The Quantum Leap: How Quantum Computing Could Change Blockchain & DeFi - Defiway
Exploring Quantum Computing: What Does it Mean for Blockchain photo
By: Natali

Exploring Quantum Computing: What Does it Mean for Blockchain

Table of Contents

Many of us have heard about quantum computers since school. Until recently it was just a tech geek’s fantasy. But in the 20s’ this dream may finally come true! How can new computers change our lives and the DeFi industry? And could quantum computing kill Bitcoin? Let’s find it out.

Traditional computers and phones, like the one you're using right now, use bits to store and process data. These bits can represent either a 0 or a 1. There is no third way. However, quantum computers use quantum bits (qubits) that represent a 0, a 1, or both simultaneously.

This ability to be in multiple states simultaneously gives these computers incredible power. And it can change the DeFi industry for good!

Quantum Computing Explained

It is a technology that will revolutionize our world. As I said before, it’s a far more sufficient option than traditional computing. As for today, all information is stored in bits, which act like tiny switches that can be either in an "on" state representing a 1 or in an "off" state representing a 0. Each digital file today is a complex combination of 0 and 1: from the ABBA song on your phone to the blockchain app.

Quantum computing uses qubits, which can exist in multiple states simultaneously. And this isn’t magic. It’s a quantum physics trick. This ability gives extraordinary processing power to those computers.

Another vital concept in quantum computing is the entanglement. It is a unique relationship between qubits, where the state of one qubit depends on the state of another. Distance doesn’t matter there.

I know what you are thinking: yes, it applies to interplanetary communication too. So humanity definitely will use quantum technologies during their interstellar era.

But how can this technology help people on Earth today? It has the potential to solve complex equations much faster than traditional computers. New tech can optimize supply chains, simulate and design new molecules for drug discovery, and solve complex mathematical equations.

Quantum computers are still in the early stages of development. However, some quantum technologies are already tested in cryptography. Blockchain technology is based on cryptography, so I think DeFi will be the first industry where we will see the true power of qubits.

The Impact of Quantum Computing on Cryptography

Qubit technologies have the potential to break traditional encryption methods. They are great, but they are still vulnerable to attacks. Generally speaking, each cryptography project uses its own secret code that converts your information to gibberish. But once another person uses the key to this code, they can re-convert information to the original state. If hackers get access to your public and private wallet keys, they get access to your wallet.

The most common RSA algorithm is almost impossible to crack today. It is based on the factorization of large numbers into their prime factors. It would take years to encrypt a single key. But new computers will crack these equations within minutes or seconds. So developers will need to create more complex equations.

Quantum computing can provide you with truly confidential communication. As of today, even bank transactions are usually protected by RSA or Elliptic Curve Cryptography (ECC). Hackers with a quantum computer will likely be able to break those encryptions with ease. So developers will need to create other quantum cryptography algorithms that will be safe from hacking.

Many organizations rely on traditional encryption methods both in rest and transit data. Hackers with powerful quantum computers could easily break into those systems and steal sensitive personal information. So government, financial and medical institutions should be among the first to implement quantum computers into their workflow.

The same approach applies to cryptocurrencies. Each currency will need to run a hard fork by implementing quantum-based security mechanisms. Some people have thoughts like “Could quantum computing kill Bitcoin?”. I can assure you that it won’t kill Bitcoin or other major digital coins. Big currencies will mostly implement hard folk.

But speaking of small digital currencies… I don’t have the same confidence. Many will refuse to change encryption methods, leading to double-spending attacks, where an attacker spends the same cryptocurrency twice, or unauthorized access to transaction records.

Implications for Blockchain and DeFi

The inevitable effect of quantum computing will affect various services. And the DeFi industry will feel it among the firsts. All blockchain services will need to run quantum-resistant solutions.

New encryption algorithms should withstand attacks from quantum computers. These algorithms will ensure the security and privacy of transactions and smart contracts. But new computers will need the transition period. It will be a long process, taking years to implement.

There will be at least 3-5 years in which both traditional and quantum-resistant cryptography coexist in blockchain networks. This transition period is required to modify protocols, smart contracts, and the overall infrastructure to support quantum-resistant cryptography.

You may get sad due to huge roadblocks, but there will be even greater opportunities. New computers should enable more complex consensus mechanisms, faster transaction validation, and improved scalability for quantum computing and blockchain networks. They may also facilitate advanced data analysis and modeling, enabling more accurate predictions and risk assessment in DeFi applications.

Speaking of the interplanetary connection that I’ve mentioned in one of the previous articles, these computers also enhance it too. As you remember, Mars is 12 light minutes from Earth, and radio waves travel 15-20 minutes to Mars. So it would be insane transition times between planets with our current digital currencies.

But quantum computers could solve this problem for good with entanglement. Despite particles in Martinan and Earthman computers being billions of kilometers from each other, they could exchange data in moments.

Unlikely there will be interplanetary Zoom calls in the next 50-70 years (video conferences need too much data). But speaking of lightweight transactions like text messages or finances, they would work perfectly. So quantum computers will be a crucial part of the interstellar DeFi industry.

Potential Countermeasures and Quantum-Resistant Technologies

Those technologies will change our world. But what countermeasures should we apply to keep everyone safe? Firstly, developers should combine their knowledge and skills to build quantum-resistant cryptography algorithms. Examples of post-quantum algorithms include lattice-based cryptography, code-based cryptography, and multivariate cryptography.

Each algo should be standardized to ease the implementation by various systems and industries. Developers, industry stakeholders, and experts also should work on strategies to seamlessly migrate existing blockchain networks and DeFi applications to the new standards.

The mix of quantum computing and blockchain will enhance the security and privacy of DeFi applications. By utilizing new algorithms, they can protect sensitive data and ensure security, withstanding attacks from any computer.

Challenges and Opportunities of Quantum Computing in Blockchain and DeFi

Behind every silver lining, there is a cloud. So, post-quantum DeFi will face many challenges, including increased hacking risks and privacy concerns. When quantum computers become publicly available technology, there will be thousands of hackers who want to use it for criminal purposes.

As quantum computers become more powerful, they could break modern encryption algorithms securing sensitive data and transactions. It could lead to unauthorized access, data manipulation, and the compromise of financial assets. So developers will need to continuously enhance encryption algorithms, making it quantum-resilient.

The emergence of powerful quantum computers could lead to a partial centralization of power in blockchain and DeFi. If quantum-resistant solutions wouldn't be adopted widely, entities with quantum access might gain an unfair advantage.

It makes it harder to grow for small prospective companies without big budgets. And it could lead to a lack of innovations until quantum technologies become generally available.

But, on the other hand, quantum computing presents opportunities for improving the DeFi and traditional finance institutions’ security. It will incentivize the development and adoption of quantum-resistant cryptography solutions everywhere.

Quantum computers are capable of processing vast amounts of data. So they can improve the network's scalability with ease, facilitating interoperability and seamless cross-chain transactions in blockchain and DeFi.

Another quantum opportunity is advanced data analysis. New tools will ease complex risk assessment, fraud detection, and market prediction. They will become even more accessible to the general audience.

Wrapping Up

Quantum computing is a new technology that uses physics tricks to unlock advanced computing capabilities. New tech will solve problems much faster than the fastest modern computers. It definitely could revolutionize various industries.

But despite all the undeniable advantages of this technology, it could lead to the increased vulnerability of confidential communication, data privacy, and blockchain networks that work with more traditional encryption algorithms. Developers will need to build quantum-resistant algorithms to address this threat. It enhances security in DeFi, traditional finance, and healthcare industries.

Quantum-resistant solutions will unlock new opportunities. Moreover, quantum computers will be an integral part of interplanetary and interstellar communications allowing fast communication between space colonies.

However, the transition to a quantum-resistant world requires careful planning and collaboration to ensure a smooth migration. Otherwise, we can end in partial centralization and monopolization of the DeFi industry.

Want to keep up with the latest DeFi industry insights? Stay tuned with Defiway! Subscribe to our socials, so you don’t miss new posts with fascinating news.