Chris’ note: Crypto investors got a huge scare recently.
Reports came out last month that Google made a breakthrough in quantum computing. The company supposedly had a quantum computer solve a complex calculation in about three minutes – while the strongest supercomputer today would take 10,000 years to solve the same equation.
A computer with that kind of power would be able to crack almost any kind of encryption… including a cryptocurrency.
And if that happened, it could make a crypto asset completely worthless.
It wasn’t long before the crypto community (and the mainstream media) started panicking. But here at Casey Research, we don’t lose our cool just because the “financial experts” say we should.
That’s why I turned to my good friend and colleague, Marco Wutzer, to cut through the noise and explain why you shouldn’t be worried if you’re a crypto investor.
Marco’s been involved with digital currencies for decades. He knows more about the industry than anyone I know. Below, he tells me what Google’s breakthrough really means for cryptos like bitcoin… and why you shouldn’t hit the panic button just yet…
Chris Reilly, managing editor, Casey Daily Dispatch: Hi, Marco. Thanks for taking the time to speak with me today. To start… what exactly is quantum computing? And how does it differ from “regular” computers?
Marco Wutzer, senior analyst, Disruptive Profits: Sure.
Simply put, a quantum computer is exponentially more powerful than the common binary computers that we use today. This makes quantum computers very good for processing certain large datasets.
There are algorithms you can run on a quantum computer that lend themselves to certain types of calculations. These calculations would be too complex for even binary supercomputers.
For example, the movement of subatomic particles… or simulating how molecules react to drug treatments… or even forecasting the weather.
And now, the development of quantum computing has reached a stage where we have to deal with it and be aware of it.
Chris: That leads me into my next question… As you know, an article was published a few weeks ago that said Google has achieved “quantum supremacy.” What does this ultimately mean?
Marco: Quantum supremacy means we now have a quantum computer that is able to solve a mathematical equation or a calculation that would basically take a lifetime on a regular computer to process.
So in other words, we cannot process it on a regular computer, but we now could on a quantum computer. Now, what are the implications of all of this?
People are talking about Google because the company’s in the news now about this. But think about it… If Google has it, you can also assume that certain state actors and intelligence agencies have quantum computers that are as powerful or even more powerful.
Because if you look at history, governments have been breaking encryption codes for years before the public was even aware of it. There’s no reason to believe that this is not going on right now, too. So there’s most likely more than one entity that has access to these kinds of computing resources.
Remember, Chris, everything that we do in the digital world that is of some kind of value or importance is encrypted. Our entire financial system is encrypted. Everything that you do online that contains sensitive data is transmitted in encrypted form. So the entire global financial system, all banking, medical data, all confidential communication: everything is encrypted.
With a quantum computer, all of that is at risk in general. Now, this is of course nothing new, and people have been working on both quantum computers and quantum computing-resistant cryptography for many years.
Now that Google’s in the news with this quantum supremacy event, people are acting like this is the Big Bang event that’s changed everything. And it’s really not the case, because it’s a technological development that has reached a certain stage now, but it’s not something that just by default flips everything.
Because quantum computing is a very new technology, very unstable, still very much under development, and the amount of raw processing power is just one element of that whole architecture.
Chris: Is quantum computing a direct threat to blockchain technology?
Marco: In short, no.
Remember, a cryptographic algorithm is just software. So it’s really just a matter of changing it out for a new algorithm that is quantum computing-resistant. And these algorithms already exist.
There is also an ongoing competition hosted by the U.S. National Institute of Standards and Technology. It has already received over 80 different proposals from researchers and academics for quantum computing-resistant public key cryptographic algorithms.
Not only do we already have a few of these algorithms, but new quantum computing-resistant algorithms are constantly being worked on, and it’s just a matter of upgrading everything.
So if anything, this quantum supremacy event in the media has brought a lot more awareness to the risks that this implies and the work that needs to be done in the technology field and in the software field as it comes to cryptography in general.
This includes all the blockchain projects that use the cryptography vulnerable to quantum computing right now. They all need to upgrade over the next one or two years.
What we have on the one hand is quantum computers developing, and on the other hand upgrading all the algorithms to become resistant to that technology.
Chris: So it sounds like our readers who are invested in cryptos and blockchain technology shouldn’t worry about this right now.
Marco: That’s right.
The media is painting this as some fatal flaw for blockchain. It’s really just a lot of fear, uncertainty, and doubt. And as I mentioned, it’s just a matter of switching out algorithms, making sure everything works, and basically just staying up-to-date.
A good analogy is with crypto mining. When a new mining chip comes out that is more efficient than the old ones, then the old ones become obsolete because they are no longer competitive.
So just like we have these upgrade cycles in hardware, we go through these upgrade cycles every once in a while with software, too. And it’s just a matter of upgrading.
In fact, we already had simple upgrade cycles where old cryptographic algorithms had to be upgraded for newer, better ones.
With quantum computers, it’s a bit more complex, but it’s still just another example of a software upgrade cycle. Just like you have to upgrade your operating system.
Overall, it’s not the big deal it’s made out to be.
Chris: Thanks, Marco. I appreciate the time, as always.
Marco: You’re welcome, Chris.
Chris’ note: Shifting gears to the latest moves in commodities… as you may have noticed, gold took a dip today. It’s down 1%.
As we’ll show you in tomorrow’s Dispatch, this is no reason to panic. Drops like this are normal, especially after a big runup like we’ve seen so far in 2019. In fact, this presents a great buying opportunity.
Tomorrow, commodities expert Dave Forest explains why – and shares the best way to take advantage.