Is Quantum Computing the Next Big Thing in Tech?

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A quantum financial system, or QFS for short.

Maybe it’s the way my feeds are set up, but every day seems like a headline about cryptocurrency and AI these days. Take my daily things worth reading, and here’s a few examples just from last Monday.

On crypto:

And about AI:

There is a tsunami of news breaking about these two technologies, and I’ve written a lot about them including my last book, which was dedicated to the subjects. Yet now we move on to the NEXT BIG THING. What is the next big thing?

QUANTUM COMPUTING..

Whenever I talk about quantum, it starts with Schrödinger’s cat.

Schrödinger’s cat argues that a cat, placed in a box with poison, could be alive or dead. Until someone opens the box and reveals the cat’s fate, the cat is both alive and dead. It is a state described as a “superposition”, and is the basis of quantum computing*. A qubit – the equivalent of bit in a byte – is neither a 1 or a 0 until it is accessed (opened).

The idea of this technology is that it can super turbocharge everything and yet, at the same time, it’s incredibly complex but, at the core, the idea is that quantum computers can do things our computers do today at 1,000 times faster for a thousandth of the cost. Get it?

This is because quantum computers can work on many computations at once, rather than processing one-by-one. This is because they can exist in multiple states at the same time in a “superposition”.

What does this mean for banking? Good question, as it will be in investment banking where we will see the first impacts, as investment banking is all about speed and cost. Going further from this, the impact may be across everything from risk and compliance to service and experience. According to Jamie Harbour at Lloyds Banking Group, the impact will be massive.

“There are a myriad of ways that quantum computing could be used to improve financial services – from modelling complex systems to better predict future events, assessing large, multi-variable data sets to determine the optimal answer to a given query or developing quantum machine learning algorithms working side by side with classical algorithms to improve the accuracy of the models.”

Jamie concludes that “progress in quantum computing has accelerated rapidly. Now, experts predict that these powerful machines are between five and ten years away from hitting the mainstream.”

I agree, and wonder what this means. For example, will we still need blockchains, DLT, cloud and such like in a quantum world?

Many say that we will not. It is an intense debate, but it makes you wonder what it means. Will we need to get rid of everything we have developed in the last decade(s)? After all, most current blockchain systems rely on cryptographic algorithms that can be easily cracked by powerful quantum computers, potentially compromising the integrity of transactions and data stored on the blockchain.

This is why a number of firms are developing quantum-resistant cryptography. What’s that? It’s a way to create cryptographic algorithms that can withstand quantum computing attacks. In fact, in that process, quantum computing could actually be used to enhance blockchain technology by enabling faster computations at low cost.

We’ve talked about this quite a lot at the FSClub, and the core concern is that quantum could break crypto. So what? Well, cryptocurrencies currently have over $3.5 trillion invested. What happens if that is destroyed overnight? As LCX point out:

“Quantum resistance in blockchain is not a luxury; it’s a necessity. As quantum computing continues to advance, the threat it poses to traditional cryptographic methods becomes increasingly real. The blockchain community must proactively address this threat to ensure the long-term security and viability of cryptocurrencies.”

Too right!

There are actually many articles and research into how to integrate quantum computing with AI and blockchain technologies, and this may be the key to the future. A quantum financial system, or QFS for short.

What does a QFS look like? This is asked by Ankit Singh, a research scholar writing on AZO Quantum, and his answer is that it would deliver huge benefits in many areas:

Enhanced Security and Speed: Quantum encryption could provide higher levels of transaction security, helping to address cybersecurity risks faced by financial institutions. Quantum technology may also support faster transaction processing, reducing delays common in traditional financial networks.

Cost Efficiency: By streamlining processes and minimizing the need for intermediaries, QFS has the potential to reduce certain operational costs. These efficiencies may benefit both financial institutions and their customers as the technology matures.

Broader Financial Access: A decentralized QFS could improve access to financial services in regions that currently lack traditional banking infrastructure. This application may provide new opportunities for underserved markets and unbanked populations.

New Financial Products: With QFS, financial institutions could explore innovative offerings, such as quantum-supported loans or dynamic, real-time investment options, which could offer new value to clients.

Improved Smart Contract Functionality: The integration of blockchain-based smart contracts with QFS could simplify complex financial agreements, automating execution when specific conditions are met and potentially reducing the likelihood of human error.

Real-Time Fraud Detection: Quantum-enhanced algorithms may help financial institutions analyse large datasets quickly to detect and respond to fraud. This capability could improve response times and enhance overall security.

Sounds good to me.

Related: Who Wants Payments on X?