist Claudia Biancotti in a study for the Bank of Italy.

In the document titled “What if Ether Falls to Zero?” the author identified the primary vulnerability of decentralized networks as the close link between the native token’s price and the infrastructure’s functionality.

Blockchains are managed by independent validators who receive rewards in cryptocurrency (in this case, ETH). If the token loses value, the economic incentives to support the network vanish. This would trigger a chain reaction, turning market risk into infrastructure risk.

Validators would begin shutting down equipment to avoid losses. This would lead to a slowdown and eventually a complete halt in transaction confirmations.

Stablecoin Trap and Cyber Attacks

The greatest danger threatens users of assets issued on top of the main blockchain. Even fully backed “stablecoins” (USDT, USDC) or tokenized securities would become useless.

If the network stops, these assets will remain in wallets, but transferring them will be impossible. The infrastructure they rely on would simply stop responding.

The decline in token value would not only deprive validators of motivation but also reduce the network’s “security budget.” A 51% attack would become inexpensive. Malefactors could easily seize control of the distributed ledger to conduct double-spending or censor transactions.

Recommendations for Regulators

Biancotti suggested two solutions for regulators:

1. Prohibit supervised financial institutions from using public blockchains.
2. Require tokenized asset issuers to develop disaster recovery plans.

As a protective measure, she proposed maintaining off-chain ownership registries. This would allow user balances to be restored on an alternative network if the main blockchain fails. Automatic cross-chain bridges may be unsafe or overloaded during a crisis.

Earlier, MN Trading founder Michaël van de Poppe stated that the theory of Ethereum’s “demise,” based on its prolonged decline against Bitcoin, is unfounded.