Google’s Quantum Computing – a Threat to Bitcoin and Cryptocurrencies?

Written by: Jay Yi, MBA; Edited by: Chris Thompson, CFA, MBA, P.Eng

eResearch | Last week, NASA posted then quickly retracted a paper written by Google’s (NASDAQ: GOOGL; LSE; 0RIH; DB: ABEA) researchers outlining a claim that the tech company built the first quantum computer while citing the term “quantum supremacy”, which means the computing power has reached a point capable of carrying out calculations previously impossible or more specifically, too time exhaustive, to carry out. According to Fortune, NASA took down the paper due to potential improper peer-review evaluation which must be done by a panel of experts.

Quantum computing, still largely theoretical, harnesses non-binary bits of information that can exist in multiple possible states compared with today’s computers which have binary bits of information that only exists in two states; a traditional computer has options 0 and 1 compared with a quantum computer which has beyond those options.

This is not good news for cryptocurrencies such as Bitcoin as one of the main value drivers of its underlying technology, blockchain, is its cryptographically encrypted security, which costs too much and takes too long to decode with current computing powers.

In Canada, the University of Waterloo partnered with the National Research Council of Canada and received C$180,000 in funding for quantum-safe blockchain technology

Bitcoin is cryptographically transacted using an algorithm called SHA-256, which encrypts the private key that is used to access an individual’s cryptocurrency wallet. SHA-256 produces 256 bits and each bit has two values, 0 and 1, therefore two to the exponent 256 (2^256) possible values exist that must be computed to hack the private key.

The following must be done to successful hack Bitcoin:

1. 1. 1. 1. 1. 1. 1. 1. 1. 1. Reverse engineer the hashed (SHA-256) block through countless permutations to get the private key.
                           2. Simultaneously hack 51% of the participating nodes to verify the transaction.
                           3. Make sure to change every single time stamp on each block if the changed transaction wasn’t the most recent block on the chain.

The number of permutations in SHA-256 geometrically increases to a level that today’s technology struggles to come close to computing in a timely manner. Quantum computing provides enough computational power to run through all the permutations fast enough; it was reported that a complex equation that the world’s fastest supercomputer was expected to complete in 10,000 years was finished in 3 minutes by Google’s quantum computer.

Google has even created the term “Neven’s Law” which states that quantum computing’s growth will increase by double exponential growth compared with “Moore’s Law” which states that traditional computing power is going to grow double every two years.

Until NASA re-releases the research paper with approval from a board of peer reviewers, it is not certain that Google has accomplished the task of “quantum supremacy”. It will be interesting to see how Bitcoin and other cryptocurrencies react to Google’s advance towards a technology that may break down the integrity of its security.

Alphabet Inc. (NASDAQ: GOOGL; LSE; 0RIH; DB: ABEA)

• Headquartered in California, United States, Alphabet is a multinational conglomerate of technology companies that was created through a corporate restructuring of Google in 2015.
• It is now the world’s fifth largest technology company with continued leadership in its search engine.
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