It’s a real concern.
A quantum computer effectively erasing the value of your entire crypto holdings overnight.
Today I’m going to talk about why this fear is only partially justified.
For a bit of context, crypto markets roared back to life over the last two months and everyone suddenly remembered that crypto is a viable or indeed, rational investment.
(By the way, to understand why the crypto resurgence is just getting started I would highly suggest familiarising yourself with Money Morning editor Sam Volkering’s book, Crypto Revolution.)
Anyway, this is what’s happening with the bitcoin price right now:
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From a low of around US$6,800 in December, bitcoin is now up to around US$9,600.
So things are looking up for the much-loved crypto.
However, what if it went to $0 in one fell swoop?
The idea certainly got floated in the mainstream.
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25% of the bitcoins in circulation are vulnerable to a quantum attack
A Forbes article asked ‘Could Google Be About To Break Bitcoin?’
This was back in October when Google officially announced it had achieved ‘quantum supremacy’.
This was largely just a test run — and IBM argued that it wasn’t a real breakthrough.
Would you believe a small ASX-listed company could beat Google to the quantum punch?
Back to the quantum threat to bitcoin though.
You see, only about a quarter of bitcoin could be wiped out by a quantum attack.
Deloitte for instance, notes that:
‘Presently, about 25% of the Bitcoins in circulation are vulnerable to a quantum attack. If you have Bitcoins in a vulnerable address and believe that progress in quantum computing is more advanced than publicly known, then you should probably transfer your coins to a new p2pkh address (don’t forget to make a secure backup of your private key).’
And:
‘In case your own Bitcoins are safe in a new p2pkh address, you might still be impacted if many people will not (or cannot) take the same protection measures. In a situation where a large number of Bitcoins is stolen, the price will most likely crash and the confidence in the technology will be lost.’
You may be asking, what is a p2pkh address?
And how do you get one?
P2pkh stands for ‘pay to public key hash’.
It gets a bit complex, but chances are you already have one.
And here’s why I don’t think a quantum attack is an immediate threat.
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What would you do with it if you had the power?
It all comes down to motivation and priorities.
For starters, why destroy the value of bitcoin?
Sure a malevolent government may want to do this, but if you are a private company there would be far bigger things on your mind.
For instance, the estimated global cost of cancer is upwards of US$1.16 trillion a year.
Putting your quantum computer to work on solving the cancer problem would likely net you far more than stealing 25% of bitcoin’s total market cap of US$175 billion.
You’d be making off with $43 billion of course.
But that is a paltry sum compared to what else you could do with a quantum computer.
What would you do with it if you had the power?
You could build the most powerful trading bot in the world.
Guaranteed returns in any market.
Perfect weather predictions, super powerful AI.
And if you want to get nasty — hack everyone’s password.
All of these things would likely come before an attack on bitcoin.
That’s not to say it isn’t a risk — it’s just more like a ‘known unknown’.
This is not a stagnant technology — crypto is a constantly evolving world and it will adapt to a quantum attack.
Indeed, there are already projects out there like Praxxis and QRL (Quantum Resistant Ledger) that are working on solving the quantum problem.
And any advances that these projects make will likely be folded into Bitcoin and Ethereum’s development.
So when quantum does come, I think the crypto world will be ready.
Finally, consider balancing the risk to your crypto with some quantum exposure.
Regards,
Lachlann Tierney,
For Money Weekend
PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.
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