In the past five weeks, we have witnessed Bitcoin take a mighty fall from grace, and then rise from the ashes to record its third greatest gain in a single day. These sudden changes in direction should not come as a surprise. Bitcoin has been labeled the most volatile asset class in history for good reason. Such strident swings are “normal” in Crypto-Land, especially when trading volumes are low. At just such times, a minor event or public disclosure can send Bitcoin rushing to find new support levels, up or down.
The surprising part of these moves is that the analyst community goes into hyper drive, doing their best to determine the exact causes for such a significant change of pace. As the story typically unfolds, surely no single reason could ever suffice. Major moves must be due to a combination of causes, all happening at about the same time. In both the fall and rise alluded to above, analysts pinpointed several “smoking guns”, even up to a dozen, when it came to the fall.
One of these “fall” related causations was Google’s claim of “Quantum Supremacy”, which had occurred in the press weeks before, but then maybe it took time for analysts to understand the gravity of the situation. The term “Quantum Supremacy” conjures of nightmares from “Terminator” movies where SkyNet takes over the world, but in the current day, these “nightmares” have more to do with monster computers being able to crack encryption codes that protect everything on the planet, including the blockchain.
Several articles have been devoted to explaining first the threat and then the potential consequences and if they are “real”. Per Coindesk: “After a month of speculation, Google announced that it has built and tested a 54-qubit quantum processor called “Sycamore.” The processor, which looks like it’s covered in a writhing mass of serpents inside its super-cooled cryo-chamber, was able to perform a complex computation in 200 seconds.”
How “complex” you ask? According to the scientists that created Sycamore, they noted on their blog: “From measurements in our experiment we determined that it would take the world’s fastest supercomputer 10,000 years to produce a similar output.” Let’s see – 200 seconds versus 10,000 years… hmmm… Houston, we have a problem!
Suffice it to say that many people have been studying this threat for some time. The NSA has been working at the problem for over four years, so it must be taken seriously, although many technical gurus purport that quantum computing is much like nuclear fusion – it is a great idea, but scaling the idea up into a working model that produces tangible results has always been the rub.
Patrick Dai, founder and CEO of Qtum, a business-focused blockchain provider, offers sanguine counsel: “Quantum computing will impact many forms of encryption including SHA-256, which is used by bitcoin. Since Bitcoin has value, people will have more of an incentive to attack it. However, I believe many easier encryption algorithms will be broken first and alert the community that it’s time for a change. Breaking SHA-256 isn’t something that happens overnight. We will have many warnings. Ultimately miners will pay the price when the switch happens, because they are stuck with incompatible hardware, but bitcoin will continue to progress.”
No one knows when the first real applications of quantum computing will actually evolve far beyond the idea stage. Google is only the latest in a number of competing entries. Many experts claim that this technique can only be used in very specific situations, but the technical underpinnings are strange enough that the use of quantum techniques could pop up anywhere in the real world to wreak havoc. The only advice for now is to be prepared. A shift in encryption standards may be all that is needed for now.
According to Adrian Scott, CEO of Freedom Stack, a crypto startup, we may not get the hoped for early warning signals. In that event, he suggests: “This is like a Y2K problem for crypto, as it does mean significant upgrades to platforms across networks, software libraries used by many applications, integrations with other systems, etcetera. We also don’t know for sure how quantum-resistant the ‘quantum resistant’ approaches are.”