Quantum has become a major theme for crypto the past few months, in part because of technological developments in that space, but also as investors look for potential culprits of the stagnation in crypto prices post October. Quantum risk may come across as an existential threat to bitcoin (BTC) given the potential for bad actors to crack legacy accounts such as Satoshi's. However, a clearer understanding of the threat and increasing industry focus on solutions are driving toward a positive resolution.
There are striking parallels to the concerns over the energy use and climate impact of Bitcoin's Proof of Work (PoW) mining that dominated headlines in 2021. Those felt existential too, as the headline risk made BTC socially unacceptable. Although industry insiders knew climate concerns were misguided (compared to other industries, such as tech's data centers, BTC's energy footprint is low), fears perpetuated, culminating with Tesla dropping BTC as a payment option because of climate risk. At the time, Elon Musk's support for BTC was a large driver of sentiment, so this action startled the market. If forward-thinking Elon thought the issue was meaningful enough to pull his support of BTC, more conservative groups could seek to ban it or otherwise stifle BTC adoption. From an investor standpoint, why would you buy into an asset with such risk? This question resonates today and is especially pertinent as lower crypto prices weigh on sentiment.
The good news is that the industry can overcome this. In 2021, it took industry leader Strategy taking initiative to work with BTC miners to publish stats on the renewable mix of their energy consumption. While it was no secret to the crypto community that BTC miners naturally seek the lowest cost of energy, which is often renewables, compiling hard data helped convince naysayers. The industry was able to regain credibility to help dispel concerns.
We are seeing the same play out as industry stalwarts come together to publish facts around quantum risk. Coinbase recently established a quantum computing and blockchain working group, which will help issue recommendations for industry participants to protect against quantum risks and provide analysis on quantum breakthroughs. Furthermore, on February 5, as BTC was sharply selling off towards $60,000, Strategy announced a quantum security program during its earnings call, which may have helped stem further selling. It aims to coordinate with the "global cyber, crypto, and bitcoin security community" to help with Bitcoin's quantum transition.
Concurrently, several startups are working on developing post-quantum technology for blockchains, such as Project Eleven and BTQ Technologies. These developments indicate that the crypto community is rapidly working towards solutions and should help alleviate near-term concerns.
BTC stands to turn the page through its proactive efforts to dispel quantum hysteria. Once the industry issues clear facts and a plausible plan, this issue will come to pass, just like the PoW climate overhang from years past.
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