1st April 2022 > > Quantum computers.

tl;dr

A popular fear for the threat posed by quantum computers to cryptos is rather overstated.

Market Snap (at time of writing)

Market Wrap

The US yield curve is very close to inverting between 2-year and 10-year yields, a surprisingly robust and reliable indicator of a looming recession in the next 6 to 12 months. The gap is a measly 3bps and is unlikely to survive the next round of inflation data.

Policy makers in the shape of unelected central bank officials are mandated to attempt price stability, a task at which they are failing badly. Their only recourse is to hike short term interest rates, precipitating the recession that is feared by bond markets today.

This is a situation entirely of their own making.

it could have been avoided altogether if central banks had not engaged in wholesale market manipulation on a scale never seen before using quantitative easing (QE). The punishment for individuals engaging in market manipulation is a prison sentence, but that doesn’t apply to central bankers and their masters.

As ever, one rule for the political elite, and a totally different one for the rest of us.

Curious Cryptos’ Commentary – Quantum computers

RSA (Rivest-Shamir-Adleman) cryptography lies at the heart of the crypto revolution. Its key functionality is the ability to encrypt using either a public key or a private key, whilst the other key decrypts the data.

https://encryptionconsulting.com/education-center/what-is-rsa/

This functionality allows only the owner of a particular wallet to sign a message authorising the movement of cryptos from one public wallet address to another, by encrypting with the private key. Everyone else – armed with the public key which doubles up as the wallet address – can read that message proving the ownership of those coins.

There has been much speculation in the past that the development of quantum computers, able to perform large numbers of calculations in extremely short time spans, would render much current cryptographic knowledge and theory redundant, and therefore all cryptos to be worth precisely zero.

That would be an outcome welcomed by naysayers such as Warren Buffett, Jamie Dimon, and Peter Schiff, all of whom have been accurately quoted in previous editions of the CCC with damning views of cryptos.

…

Quantum information expert Sankar Das Sarma has weighed in with his views. In his role as director of the University of Maryland’s condensed matter theory centre, he wrote an article for the MIT Technology Review.

In this article, Sankar has some comforting words for us:

“The most advanced quantum computers today have dozens of decohering (or “noisy”) physical qubits. Building a quantum computer that could crack RSA codes out of such components would require many millions if not billions of qubits.”

He is convinced that an ability to crack current cryptography is well beyond the ability of current quantum computers:

“It is akin to trying to make today’s best smartphones using vacuum tubes from the early 1900s.”

Note that Sankar is not denying that one day quantum computers will have this ability, but that the day is a long way away.

Phew!

…

Meanwhile work is being done to develop quantum computer resistant cryptographic solutions.

Ironically, given Jamie Dimon’s view of cryptos, the firm of which is CEO – J.P. Morgan – is leading research on this very topic.

In a recent statement the firm said this:

“Quantum key distribution (QKD) blockchain network is the only solution that has been mathematically proven to defend against a potential quantum computing-based attack.”

JPM in collaboration with Toshiba and Ciena has deployed and tested a real-world QKD blockchain.

Like all successful investment bankers, Dimon is hedging his bets.