Passion Writing

Could Quantum Computing Sink Cryptocurrencies?

By John Baxter, john.baxter@leadeconomics.org

Evangelists for cryptocurrency insist it's the financial technology of the future. Secure, untraceable, and uncontrollable by central banks advocates say crypto will return monetary power to the people.

However, there's a major problem on the horizon which could threaten the very existence of Bitcoin, Ethereum, and all the other cryptocurrency variants available today.

The danger doesn't come from any government crackdown or the assimilation of blockchain by banking giants. The problem is simply the onward march of technology, and it has the potential to pull the rug out from under cryptocurrencies almost overnight.
 

Strong Encryption Technology

As the name suggests, cryptocurrency is underpinned by strong encryption technology to keep both transactions and the currency itself secure. This isn't an individual feature of Bitcoin or any other of today's currencies -- it's the basis of every single tradable coin out there.

The cryptography behind blockchain is effectively unbreakable with today's technology, generating the basic security appeal behind crypto. But this foundation could be unexpectedly shaky thanks to the accelerating development of quantum computing.

 

Trillions of Calculations

Even the most powerful of today's supercomputers would take so long to break a single blockchain entry that it's realistically impossible. This is because the number of calculations required to arrive at the solution runs into the uncountable trillions, and each calculation needs to be done individually.

However, a new form of computing may be just around the corner. Quantum computing is based on the spooky effects of quantum mechanics, and can solve many, many calculations at once. In theory, there's no limit to the number of calculations a functional quantum device could solve in the blink of an eye. This would render the 256-bit private key encryption technology used by Bitcoin obsolete overnight.
 

So Are Bitcoin and Brethren Doomed?

The good news for Bitcoin is that quantum computing is one of those technologies that's long been promised but seems to only creep closer at glacial speed. Some experts doubt whether it will be viable in any reasonable timescale, while others claim a breakthrough is just around the corner.

The truth, of course, is likely somewhere between these extremes. Within a few years to a few decades, the security of Bitcoin, Ethereum, Litecoin, and all their relatives could be blown out of the water, and the value of investments in them will vaporize.

 

Is it Time to Give Up on Cryptocurrency?  

Given that the long-term future of crypto seems to be at risk, at least in its current form, is it time to give up on it?

Not at all.

If quantum computers finally arrive, Bitcoin as we now know it will die. However, the basic concept behind blockchain will stay valid, so long as a different type of encryption can be found which is invulnerable to any foreseeable advances in computing. Several theoretical encryption schemes have been developed, but until quantum computing arrives, it's difficult if not impossible to implement these ideas and test their strength.

In any event, functional quantum computing isn't going to appear overnight, still less with sufficient power and availability to seriously threaten existing currencies. And by the time that happens, cryptocurrencies – perhaps? – will have evolved, too…

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