Perhaps you’ve heard of Nassim Nicholas Taleb, author of “Fooled by Randomness”, ‘The Blackswan”, and his most recent book “Anti-Fragile”. In “Anti-Fragile”, Taleb discusses the properties of things which gain from disorder.
To understand the concept of ‘Anti-Fragile’, you must first think about what is the opposite of fragile. Imagine a wine glass. Let’s smash it with a hammer. It shatters into a dangerous mess to be put into the trash. This is a fragile item. What is the opposite of this fragility? Most people believe that it is non-fragile, that it won’t break like one of those $1000 submarine ashtrays. But it isn’t. Being resistant to destruction is defined as robust. The true opposite would be an object which actually gets stronger from the action of breaking. Taleb had to create the word ‘Anti-Fragile’ since no other existed.
Your body is an excellent example of this. As you play as a child, putting stress on your bones and muscles, they get stronger. Another good example is your local street with restaurants on it. If one is poorly run, it will go out of business. The other restaurants in the area would then benefit with more customers.
In the banking crisis of 2007-2009, instead of allowing the weaker, poorly run banks to fail, the government bailed them out andhelped them to grow bigger, in some cases via forced acquisitions. This is the opposite of what happens in nature and what should happen in a true capitalist society. We now have larger banks, and arguably a more fragile banking system. Additionally, banks are allowed by law to use leverage, often at 10:1. Leverage can create fantastic returns when things are going well, but in a downtown it can cripple a bank- hence federal insurance programs and bailouts.
How does this relate to bitcoin? Well, lets take a look at what happened when Mt.Gox’s Dwolla accounts where frozen by the US Government in May of 2013. Did the bitcoin system break because of this? No, in fact, the other exchanges gained in volume as customers moved their bitcoins and business to other exchanges. The users of Mt. Gox did have to exchange their US dollars for bitcoins at a premium, but this is far better than a taxpayer bailout.
This was repeated in late June of 2013, when Mt. Gox announced that they would temporarily stop US dollar withdrawals. The other bitcoin exchanges had a sharp increase in transactions. This helped the the other exchanges gain volume and fees and helped spread out the user base among more exchanges. The network in essence grew more stable and less dependent on any one exchange.
This is a perfect example of ‘Anti-Fragility’ in a marketplace.