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What is the Impact of Quantum Computing on Blockchain and Cryptocurrency?

by DWS Holdings IncMay 28th, 2022

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Supercomputers aren’t as powerful as you may think and may fail in modeling complex cryptographic problems, chemical reactions, natural systems, etc. Quantum computers can solve these problems despite their complexity. However, Quantum computing can also prove detrimental to today's cryptography standards with its immense speed. Blockchain technology can counter the challenges by reinventing its current implementation to nullify such impact.

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Supercomputers aren’t as powerful as you may think and may fail in modeling complex cryptographic problems, chemical reactions, natural systems, etc. Quantum computers can solve these problems despite their complexity.

However, Quantum computing can also prove detrimental to today's cryptography standards with its immense speed. Blockchain technology can counter the challenges by reinventing its current implementation to nullify such impact.

Quantum computers have shown that they can solve the most advanced mathematical algorithms used in cryptography, the backbone of Blockchain technology and cryptocurrencies. It has led to widespread concern about the ineffectiveness/demise of cryptography and Bitcoin.

This article discusses these aspects in detail to present a balanced view of the implications that Quantum Computing can have, whether positive or negative, on Blockchain technology and cryptocurrencies. Before delving into that, here is a brief outlook on quantum computing.

What is Quantum Computing?

Quantum Computing uses the complex laws of quantum mechanics for solving problems (such as mathematical algorithms) that are out of reach of the ability of conventional computers.

As a result, quantum computers can outperform today's most advanced computers, including supercomputers. Though it does not make classical computing redundant, Quantum Computing has proved its utility in various fields, including material sciences, automobiles, pharmaceutical research, and even Blockchain technology.

What is Qubit?

Qubit, also known as Quantum bit, is the basic unit of quantum information used in a quantum computer. It is similar to the binary digit or bit used in classical computing.

However, it represents a two-state quantum-mechanical system, identical to the spin of an electron, depending on its charge or polarization. A bit can be either a 1 or a 0 in classical computing. However, in quantum mechanics, a qubit can simultaneously be in a coherent superposition of 0 and 1.

Quantum Computing: The Current State

IBM developed one of the giant quantum computers known today in 2020. This computer, consisting of 65 qubits, identifies numerous areas where you can apply Quantum Computing.

In addition, China has improved the IBM model by introducing a 66-qubit supercomputing quantum processor known as Zuchongzhi that can perform a sample task in 1.2 hours that a classical computer could take eight years to accomplish.

And in November 2021, IBM unveiled Eagle, the most powerful quantum processor with 127 qubits. Even Google aims to create a quantum computer with 1 million qubits by 2029.

However, even after all these developments, their capabilities require tremendous improvement. Quantum Computing is still in a nascent stage. However, tech giants, including Microsoft, Google, IBM, and Honeywell, are building quantum computers globally.

Quantum Computing applications have the potential ability to break encryption, blockchain technology, and the internet, but is it going to happen soon? Here are some statistics on Quantum Computing that should give you an idea about its growth.

The global Quantum Computing market is estimated to attain $949 million by 2025, displaying a CAGR of 43% between 2020 and 2030. By 2030, the market could expand to $9 billion.

The US alone invested $625 million in multidisciplinary Quantum Information Science Research centers in 2020.

What are Quantum Computers Capable of?

Quantum computers function using the properties of quantum physics for storing data and performing computations that could prove advantageous for tasks that are impossible for conventional computers and even state-of-the-art supercomputers. Quantum computers are capable of the following:

Breaking strong encryption*:* Today, the world uses TLS and VPN encryption systems that are considered impregnable. However, quantum computers can crack and expose the security layers using Shor's algorithm. While the security algorithms used today would take 10 billion years to decrypt, Quantum Computing algorithms would not take more than ten seconds for the task.

Accelerating developments in artificial intelligence*:* Today, Machine Learning and Artificial Intelligence are two of the latest concepts with the highest technological capabilities possible. In this age of Big Data, AI-ML helps Data Analytics enormously besides other technologies and industries, such as Natural Language Processing (NLP), online fraud detection and cybersecurity, EdTech, and E-commerce. And with its unimaginable calculating speed, Quantum Computing has the potential to help ML and AI to scale further heights unimagined so far.

Advantages in financial markets*:* The financial industry was among the first to use Big Data and combinatoric calculations to make simulated market movement projections. A millisecond advantage in obtaining price information is critical in financial markets. Today, Financial Technology (FinTech) has shot up to greater heights encompassing a wide range of monetary systems based on Blockchain, such as Decentralized Finance (DeFi) and non-fungible tokens (NFTs). With its unfathomable speeds, Quantum Computing can further revolutionize the financial industry to achieve far more than it has.

Implications of Quantum Computing for Blockchain Technology and Cryptocurrencies

Cryptography uses the most secure mathematical algorithms to maintain the highest levels of security and privacy. Quantum Computing promises to revolutionize computing by introducing enormous calculation speeds that can potentially make cryptography, the underlying technology behind Blockchain Technology, and cryptocurrencies redundant.

Besides cryptocurrency, Blockchain is widely used in many state-of-the-art technologies, such as FinTech, NFT marketplaces, DeFi, Metaverse, cybersecurity, supply chain management, healthcare, IoT (Internet of Things), and identity management. A quantum computing compromise on Blockchain cryptography would thus result in total disaster as there is so much at stake globally.

The following points show the implications of Quantum Computing growth for blockchain technology and cryptocurrency.

Encryption: Will the foundation of blockchain technology shake?

IBM has recently introduced a 127-qubit processor, considered amongst the largest quantum processors. The plan is to move up to 1000 qubits by 2023. With Google announcing plans to go up to a million qubits by 2029, the foundation of blockchain technology seems to be on a weak footing. As of today, a conventional computer will require 300 trillion years to crack 2048-bit RSA encryption. However, a quantum computer with 4,099 qubits can do it in 10 seconds.

Is Bitcoin quantum-safe?

Are the current Quantum computers a threat to Bitcoin? As of date, they are not, but one cannot say about the future. With 4,099 qubits enough to crack 2048-bit RSA in ten seconds, one may shudder while thinking what a million qubit Google computer could do if introduced by 2029, as Google claims.

It may probably take 317 million qubits to compromise bitcoin in one hour. A ten-minute window will need around two billion qubits if this is true. A device with a 2B qubit processing capacity will not be ready shortly as the highest expected soon is Google's proposed plan to create a 1M qubit quantum computer by 2029, as mentioned above.

Therefore, one can say that Bitcoin is quantum-safe as of today, but no one can predict the future. The internet has taken 30 years to reach this position from scratch.

How powerful are quantum computers to compromise bitcoin?

Quantum computers can work at unimaginable speeds. For example, Shor's Algorithm is a concern because it can factor large numbers into two-component primes, crucial to breaking RSA encryption.

Bitcoin uses SHA-256, a cryptographic algorithm that present-day systems find impossible to break. However, Shor's Algorithm can theoretically crack it open. Research shows that a quantum system with 13 million qubits can break SHA-256 in 24 hours.

Google's proposed 1M qubit quantum computer will take seven more years. Once it is successful, creating a 13M qubit quantum system might not take much time. Bitcoin and Blockchain are safe for now, but time alone can tell for how long. Some of the key players, such as DWS Holdings Inc., can offer you the expert advice to plan for your readiness for quantum computing and impact on your crypto investments.

It could Take a Few Years for Quantum Computing to Achieve its Full Potential

Quantum Computing is taking its baby steps today, but it will not take much time to start flying high, especially considering the speed of technological improvement. Three decades ago, no one would have dreamed of the widespread internet of today with its enormous capabilities and possibilities. One must look forward to the following in the future.

Fault-tolerant Quantum Computing is distant*:* IBM introduced the 127 qubit-powered quantum processor in 2021. The organization has declared 2023 as the year to deliver quantum advantage. Technology is developing at tremendous speed. However, fault-tolerant Quantum Computing is still some time away, but Noisy Intermediate Scale Quantum (NISQ) computers might come sooner than expected.

Quantum blockchain technology: Despite Quantum Computing being many years away from making Blockchain technology redundant, there is cause for concern, especially with the speed of development of Quantum Computing technology. The ideal way for Blockchain to counter this threat is to invest more aggressively in research and invent quantum blockchain technology.

Final Words

When the internet was invented, nobody had envisaged technologies like Blockchain could ever emerge. However, it has become a reality today and has revolutionized every conceivable field vital to human existence.

However, Blockchain is under threat today from the emerging technology of Quantum Computing as it possesses robust potential to make the high-security cryptography of Blockchain redundant. Professionals and experts from DWS Holdings Inc. suggest that it may not happen in the near future.

Still, blockchain technology must reinvent itself and advance its cryptography technology to the next level and place it out of reach of Quantum Computing. Besides, instead of viewing Quantum Computing as a threat, blockchains must use its potential and possibilities to improve their cryptography and enhance security to higher levels.