A Weak Link in Permissionless Blockchains

A Bank of Italy paper has pointed out there is a link between permissionless blockchains, the most common settlement infrastructures in the crypto ecosystem, and the volatility of the prices of crypto-assets and the availability and security of these infrastructures ¹.

Permissionless blockchains are managed on a decentralised basis by a community of independent validators, usually remunerated in unsecured crypto-assets known as native tokens. Should such tokens suffer a substantial and persistent loss of market value, validators may decide to cease their activities. The settlement of transactions could slow down or stop altogether, and the exposure of the infrastructure to cyberattacks would increase.

This creates a problematic linkage where market risk for volatile, unbacked assets can transform into infrastructure and security risk for supposedly safer assets like stablecoins or tokenised securities that operate on the same blockchain. While historical evidence shows validator activity has remained stable despite price volatility (likely due to long-term optimism), the paper warns that a deep confidence crisis could trigger validator exodus, network attacks, or complete infrastructure failure, with limited effective mitigation strategies available given crypto’s decentralized nature.