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US Banking System Suffers Outage: Crypto Fans Cheer

US Banking System Suffers Outage: Crypto Fans Cheer

Criticism of the Fed is unwarranted.

by Andrey Shevchenko

2 min read

In Crypto

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The U.S. Automated Clearing House system experienced an outage on Dec. 18 between 3 P.M. and 7 A.M. of the next day. Since the system handles the majority of domestic bank transfers, some in the crypto community were quick to point out that Bitcoin does not suffer outages.

The U.S. Federal Reserve operates the FedACH service, a branch of the wider system that processes transactions for commercial banks. Jean Tate, a spokeswoman at the Atlanta Fed commented to Bloomberg:

“The FedACH service … is currently operating normally after experiencing delays in processing yesterday afternoon and early this morning. Some customers experienced delays in receiving confirmations of yesterday’s transactions. Federal Reserve technical staff continue to investigate the root cause of the issue.”

This is the second major disruption of the system in 2019, following a three-hour downtime period of the FedWire interbank transfer service in April 1. The Fed did not disclose specific causes for both outages, pointing to a generic “internal technical issue” earlier.
The ACH system forms the backbone for the majority of U.S. business transactions, being developed specifically to serve medium-sized transfers. The service handled an average 58.5 million transactions a day in 2018, with an average value of $1,760.

Bitcoin Does Not Solve This

Though this news has been considered by some as a testament to Bitcoin’s resilience, Mati Greenspan, Founder at QuantumEconomics, stated that the network ultimately wouldn’t be able to handle such a transaction volume without grinding to a halt.

Under heavily optimized conditions, the Bitcoin network can handle at most 27 transactions per second. A frequently cited average value is seven transactions per second.

Using the 2018 figures for the ACH system, it processed an average of 677 transactions per second. No major cryptocurrency has been able to come close to this figure, though many projects often claim to be able to process thousands of transactions per second.

Finally, though the Bitcoin network technically never experienced outages, the situation around Dec. 2017 was, in fact, an outage in all but name.

Bitcoin unable to scale
Bitcoin mempool size. Source: Johoe’s Mempool Statistics

At one point during the height of crypto euphoria, there were over 250,000 unconfirmed transactions. Sending Bitcoins was only possible by setting a $50 fee. Users who set a fee below $10 had to wait about three weeks for their payment to be cleared — effectively equivalent to a serious localized outage.

Disclosure: This article was edited by Andrey Shevchenko. For more information on how we create and review content, see our Editorial Policy.

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