Everyone was stunned when New York City’s new mayor, Eric Adams, announced that he planned to receive his first three paychecks in Bitcoin, the cryptocurrency that has dominated the financial headlines for the past year. year. Miami Mayor Francis Suarez had previously announced that he would accept his first salary 100% in Bitcoin.
The mayor’s announcements are even more signs that cryptocurrencies are no longer esoteric investments for the super-rich (or super-crooks) but have entered the financial mainstream. In May, Deutsche Bank declared Bitcoin to be the world’s third largest currency in terms of circulation. Only the euro and the US dollar are bigger.
Mayor Adams himself says he intends to make New York “the center of the cryptocurrency industry.”
Of course, the history of the markets teaches us that what goes up must eventually come down, especially a commodity like crypto, whose rise has been fueled as much by hype as it is by financial realities. It is impossible to say if the current crypto boom is turning out to be a crypto bubble. What Bitcoin and other cryptocurrencies have for them are two virtues.
The first is that they are not state currencies, whose heads across the world have been shown to be inept or corrupt or both.
The other is the cryptocurrency’s reliance on blockchain, or distributed ledger (DLT) technology, to protect and authenticate its transactions. The current ledger of cryptocurrency transactions is never stored in one place, meaning there is no centralized version that a hacker can corrupt. Since data is hosted by millions of computers simultaneously, it is accessible to anyone on the Internet. But it is also protected because after each transaction in the shared ledger; and after all the registers match for each computer on the network; the transaction is encrypted with the rest in what is called a block. The new block is then added to the previous existing blocks to form a chain of blocks, hence the term blockchain.
Overall, the blockchain is a built-in security system that prohibits a hacker or attacker from forcing the distributed ledger to open without everyone knowing.
As tech guru George Gilder states in his book, Life after Google, the use of blockchain to share but also to protect data poses a greater threat to the domination of Big Techs on the Internet than any government regulation or legislation, just as cryptocurrencies pose a useful challenge for the elites who control our currencies denominated by the State.
But as always, there is a catch. Blockchain is adequate protection against existing cyberthreats, but not against the future posed by large-scale quantum computers.
As I mentioned in a previous column, blockchain encryption is based on elliptical curve cryptography, which will be vulnerable to factorization by quantum computers capable of decrypting the complex algorithms used by asymmetric encryption systems to secure almost all electronic data, including blockchain. The quantum attacker will just look like another member of the shared ledger, in a cyberattack that will be undetectable and persistent.
How vulnerable will cryptocurrencies like Bitcoin be?
Consider: In 2020, the total market cap of cryptocurrencies was $ 330 billion. Today it is approaching $ 2 trillion. Institutional investors account for 63% of crypto exchanges, down from just 10% in 2017, which means that a collapse in the value of cryptos is expected to spill over to balance sheets all over Wall Street and around the world.
Our most recent study, conducted here at the Quantum Alliance Initiative, conducted in conjunction with econometrics firm Oxford Economics, indicates that a quantum attack on crypto precipitating a 99.2% collapse in value, would inflict $ 1.865 trillion in value. immediate losses to homeowners, with nearly $ 1.5 trillion in indirect losses for the entire economy as a result of this collapse.
Overall, we envision a $ 3.3 trillion blow to the US economy.
It is a calculation based on the current value of the crypto. By the time a large-scale quantum computer emerges, by around 2030, cryptocurrencies will be even more entrenched in the global financial system and the losses even greater.
Fortunately, there is a solution. The most immediate is post-quantum cryptography, that is to say the deployment of an encryption based on algorithms that is impenetrable to future quantum attacks but also to classical attacks now. Crypto exchanges have already attracted some very damaging attacks, like the 2018 one on Bithumb, the South Korean cryptocurrency exchange, which cost $ 30 million, or the assault on Poly Network last August during from which cyber thieves have stolen more than $ 600 million.
The National Institute for Standards and Technology (NIST) is working on post-quantum cryptography standards for deployment starting in 2024, but there is no reason to wait. Companies in the United States and Canada can now offer solutions, including hybrid solutions that deliver the best of post-quantum and quantum technologies, while others are creating versions of DLT that integrate quantum solutions from the start. .
Don’t make mistakes; Whatever the ups and downs of Bitcoin and Ethereum in today’s markets, even if a Bitcoin bubble bursts, cryptocurrencies are here to stay. Quantum-safe solutions can guarantee their stability and security for a long time.