What if Ether Goes to Zero? How Market Risk Becomes Infrastructure Risk in Crypto (Bank of Italy)

The Bank of Italy published a paper that examines how the market value of unbacked native tokens (like Ether) directly affects the security and availability of permissionless blockchains. It explains that these blockchains rely on validators who are compensated in native tokens—if a token’s price crashes substantially and persistently, validators may cease operations, potentially halting transaction settlement and increasing vulnerability to cyberattacks. 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 tokenized 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. [Source: Bank of Italy]

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