Bitcoin blockchain and quantum computer

Bitcoin Blockchain and Quantum Computer-I

What is Cryptocurrency?

Cryptocurrency is a form of contactless payment for online (and in future offline) goods and services. The company issue its own cryptocurrency called tokens for buying its goods or services. It is similar to arcade tokens or casino chips and requires exchanging real currency for the cryptocurrency.

Cryptocurrencies work based on a decentralized technology called blockchain. Blockchain ledger spread across many computers to records transactions making it more trustworthy and secure.

Major Cryptocurrencies in circulation

  • Launched in 2009, bitcoin is the world’s largest cryptocurrency by market capitalization
  • Unlike fiat currency, bitcoin is created, distributed, traded, and stored with the use of a decentralized ledger system, known as a blockchain
  • Bitcoin’s history as a store of value has been turbulent; it has gone through several cycles of boom and bust over its relatively short lifespan
  • As the earliest virtual currency to meet widespread popularity and success, bitcoin has inspired a host of other cryptocurrencies in its wake
  • Ethereum is an open-source blockchain-based platform used to create and share business, financial services, and entertainment applications

  • Ethereum users pay fees to use dapps. The fees are called “gas” as they vary depending on the amount of computational power required

  • Ethereum has its own associated cryptocurrency, Ether or ETH

  • ETH is now second only to Bitcoin in market value

  • Tether (USDT) is a stable coin, a type of cryptocurrency which aims to keep cryptocurrency valuations stable

  • Tether is used by crypto investors who want to avoid the extreme volatility of other cryptocurrencies while keeping value within the crypto market

  • In April 2019, the New York Attorney General accused Tether’s parent company of hiding an $850 million loss

  • Tether tokens trade under the USDT symbol

  • Binance Coin is the cryptocurrency issued by the Binance exchange and trades with the BNB symbol

  • BNB was initially based on the Ethereum network but is now the native currency of Binance’s own blockchain, the Binance chain

  • Every quarter, Binance uses one-fifth of its profits to repurchase and permanently destroy, or “burn,” Binance coins held in its treasury

  • Binance was created as a utility token for discounted trading fees in 2017, but its uses have expanded to numerous applications, including payments for transaction fees (on the Binance Chain), travel bookings, entertainment, online services, and financial services

Impact on Bitcoin Blockchain

Deloitte Warns 4,000,000 Bitcoin Worth $28.6 Billion Vulnerable to Quantum Attack, presently which is about 25% of the Bitcoins in circulation.

Bitcoin is a decentralized system for transferring value. Unlike the banking system where it is the responsibility of a bank to provide customers with a bank account, the user of Bitcoin is responsible for generating his or her own random address. By means of a simple procedure, the user’s computer calculates a random Bitcoin address (related to the public key) as well as a secret (private key) that is required in order to perform transactions from this address.

Moving Bitcoins from one address to another is called a transaction. Such a transaction is similar to sending money from one bank account to another. In Bitcoin, the sender must authorize their transaction by providing a digital signature that proves they own the address where the funds are stored. It is believed that someone with an operational quantum computer and public key could falsify this signature, and therefore potentially spend anyone’s Bitcoins!

One of the most important features of Blockchain is immutability. Blockchain data, hashes and signatures are perpetual and therefore liable to attacks by hackers. Quantum technology can simply hash calculations and make hash collisions retrieval achievable thereby compromising blockchain security. Also, blockchain signatures can allow attackers to retrieve the associated private key.

So, current blockchains will require its own migration. This will likely take the form of fork or a protocol update, creating a new post-quantum chain or addresses and a limited window of time for users to migrate their data and assets.  Even if everyone takes the same protection measures, quantum computers might eventually become so fast that they will undermine the Bitcoin transaction process. In this case the security of the Bitcoin blockchain will be fundamentally broken. The only solution in this case is to transition to a new type of cryptography called ‘post-quantum cryptography’.

Adapting blockchains to the post quantum era will require increased storage and computing resources. The evolution of technology will account for that in most cases. Perhaps IoT applications, where resource constraints are greatest, will have greater difficulty in adapting.

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