How Blockchain Is Changing Banking and Financial Services

How Blockchain Is Changing Banking and Financial Services

It won't just "disrupt," it will transform

BY JUSTIN PRITCHARD Updated December 02, 2019

Dong Wenjie / Getty Images

Blockchain technology makes transactions fast and easy, and it can do more than just support Bitcoin. Blockchain is already transforming payments, and you may see more mainstream banking services that rely on blockchain soon.

What Is Blockchain?

Blockchain is a technology that facilitates trust between trading partners. If you’re familiar with Bitcoin, blockchain is the underlying technology that makes it possible to transfer currency and have confidence that transactions are successfully completed. But banking and other industries are using blockchain (with or without Bitcoin) in a variety of ways.

A blockchain is a secure “ledger” or a list of transactions. The benefits of blockchain come from two key features:


There are numerous copies of the ledger. A public blockchain, like the Bitcoin blockchain, gets published and copied in multiple places. New transactions get broadcast to a broad network of participants, who add those transactions to the ledger. Nobody controls the ledger, but the system is designed so that everybody’s ledger contains identical information.


A blockchain should maintain an accurate history of transactions. Because there are multiple copies of the ledger, it’s hard to alter or delete transactions (or add new information that’s false). To do so, you’d need to change every copy of the ledger in every location. That would require successfully hacking thousands (or more) of computers simultaneously—which is believed to be impossible.

So, how will this affect you? Most people don’t care about the technical details—but you should expect a transformation in banking and other financial services.

Money Transfers

Sending money to another country is an area ripe for improvement, and banks are already using blockchain for remittances. Consumers and businesses transmit hundreds of billions of dollars internationally every year, and the process has traditionally been cumbersome and expensive.

Bitcoin provided an “alternative” way to move money, but mainstream banks and service providers are also using blockchain technology to improve remittances and minimize exposure to cryptocurrency. For example, several major banks have partnered with Ripple to facilitate cross-border payments using blockchain technology, and other service providers are busy developing solutions.

Blockchain-based transfers save banks time and money, but consumers can also benefit. For example, assume a worker in the U.S. wants to send funds to her home country. In the past, she’d have to travel to a money transfer office, wait in line for an agent, pay cash, and pay fees of 7 to 10 percent to complete a transfer. The recipient might follow a similar process. But with blockchain technology, both parties can complete an electronic transfer with mobile phones—and pay far less.

Inexpensive Direct Payments

When you send or receive a payment, the funds typically move through banks, credit card processing networks, and other intermediaries. Each step adds complexity, and every service provider expects to earn a fee for the part they play in your payment.

Merchants can benefit from blockchain technology in several ways:

Swipe fees

When customers pay with plastic, merchants pay processing fees, and those fees eat into profits. Less-expensive blockchain payment networks may be an option for some merchants. If nothing else, more competition should lower prices.

Insufficient funds

Customers who pay by check may bounce checks, causing losses and fees for merchants. Electronic payments from customer checking accounts may also fail. But blockchain-based payments can provide merchants with certainty within a few minutes (or less).

Individuals also enjoy receiving payments with confidence. Online “buyers” may try to scam you, but blockchain-based payments should be quick and irreversible. Plus, they’ll likely be easier and less expensive than bank products. For example, if you’re selling a high-priced item like a vehicle, it’s critical to receive payment before handing over the keys. The safest ways to get paid currently include cash, wire transfers, or cashier’s checks. But cash is dangerous, wire transfers are labor-intensive, and cashier’s checks can be faked.

Transaction Details

Banks can use blockchain for more than moving money. The technology is excellent for keeping track of transactions, and that may be useful in several areas.

Title details

Because ledgers are hard to tamper with, they can make it easier and more efficient to track ownership. Each transfer of ownership (as well as liens and other events) can go in the ledger, resulting in a trustworthy source of information about almost any type of property.

Smart Contracts

It may be possible to automate activities that previously added cost, complexity, and delays to transactions. One such method is with the creation of smart contracts. These computer protocol contracts can monitor when a buyer makes a payment, when a seller delivers on her end of the deal, and handle a variety of problems that may arise. Plus, they don’t take vacations or make mistakes—assuming they are programmed correctly. Smart contracts can be as simple as an indifferent third-party between a buyer and seller (like the escrow providers we know today), and they can get substantially more complicated. Combined with open banking, encrypted smart contracts could lead to faster, automated lending decisions in a marketplace of bidders.

Financial Inclusion

By keeping costs low and allowing startups to compete against big banks, blockchain, and other technologies can promote financial inclusion. Blockchain-based solutions may better serve those who avoid bank accounts because of high fees, minimum balance requirements, and lack of access. Instead of needing assets and regular income for banks, they need a mobile device. In situations where it’s traditionally hard to identify individuals, digital IDs can provide a large-scale solution.

Reduced Fraud

Blockchain technology resists hacking, DDOS attacks, and other forms of fraud. It can also help banks and others identify individuals quickly and accurately through a blockchain-enabled digital ID. With less fraud, the costs of doing business decrease, and presumably, the savings benefit everybody.

What We Don’t Know

Blockchain is still relatively new, although banks and other industries are already innovating with blockchain technology. At this point, the technology is probably ahead of regulations, and it’s not always clear what to expect in terms of protection, privacy, potential risks, and dispute resolution. Those issues can all be solved, but it’s critical to research and understand what problems may arise before using blockchain for significant transactions.

Original article written by Justin Pritchard, and posted on the website.

Article reposted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more:

This Alleged Bitcoin Scam Looked a Lot Like a Pyramid Scheme

This Alleged Bitcoin Scam Looked a Lot Like a Pyramid Scheme

Five men face federal charges of bilking investors of $722 million by inviting them to buy shares in bitcoin mining pools.

Written by GREGORY BARBERBUSINESS – 12.10.2019 07:48 PM

In emails, the operators of BitClub Network allegedly referred to potential investors as “sheep.”

The world of cryptocurrency has no shortage of imaginary investment products. Fake coins. Fake blockchain services. Fake cryptocurrency exchanges. Now five men behind a company called BitClub Network are accused of a $722 million scam that allegedly preyed on victims who thought they were investing in a pool of bitcoin mining equipment.

Federal prosecutors call the case a “high-tech” plot in the “complex world of cryptocurrency.” But it has all the hallmarks of a classic pyramid scheme, albeit with a crypto-centric conceit. Investors were invited to send BitClub Network cash, which would allow the company to buy mining equipment—machines that produce bitcoin through a process called hashing. When those machines were turned on, all would (in theory) enjoy the spoils. The company also allegedly gave rewards to existing investors in exchange for recruiting others to join. According to the complaint, the scheme began in April 2014 and continued until earlier this month.

Matthew Brent Goettsche, Jobadiah Sinclair Weeks, and Silviu Catalin Balaci are accused of conspiracy to commit wire fraud and conspiracy to offer and sell unregistered securities. A fourth defendant, Joseph Frank Abel, faces only the latter charge. Another unnamed defendant remains at large. Balaci’s name was redacted from one public version of the indictment, but appeared on another.

The scheme appears to have started as a relatively modest scam and spiraled dramatically in ambition. Internal messages between the conspirators give the impression of growing glee at the ease of taking advantage of investors, referring to “building this whole model on the backs of idiots.” The men allegedly described their victims as “dumb” investors and “sheep.”

“They were not wrong,” Emin Gun Sirer, the CEO of blockchain startup Ava Labs, quipped on Twitter.

In October 2014, a few months after BitClub Network was founded, Goettsche allegedly posted about the need to “fak[e] it for the first 30 days while we get going,” instructing a co-conspirator to do some “magic” on the company’s revenue numbers. They allegedly agreed on a method of cooking the numbers that would include inconsistencies to make sure they appeared real. The tricks swiftly became more daring. Later, Goettsche allegedly suggested the company “bump up the daily mining earnings starting today by 60%.”

“That is not sustainable, that is ponzi teritori [sic] and fast cash-out ponzi . . . but sure,” Balaci responded, according to messages included in the indictment. A September 2017 email from Goettsche allegedly suggested the company “[d]rop mining earnings significantly starting now” so that he could “retire RAF!!! (rich as f&*#).”

The defendants also allegedly sold shares of the company in violation of securities law, traveling around the world with marketing materials that touted the company as “transparent” and “too big to fail.” (The BitClub website now has a disclaimer saying investments are not available to investors in the US or the Philippines.) At one point, one of the defendants appeared to express remorse, referring to selling shares in BitClub without using the money to purchase mining equipment as “not right.”

The identities of the alleged victims are unclear, but there are hints in still-online videos and advertisements that the company had wide reach. In one ad, appearing on the website of Ben Franklin Technology Partners, a nonprofit investment firm affiliated with the Pennsylvania Department of Community and Economic Development, a company calling itself BitClub Network promotes (comment added: page has recently been taken down) “Founder” status for people who agree to purchase shares in four purported mining pools. The going rate was $1,000 per “GPU share,” a unit of measure that isn’t illuminated in the marketing materials. (Ben Franklin did not respond to an after-hours request for comment).

In 2018, a large number of Facebook posts about BitClub Network caught the eye of Japhet Mesa in Zambia. In a Medium post, he described what he saw as signs of a scam. Despite BitClub’s claims of radical transparency, the location of the purported mining rigs appeared to be a mystery, and the individuals behind the company were hard to identify. “Going by the hype around BCN, I was amazed to see the number of people getting into it,” he wrote at the time. “This could be seen by the number of people posting about it on social media, facebook especially.”

Facebook pages based around BitClub Network communities in countries including Malaysia and South Africa remain active, with tens of thousands of members.

The crypto world is rife with scams. The grift reached a fever pitch in 2017, when bitcoin prices spiked and scammers lured victims to invest millions in cryptocoins or blockchain-based products that would never come to exist. Schemes around participation in mining pools are also popular to scammers who sell customers on the narrative of participating in business ventures that effectively amount to printing money. That’s become all the more tantalizing now that mining is mostly out of reach for many stay-at-home miners. (The selling point is that large mining “pools” enjoy greater efficiencies—and thus returns.) In January, a man in Hong Kong was accused of a similar mining pool scam that allegedly included an advertising stunt that involved throwing money off of a skyscraper.

The wire fraud charges carry a maximum of 20 years in prison, while the securities violation allows five. The defendants’ lawyers could not immediately be reached for comment.

The original article written by Gregory Barberand posted on

Article reposted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more:

Jailed Bitcoin Pioneer Says Price to Top 100000 1350 Higher From 7400

Jailed Bitcoin Pioneer Says Price to Top $100,000, 1,350% Higher From $7,400

Ross Ulbricht, the creator of the Silk Road marketplace, which some say was the first real use case for Bitcoin (BTC), still has his mind on cryptocurrencies, despite being held up in jail for two life sentences after he was convicted earlier this decade for the operation of the Silk Road.

The industry pioneer, who many in the cryptocurrency space believe was key in driving Bitcoin’s earliest stages, recently released a series of letters/articles, which was then shared online by his friends and family. In it, he discussed Elliot Wave analysis, which is a form of technical analysis that focuses on “redcurrant long-term price patterns related to persistent changes in investor sentiment and psychology.”

His Elliot Wave analysis of Bitcoin’s long-term market cycles, the details of which can be found at this link, suggest that Bitcoin will reach $100,000 “around or in 2020.”

Bitcoin Analysts Agree With Ross

It isn’t only Ross who expects for Bitcoin to enter the six-digit range.

Speaking to CryptoPotato in a recent interview, long-time investor and tech entrepreneur, Anthony Pompliano, said that he still believes that Bitcoin will hit $100,000 by December 2021, just over two years away:

We will see Bitcoin’s price at $100,000 by December 2021.

The reason: In less than six months’ time, BTCwill see an extremely important event. Known as a “halving” or “halvening,” the number of coins issued per block to miners will get cut in half, effectively meaning that Bitcoin’s inflation rate will be cut in half in layman’s terms.

The math may be on Pompliano’s side.

PlanB, an institutional quantitative analyst interested in BTC, found earlier this year that the market capitalization of BTC can be accurately determined by the stock-to-flow ratio (effectively inflation) of the cryptocurrency.

His model, which is cointegrated to Bitcoin’s price history and fits the BTC price to an R squared of 0.947 (extremely accurate in statistics lingo), suggests that the cryptocurrency’s market capitalization will have a fair valuation of $1 trillion after the halving, or $55,000 per coin.

This has been corroborated by prominent trader Filb Filb, who called a move to $3,000 months prior to the capitulation even seen late last year. Using regression and statistical analysis, Filb found that by analyzing the Internet industry’s historical growth cycles of staggered booms and busts, halvings, and the scarcity of the cryptocurrency market, you can derive this graph seen below. It illustrates that the cryptocurrency could eventually enter the six-digit price region in the coming few years.

Original article posted on the site, by Nick Chong.

Article re-posted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more:

SEC Acts Against Founder Crypto Firm For Running Fraudulent ICO

SEC Acts Against Founder, Crypto Firm For Running Fraudulent ICO

By RTTNews Staff Writer | Published: 12/12/2019 9:59 AM ET

The U.S. Securities and Exchange Commission (SEC) charged a crypto-entrepreneur and his company for running a fraudulent unregistered initial coin offering (ICO) that raised more than $42 million from many investors.

SEC's complaint was that Eran Eyal and UnitedData, Inc. d/b/a Shopin, allegedly defrauded investors by conducting a fraudulent unregistered securities offering by selling Shopin Tokens in an ICO from August 2017 to April 2018.

The agency said Eyal and Shopin are allegedly responsible for scamming innocent investors. They claimed and lied to potential investors that the funds raised in the ICO will be used to create universal shopper profiles, maintained on the blockchain. It would help track customer purchase histories across online retailers and recommend products based on this information.

They also made false claims about relationships and contracts they had secured in support of a blockchain-based universal shopper profile.

The SEC also alleges that Eyal misappropriated investor funds for his personal use, including at least $500,000 used for rent, shopping, entertainment expenses, and a dating service. Eyal and Shopin are charged with violating the anti-fraud and registration provisions of the federal securities laws.

The SEC seeks permanent injunctions, disgorgement with interest, and civil penalties, as well as an officer-and-director bar against Eyal, and a bar against Eyal and Shopin prohibiting them from participating in any future offering of digital-asset securities.

For comments and feedback contact:

Article written by an RTT News Staff Writer, and posted on the RTT website.

Article reposted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more:

Federal Reserve Leaves Rates Unchanged After Three Straight Cuts

Federal Reserve Leaves Rates Unchanged After Three Straight Cuts

By RTTNews Staff Writer | Published: 12/11/2019 2:22 PM ET

After three consecutive interest rate cuts, the Federal Reserve on Wednesday announced its widely expected decision to leave rates unchanged.

The Fed said its Federal Open Market Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent on the heels of three straight quarter-point reductions.

The FOMC judged that the current stance of monetary policy is appropriate to support a sustained economic expansion, strong labor market conditions, and inflation near its symmetric 2 percent objective.

The central bank maintained its assessment of the economy, reiterating that recent data indicates the labor market remains strong and that economic activity has been rising at a moderate rate.

The Fed also once again noted that while household spending has been rising at a strong pace, business fixed investment and exports remain weak.

The FOMC noted it will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path for rates.

The vote to leave interest rates was unanimous, as Kansas City Fed President Esther George and Boston Fed President Eric Rosengren joined in after voting against the past three rate cuts.

Economic projections provided by the Fed along with the decision show a majority of FOMC participants expect interest rates to remain unchanged throughout 2020.

The projections for GDP growth in 2019 and the coming years were unchanged from September, while the unemployment rate is expected to come in slightly lower than previously forecast.

The Fed downwardly revised its forecast for core consumer price growth in 2019 to 1.6 percent from 1.8 percent, although the inflation estimates for the next three years were unchanged.

In his post-meeting press conference, Fed Chairman Jerome Powell suggested he would not consider raising rates until inflation picks up significantly.

"In order to move rates up, I would want to see inflation that's persistent and that's significant," Powell said. "A significant move up in inflation that's also persistent before raising rates to address inflation concerns. That's my view."

However, Powell noted his comments do reflect "official forward guidance," adding, "It happens to be my view that that's what it would take to want to move interest rates up in order to deal with inflation."

Looking ahead, the Fed's first monetary policy meeting of 2020 is scheduled for January 28th and 29th, with rates widely expected to remain on hold.

CME Group's FedWatch Tool currently indicates a 91.4 percent chance that the Fed will leave rates unchanged at the January meeting.

For comments and feedback contact:

Article written by an RTT News Staff Writer, and posted on the RTT website.

Article reposted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more:

Bloomberg: Bitcoin May Have Hit a Bottom in 6500 Plunge

Bloomberg: Bitcoin May Have Hit a Bottom in $6,500 Plunge

Over the past few days, the price of Bitcoin (BTC) has finally started to stabilize, finding itself trading between $7,000 and $7,800 as the cryptocurrency market aims to establish some near-term directionality.

While this consolidation has really been neither bullish or bearish due to its brevity on a macro scale, Bloomberg has suggested that it may be a sign of a bottom.

Has Bitcoin Bottomed?

In an article titled “Bitcoin in Wait-and-See Mode as Downward Trend Persists,” Bloomberg wrote that with Bitcoin’s price stabilizing “above its support level of the initial [CME futures] gap created on May 10,” there’s potential that a bottom was marked in the $6,500 range, which the cryptocurrency breached late last month shortly after tumbling under $8,000 after hitting $10,500 in the now-infamous “China pump.”

Bloomberg did note though that the cryptocurrency remains in a bearish descending channel pattern it formed in late June when it reached the year-to-date high near $14,000. “BTC would need to break out of this downtrend in order to regain positive momentum,” Bloomberg wrote, accentuating the importance of the cryptocurrency breaking above the channel.

Though, Mike McGlone, an analyst at the firm, was cited as saying that it is “only a matter of time” before the cryptocurrency breaches through resistance, the most notable of which being the horizontal and psychological resistance at $10,000.

McGlone backed this optimistic quip by looking to a potential rally in gold, which he claims would boost the Bitcoin bull narrative, as such a rally would be caused by macroeconomic turmoil, something analysts say is beneficial for alternative assets as a whole. He also looked to growing levels of adoption in the cryptocurrency space coupled with the idea that the impending halving will act as a negative supply shock for Bitcoin’s market economics.

Other Analysts Agree

Other analysts agree with this positive sentiment.

Per previous reports from Ethereum World News, top trader Cantering Clark recently observed an “uncanny resemblance” between the BTC price action seen over the last few days and the aforementioned accumulation phase. Indeed, as Clark’s two charts seen below show, the Bitcoin price action seen then and now are very similar directionality-wise, with there being drops now where there were drops in late-2018 and such.

“It would make sense that after the first major move up, that the first major correction and following accumulation period would have a fractal resemblance to the larger original,” Clark elaborated, pointing out the intricacies of the potential fractal poised to play out in real-time.

Jonny Moe, another popular analyst, also recently observed that the chart of the leading cryptocurrency has printed a bullish Adam & Eve bottoming and reversal pattern, which was seen in late-2018 and early-2019 when the cryptocurrency was trading in the $3,000s.

Original article posted on the site, by Nick Chong.

Article re-posted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more:

Spacechain Launches Blockchain Into Space

Spacechain Launches Blockchain Into Space

By RTTNews Staff Writer | Published: 12/9/2019 9:38 AM ET

Blockchain startup Spacechain announced that its blockchain hardware wallet technology is on its way to the International Space Station (ISS), aboard a SpaceX Falcon 9 rocket as part of the CRS-19 commercial resupply service mission.

The bitcoin wallet is reportedly orbiting the earth at 5 miles per second.

SpaceChain expects the testing of the hardware wallet to be completed by early 2020.

As part of its vision of an open-source blockchain-based satellite network, this is the third blockchain payload launched into space by SpaceChain in the past two years. It is the first launch of blockchain from the U.S.

Earlier, the startup had successfully tested its second blockchain node in space in January, which was launched into orbit in October 2018 by a CZ-4B Y34 rocket from Taiyuan Satellite Launch Centre, Xinzhou, China.

The first blockchain node that SpaceChain launched into orbit was in February 2018, again from China, that was equipped with a Raspberry Pi hardware board and blockchain software.

Founded in 2017, SpaceChain is a community-based space platform that combines space and blockchain technologies to build the world's first open-source blockchain-based satellite network, allowing users to develop and run applications in space by adopting space-as-a-service.

SpaceChain's open-source operating system (SpaceChain OS) provides the main blockchain application sandbox for developers to utilize for rapid and secure development, testing and deployment of space-based applications.

It will be the first blockchain hardware installed on the ISS, to be installed on Nanoracks' commercial platform on Station.

Once activated, the payload will demonstrate the receipt, authorization, and retransmission of blockchain transactions, creating "multisig" transactions which require multiple signatures or approvals to complete, increasing the security of the operation.

All data will be both uplinked and downlinked directly through Nanoracks' commercial platform.

Earlier this year, SpaceChain was awarded a 60,000 euro grant by the European Space Agency (ESA) under its Kick-start Activity program, to further develop and identify commercial use-cases for its satellite blockchain technology.

Blockchain is the next major disruptor in space. SpaceChain addresses security vulnerabilities for financial systems and digital assets in the growing digital economy.

For comments and feedback contact:

ecosystem for entrepreneurs
Markethive Advertisement

Article written by an RTT News Staff Writer, and posted on the RTT website.

Article reposted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more:

Bitcoin Enters Tight Trading Range as Analysts Watch for Massive Movement

Bitcoin Enters Tight Trading Range as Analysts Watch for Massive Movement

Bitcoin has found itself caught within an incredibly tight trading range over the several days, which is a major change from the massive volatility it has been incurring over the past month.

This bout of consolidation, however, may prove to be short-lived, as analysts are now noting that they expect it to be followed by a massive price movement that could determine how BTC trends going into the new year.

Bitcoin Stuck at $7,300 as Bulls and Bears Remain Deadlocked

At the time of writing, Bitcoin is trading up just over 1% at its current price of $7,380, which marks a slight climb from its daily lows of $7,240 and a slight decline from its daily highs of just over $7,400.

These two prices appear to be the lower and upper boundaries of the cryptocurrency’s current trading range, which has held strong since the start of December.

Bitcoin has been caught in several periods of sideways trading like this in the past, with some extending for multiple weeks. One similarity amongst all these consolidation phases is that they often end with a massive movement, in one direction or another.

Josh Rager, a popular cryptocurrency analyst on Twitter, explained in a recent tweet that he believes the trading range that BTC is currently caught within will result in a massive movement.

“$BTC is currently compressing and the range is getting smaller. Not focused on trading small moves here. The focus now is being on the right side of the next multi-hundred dollar move,” he explained.

As for where analysts expect this movement to lead BTC, HornHairs, another popular cryptocurrency analyst on Twitter, explained that he believes the strong support BTC has found at $7,240 could bolster its near-term price action and send it surging towards $7,600.

“Based on the above thesis I’m willing to punt a long: 1H breaker setup with a stop below the level that has been defended ~$7240 and target at monthly open,” he explained, referencing a chart that shows the $7,600 price target,” he said.

If Bitcoin does break above the upper-boundary of its current trading range, the cryptocurrency may be positioned for significantly further gains, as it could signal that a bullish trend shift is imminent.

Original article posted on the site, by Cole Petersen.

Article re-posted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more:

A Quantum Computing Future is Unlikely Due to Random Hardware Errors

A Quantum Computing Future is Unlikely, Due to Random Hardware Errors

Written By Subhash Kak – December 3, 2019 7.58am EST

Will quantum computers ever reliably best classical computers? Amin Van/

Google announced this fall to much fanfare that it had demonstrated “quantum supremacy” – that is, it performed a specific quantum computation far faster than the best classical computers could achieve. IBM promptly critiqued the claim, saying that its own classical supercomputer could perform the computation at nearly the same speed with far greater fidelity and, therefore, the Google announcement should be taken “with a large dose of skepticism.”

Artist’s rendition of the Google processor.
Forest Stearns, Google AI Quantum
Artist in Residence,

This wasn’t the first time someone cast doubt on quantum computing. Last year, Michel Dyakonov, a theoretical physicist at the University of Montpellier in France, offered a slew of technical reasons why practical quantum supercomputers will never be built in an article in IEEE Spectrum, the flagship journal of electrical and computer engineering.

So how can you make sense of what is going on?

As someone who has worked on quantum computing for many years, I believe that due to the inevitability of random errors in the hardware, useful quantum computers are unlikely to ever be built.

What’s a quantum computer?

To understand why, you need to understand how quantum computers work since they’re fundamentally different from classical computers.

A classical computer uses 0s and 1s to store data. These numbers could be voltages on different points in a circuit. But a quantum computer works on quantum bits, also known as qubits. You can picture them as waves that are associated with amplitude and phase.

Qubits have special properties: They can exist in superposition, where they are both 0 and 1 at the same time, and they may be entangled so they share physical properties even though they may be separated by large distances. It’s a behavior that does not exist in the world of classical physics. The superposition vanishes when the experimenter interacts with the quantum state.

Due to superposition, a quantum computer with 100 qubits can represent 2100 solutions simultaneously. For certain problems, this exponential parallelism can be harnessed to create a tremendous speed advantage. Some code-breaking problems could be solved exponentially faster on a quantum machine, for example.

There is another, narrower approach to quantum computing called quantum annealing, where qubits are used to speed up optimization problems. D-Wave Systems, based in Canada, has built optimization systems that use qubits for this purpose, but critics also claim that these systems are no better than classical computers.

Regardless, companies and countries are investing massive amounts of money in quantum computing. China has developed a new quantum research facility worth US$10 billion, while the European Union has developed a €1 billion ($1.1 billion) quantum master plan. The United States’ National Quantum Initiative Act provides $1.2 billion to promote quantum information science over a five-year period.

Breaking encryption algorithms is a powerful motivating factor for many countries – if they could do it successfully, it would give them an enormous intelligence advantage. But these investments are also promoting fundamental research in physics.

Many companies are pushing to build quantum computers, including Intel and Microsoft in addition to Google and IBM. These companies are trying to build hardware that replicates the circuit model of classical computers. However, current experimental systems have less than 100 qubits. To achieve useful computational performance, you probably need machines with hundreds of thousands of qubits.

Google’s Sycamore processor has only 54 qubits. Erik Lucero, Research Scientist and Lead Production Quantum Hardware, Google, CC BY-ND

Noise and error correction

The mathematics that underpin quantum algorithms is well established, but there are daunting engineering challenges that remain.

For computers to function properly, they must correct all small random errors. In a quantum computer, such errors arise from the non-ideal circuit elements and the interaction of the qubits with the environment around them. For these reasons the qubits can lose coherency in a fraction of a second and, therefore, the computation must be completed in even less time. If random errors – which are inevitable in any physical system – are not corrected, the computer’s results will be worthless.

In classical computers, small noise is corrected by taking advantage of a concept known as thresholding. It works like the rounding of numbers. Thus, in the transmission of integers where it is known that the error is less than 0.5, if what is received is 3.45, the received value can be corrected to 3.

Further errors can be corrected by introducing redundancy. Thus if 0 and 1 are transmitted as 000 and 111, then at most one bit-error during transmission can be corrected easily: A received 001 would be a interpreted as 0, and a received 101 would be interpreted as 1.

Quantum error correction codes are a generalization of the classical ones, but there are crucial differences. For one, the unknown qubits cannot be copied to incorporate redundancy as an error correction technique. Furthermore, errors present within the incoming data before the error-correction coding is introduced cannot be corrected.

Quantum cryptography

While the problem of noise is a serious challenge in the implementation of quantum computers, it isn’t so in quantum cryptography, where people are dealing with single qubits, for single qubits can remain isolated from the environment for significant amount of time. Using quantum cryptography, two users can exchange the very large numbers known as keys, which secure data, without anyone able to break the key exchange system. Such key exchange could help secure communications between satellites and naval ships. But the actual encryption algorithm used after the key is exchanged remains classical, and therefore the encryption is theoretically no stronger than classical methods.

Quantum cryptography is being commercially used in a limited sense for high-value banking transactions. But because the two parties must be authenticated using classical protocols, and since a chain is only as strong as its weakest link, it’s not that different from existing systems. Banks are still using a classical-based authentication process, which itself could be used to exchange keys without loss of overall security.

Quantum cryptography technology must shift its focus to quantum transmission of information if it’s going to become significantly more secure than existing cryptography techniques.

Commercial-scale quantum computing challenges While quantum cryptography holds some promise if the problems of quantum transmission can be solved, I doubt the same holds true for generalized quantum computing. Error-correction, which is fundamental to a multi-purpose computer, is such a significant challenge in quantum computers that I don’t believe they’ll ever be built at a commercial scale.

Article written by Subhash Kak, and posted on the site.

Article reposted on Markethive by Jeffrey Sloe as a followup to my article that may answer the question, "Can Google's New Quantum Computer Hack Bitcoin?".

Visit MarketHive to learn more:

Can Google’s New Quantum Computer Hack Bitcoin?

Can Google's New Quantum Computer Hack Bitcoin?

Image Sourced from Pixabay

By Bruce Ng

Ever since Bitcoin was created, the perennial question, asked by skeptics and advocates alike, could be condensed into four simple words:

Can Bitcoin be hacked?

The perennial answer: No, unless, that is, someone, someday achieves a stunning, world-changing breakthrough, creating a computer that’s far faster than any supercomputer in existence today. Nearly everyone agreed that was an extremely remote possibility. But now, some folks fear that day may be closer than expected.

The reason: Google claims to have built a quantum computer.

It’s a computer that’s no longer constrained to just 1s or 0s. Instead, it has bits that exist in multiple states at once, called quantum bits or qubits. It’s a computer that, in theory, could be one billion times faster than today’s fastest computers … that could run 10,000 years of supercomputer calculations in a meager 200 seconds. It’s a technology that, in theory, might ultimately do things which otherwise take millions of years.

In theory.

So, can Google’s (NASDAQ: GOOG) quantum computer hack Bitcoin? No, not even close!

Google’s breakthrough, no matter how noteworthy, is still very new, very experimental and light-years away from the capabilities needed to hack Bitcoin. Here’s why …

First, Google’s quantum computer merely generates random numbers, like tossing a coin repeatedly. It has no immediate practical applications.

Second, it has only 53 qubits. To crack Bitcoin cryptography, it would need at least 1,500.

Third, it’s not just a matter of quantity. To evolve from 53 to 1,500 qubits will be extremely difficult and will take many years.

Fourth, qubits are highly sensitive. They require supercooled temperatures to operate. They must be stored in enclosed vaults protected from stray dust, vibrations and contaminants. Building a 1,500-qubit quantum computer would be a monstrous undertaking.

“But suppose,” say Bitcoin fearmongers, “that some secret government agency develops a super-quantum computer decades ahead of Google’s. And suppose that computer achieves the 1,500-qubit power that could hack Bitcoin. Then what do we do?”

Our answer: Given the structure of the global tech community today, it’s extremely unlikely any such project exists.

But even if it did, there are several likely scenarios in which the Bitcoin community — and even Bitcoin users themselves — could protect themselves against any quantum-computer attack.

Today, I’ll tell you about two …

Scenario 1

Quantum-Resistant Passwords

An important cryptography mechanism that Bitcoin currently uses is the private key; and it’s the private key that would be the primary attack point for any future quantum computer.

The private key performs a function akin to that of password: Every time you use a Bitcoin wallet or send funds from a Bitcoin address, you deploy your private key, associated with a Bitcoin address that looks something like this:


When you send Bitcoin, the addresses specify the “from” and the “to” of your transmission.

But the current address system is not written in stone.

It CAN be upgraded to a quantum-resistant address system. And to make that happen in a timely manner, Bitcoin enjoys one of the largest community of developers in the world.

Scenario 2

>Users Themselves Take Protective Steps

To better understand how would work, let’s look at traditional banking.

You have a bank account with a balance of $20,000. You’re afraid that, when you make your first wire transfer, some bank employees will gain access to the numbers he needs to move your money to his own personal account.

What could you do to protect yourself?

Simple: As soon as you make your first transfer, immediately withdraw all the remaining funds in your account and move it to a new account or to another bank.

That’s similar to what you could do to protect yourself against any future quantum attack on your Bitcoin address.

When you send Bitcoin to someone, your address doesn’t appear on the Bitcoin ledger until you make your first transaction from that address. No one – including quantum attackers — will ever see your address until AFTER first transaction.

So all you have to do is this: As soon as you make your first transaction, simply move your remaining Bitcoin balance to a new address, which is easy to create. Since your new address has never before been used to send Bitcoin, there’s no way anyone, regardless of computer power, can see it — let alone hack it.

Could a quantum attacker see and hack the address in the few minutes between the moment you send the Bitcoin and the moment it’s received on the other end?

Hah! To do so in such a short period of time would require quantum computing that’s so far away in the future, even the few seconds it takes me to write this paragraph is kind of a waste of time.

But I decided to write it for a reason.

For all those folks who also worry about the destiny of our sun, which will burn out a billion years from now … or the destiny of our universe which will expand to the point of a Big Chill.

Let’s worry about such doomsday events some other day.

© 2019 Benzinga does not provide investment advice. All rights reserved.

Article written by Bruce Ng of Yahoo Finance, and posted on the site.

Article reposted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more: