How Cryptocurrencies Are Paving the Way for Quantum Computing

In today’s world, digital transformation looks set to be driven by two emerging technologies, distributed ledger technologies and quantum computing. Distributed ledger technologies allow for an immediate, transparent and secure digital transfer of value and ownership within a network. They provide a novel way of securing data and transaction records for numerous entities without the need for a trusted intermediary.

Blockchain has risen in prominence among distributed ledger systems. This rise has been occasioned by its underpinning of cryptocurrency, which has been rapidly diffused in financial markets worldwide. 

It has been 12 years since the coding of the first cryptocurrency. In that time, it has grown from being a counterculture oddity into a valuable investment cash cow. Bitcoin was trading at just above $66,000 at the time of writing, and it has become the investment commodity of choice for both small fry and big-name investors.

Quantum Computing Explained

Quantum computing, on the other hand, is computer technology based on two aspects of quantum mechanical theories, superposition and entanglement. Unlike classical computers, which only encode information in bits that take the value of 1 or 0, quantum computing uses quantum bits (qubits) that utilize subatomic particles’ ability to exist in more than one state. 

The ability enables quantum computers to handle complex problems at exponentially higher speeds than classical computers and with less energy consumption to boot. 

American theoretical physicist, Richard Feynman, struck the spark of quantum computing in 1981 when he proposed a rudimentary model for quantum computers that would efficiently simulate the evolution of quantum systems. Years later, in 1998, the race into the next era of computer power officially kicked off with the development of a 2-qubit quantum computer.

In 2017, IBM announced the operation of a 20-qubit quantum computer which they made available online. Soon afterwards, Google one-upped them with the development of a 49-qubit computer, a staggering 29 times better than the IBM offering.  

Much progress has been realized since the time of Richard Feynman. Still, experts in the quantum computing field believe that it could be another decade before the technology can provide meaningful value. Like the ones developed by Google and IBM, current quantum computers lack the power to offer any advantage over classical supercomputers. These quantum computers are, in essence, proof-of-concept models meant to prove the feasibility of the technology.  

Despite this prognosis, the industry’s value is projected to grow by $65 billion by 2030. This projection is up from its current valuation of about $500 million.

Quantum Computing Follows the Same Development Path as Cryptocurrency

Cryptocurrency and quantum computing are both largely nascent technologies. However, crypto has recently seen rapid growth in terms of both development and adoption. In this way, it may be considered a trailblazer for quantum computing. 

While the technological approach may be different, at their heart, both cryptocurrency and quantum computing share philosophical similarities; the promise of economic gain and financial and political disruption. 

The development of cryptocurrency has had a substantial social and economic effect globally. Financial institutions spent vast amounts of money determining customers’ identities and tracking transactions by enormously huge documentation processes. They have now cut costs and increased efficiency through the acquisition of blockchain technology.

A new study by international management consulting firm, the Boston Consulting Group (BCG), indicates that quantum computing could similarly negatively impact various industries, especially in the financial sector. The report suggests that cost savings and revenue opportunities for users of quantum computing are expected to range between 2 and $5 billion in the next three years. 

However, according to the report, the gains will surpass $450 billion annually and reach $850 billion by 2050. This forecast is predicated upon the assumption that developers can overcome major technological hurdles and that the power and reliability of quantum computers will increase exponentially.

A Straight Path to Popularity

The BCG report hints at quantum computing following a similar path to prominence as crypto, from academic concepts to high-value technology.

And it is here that quantum computing can learn a thing or two from crypto’s journey. In 2009 cryptocurrency was an oddity, a newfangled idea that was only popular within a small tech niche. Fast forward 12 years later, and most people are aware of it and fascinated by it, regardless of their understanding of its underlying technology. Crypto is on the road to becoming ubiquitous, especially in decentralized financial circles.

The same may be said of quantum computing. Since 2017, there have been steady advances in quantum computing. In 2019, Google claimed it had achieved quantum supremacy after its 54-qubit Sycamore processor reportedly took 200 seconds to run a calculation that would have allegedly taken 10,000 years on classical supercomputers.

Multiple industries stand to gain from the development of quantum computing. Still, just like with crypto, it is expected that the financial sector will be the most affected by this technology. 

Despite its promise, quantum computing is still at a stage too early for meaningful adoption. Large-scale, fault-tolerant quantum computers are still decades away, but the technology is steadily gaining mainstream recognition, much like crypto.

Posing An Existential Threat to Crypto

Quantum computing promises to address the shortcomings of classical computers by exponentially increasing computing capacities. However, advancements in quantum computing have elicited jitters among the crypto crowd. There are genuine concerns that quantum computing can break many current cryptography methods.

For instance, Blockchain relies on asymmetric cryptography or public-key encryption. Private and public keys are generated in twos, with the private key kept secret, and the public key made publicly available. 

Now, asymmetric cryptography is based on the mathematical principle known as one-way function, which means a public key can be extracted from a private key but not vice-versa. In this system, public keys represent wallet addresses, while private keys are the means to access those wallets. 

Without the keys, classical computers could take years, heck, even hundreds of years, to brute force an address. However, quantum computing’s incredible processing power potentially makes all this protection worthless. In theory, the security of encryption could be ripped away and the contents of an address accessed without a key.

The unbelievably complex calculations required to brute force an address could take a quantum computer mere minutes instead of the possible centuries needed by a classical computer. Using an algorithm discovered in 1994 by American mathematician Peter Shor, a quantum computer could determine a private key connected to any address on a blockchain.

The Hope Offered by Quantum Blockchain

The combination of Blockchain and quantum computing is referred to as a quantum blockchain. Like regular Blockchain, quantum blockchains are decentralized, encrypted ledgers, but they are also based on quantum computation and quantum information theory. 

While still only theoretical, a quantum blockchain model has been proposed, where it would store data in entangled photons that would exist only momentarily. The photons would then remain in an impossible to change, read-only state. This technology could be the basis of a highly secure blockchain. 

Researchers have postulated a new kind of cryptocurrency; the quantum coin could be created on this Blockchain. Quantum blockchains are considered to be potentially more secure and efficient than the blockchains we currently have.

Quantum computing could also potentially accelerate the net effect of decentralized projects and further strengthen privacy on the internet. It could do this by facilitating much higher encryption standards and immutability not possible in today’s Blockchain.