Is blockchain just a bridging technology?

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What happens when quantum computers become reality?

One of my favorite moments at a cryptocurrency seminar last year was when someone asked this question. The response was dead silence. After a long pause, the speaker said something to the tune of, “We’ll find out when we get there.

Let me explain.

The whole premise of blockchain technology and cryptocurrencies, non-fungible tokens (NFTs) and smart contracts derived from them is that distributed ledgers are extremely secure and cannot be hacked with modern computers. I’m oversimplifying a bit, but for a transaction to be accepted by the blockchain, more than 50% of the computers on the network that share the blockchain must agree that the computer claiming to be the new owner of a cryptoasset is actually the owner legitimate. And the network only accepts claims that have proof of work (PoW), which is essentially an exercise in mass multiplication of several very large numbers. Again, I’m oversimplifying here.

Once such a PoW has been submitted to the blockchain network and more than 50% of the computers accept it, a new block is added to the chain, and the longest blockchain is considered the real blockchain. Submitting a PoW for a new cryptocurrency is what creates a new token or coin. Similarly, submitting a PoW creates a contract that proves ownership of certain assets without relying on centralized databases or potentially corrupt government officials.

Now imagine being able to produce those PoWs faster than all the computers on a network can verify the veracity of the PoW. Then you could constantly override the verification process and generate new blocks in the blockchain before the rest of the network can verify them. And since all blockchain technology assumes that the longest blockchain is the legit one, you can effectively “hack” the system. All other computers would simply accept your blockchain as the one against which to compare any new PoW.

With modern computing power, it is simply impossible to create such a 51% hack. But quantum computers will be so much faster that at some point they will easily overtake any network of traditional computers. In fact, speed will not be their only advantage.

Conventional computers are based on transistors that differentiate between two binary states – called “bits” – 0 and 1. But quantum computers can take both 0 and 1 at the same time and superimpose these “Qbits”. If that sounds strange to you, think of a typical old-fashioned computer that encodes letters or numbers as a series of eight bits. There are 256 different characters or numbers that can be encoded with these eight bits and at any time a transistor in a standard computer will be in one of these 256 possible states. But a quantum computer with eight Qbits could take all 256 states at once and use them for calculations simultaneously. Thus, the advantage of quantum computers grows exponentially as they include more Qbits.

This means that quantum computer algorithms must be completely redesigned in order to take advantage of these computational capabilities. But it also means that quantum computers will be much more powerful. They will easily solve problems that traditional computers could not solve for the remaining life of the universe.

So let’s say you’re the first person or company to build a fully functional quantum computer. Since all networks in the world are based on conventional computers, you can support all blockchains on earth in seconds. Only when the majority of computers in a network also become quantum computers will blockchain be safe again. But by then, it may be too late.

This advantage of quantum computers holds even when they haven’t really achieved what’s called a true quantum advantage, or when they can solve problems that no traditional computer can solve. Once the problem-solving capability of standard computers is sufficiently surpassed by their quantum counterparts, all blockchains in the world will become hackable by anyone with a quantum computer.

So when quantum computers become a reality, blockchain technology will have to be completely recreated from scratch or lose all its advantages of decentralization and security.

But quantum computers are still just science fiction, right? Yes they are. But they are under development right now. And if you extrapolate current advances at the speed of computing power in the future based on Moore’s law, a single quantum computer will be able to hack the bitcoin blockchain by around 2045.

Quantum Computer vs. Bitcoin Hash Rate

Quantum Computer vs. Bitcoin Hash Rate

Quantum Advantage over Proof of Work,” by Dan A. Bard, Joseph J. Kearney, and Carlos A. Perez-Delgado

And this estimate is based on two assumptions: first, quantum computing is progressing at the same rate as traditional computing. We know, however, that new technologies tend to advance much faster than well-established technologies. Second, the 2045 date applies to the bitcoin blockchain, which is by far the most complex and computationally intensive. (That’s why bitcoin cannot compete as a payment system with the PayPal networks and credit card networks of the world). Other blockchains like Ether or these underlying trading applications use much smaller networks. And according to a new study on the benefits of quantum computing, quantum computers could hack these blockchains as early as 2023.

Personally, I don’t think 2023 is realistic. But the more I read about advances in quantum computing, the bigger I think it could be in this decade. And what happens then?

Unless all blockchain applications have been fundamentally redesigned beforehand, they will likely be rendered unsafe and useless.

Warning: Please note that the content of this site should not be construed as investment advice, and the opinions expressed do not necessarily reflect the views of CFA Institute.

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Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.