Decentralised nature of cryptocurrencies could work against them when it comes to quantum computing
(CNBCTV) Experts say advances in quantum computing, which is poised to increase computing power by more than a thousandfold, could make light work of the security features of cryptocurrencies, upending the technology that many believe will disrupt finance.
Cryptocurrencies enable quick and secure transactions through a technology that uses cryptography to create tamper-proof records. This technology, known as blockchain, works on a decentralised register – with millions of computers coming together to validate transactions. The process of validation, also called mining, uses immense power as computers rely on brute force to make complex calculations.
But quantum computers, which use concepts from physics to process problems at a speed exponentially faster than conventional computers, could change the way cryptocurrencies work – for better or for worse.
The worst-case scenario: a user with a quantum computer could easily break the encryption associated with cryptocurrency transactions allowing them to impersonate someone else on the network.
It is not that the cryptocurrency industry is not aware of the threat posed by quantum computing.
The rapid advances in quantum computing means regulation will be needed to protect cryptocurrencies such as bitcoin.
Makers of Ethereum, the world’s second-largest cryptocurrency, are working on developing what is called “post-quantum computing technology”.
Post-quantum computing technology is an upgrade spearheaded by the US government’s National Institute of Standards and Technology (NIST). Experts say the upgrade is as massive as fixing the Y2K problem or upgrading the Internet from IPv4 to IPv6.
The very decentralised nature of cryptocurrencies could work against them when it comes to quantum computing. Cryptocurrencies that have more centralised decisionmakers, such as the upcoming “central bank digital currencies” could move swiftly through upgrades such as post-quantum computing technology.