CRYPTOCALYPSE – IT’S NOT OVER TIL THE QUANTUM COMPUTER SINGS

So. Crypto. It’s been a bit in the news lately, primarily because Bitcoin — and in turn the altcoins — have been crashing. Every man and his economist has been coming out the woodwork commenting on how it’s a bubble and cryptocurrency is dead and all it’s been a vast, interesting, but none-the-less waste of lime experiment. Which is ot course, absolutely not the textbook reaction to change.

The truth is all pundits — myself included — are not equipped to prophecise the future of cryptocurrencies. The reason is simple: the world has never seen them before. There is no prior art, no prior guide. While human behaviour gives us some insight into traditional predictive movements on the wild-west markets where cryptocurrencies are currently traded, this does not mean they behave like traditional stocks.

It’s also plain to see how cryptocurrencies — and in fact crypto tokens — have been conflated with Bitcoin. They are not the same. Ethereum for example is perhaps the second most recognised crypto term after Bitcoin, but it is itself not a currency, it’s a platform for smart contracts and distributed apps. Ether, however, utilises the Ethereum platform and is tradable token of value (and which drives the platform) on cryptocurrency markets. Indeed Ethereum is a platform for a raft of tokens, not all of which are trying to be currencies.

Tokens may hold value and be tradeable, but that value is a function of the platform and the asset they embody for that network — not all cryto-* are trying to be replacement fiat. Bitcoin certainly started with this lofty goal, as has Bitcoin Cash, and alternatives like Litecoin and ZCash. But there subtleties here.

Ripple for example made the news recently when co-founder of Ripple Labs Chris Larson briefly tied Mark Zuckerberg for the title of world’s 5th richest man. Ripple itself is designed to be, via the RippleNet platform, an alternative for currency transfer between banks, payment providers and companies that is cheaper and faster than today’s solutions. It’s not a fiat replacement, but can represent a value of fiat.

Indeed, despite Bitcoin’s popularity as the poster boy for cryptocurrency, it’s actually suffering under the weight of its own success: transactions are expensive and take too long, something alternatives like Litecoin and Ripple aimed to solve (and which the upcoming Lighting Network update to Bitcoin and its spinoffs may also fix).

Those that declare crypto’s time is over are wrong, and are typically not technologists. While it’s possible cryptocurrencies could be relegated to a footnote under the heel of heavy global government regulation, I don’t think that will happen. And you can bet the bank (as it were) that blockchain as a technology is here with us for evermore, as the potential applications are huge.

No, if there is a cryptocalypse it’s most likely to come from another technological upstart: quantum computing. The spine of all cryptocurrencies and tokens depends on encryption. It is the one binding force, the method by which trust is created, that allows the system to work. Breaking this with the world’s fastest computers today would take longer than the age of the universe.

Not so with quantum computing. With current trends, it’s plausible quantum computing could reach a point where it could pose a threat to cryptocurrencies within one to two decades, though the prohibitive cost would be leave them few and far between for a while (typically, one can imagine, in the hands of governments and corporations).

But maybe not. By then, with this expected advance, solutions may be in place including increasing the problem size for cryptographic key’s, necessitating further quantum advances to catch up, or to use quantum cryptography itself of some form.

One thing remains: our understanding of money, ownership, transfer and trade is forever altered by cryptocurrencies and blockchain, and news of a cryptocalypse has been vastly exaggerated.

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