The AI narrative has taken stock market indices and AI-related cryptos to new all-time highs. So this begs the question of what the next big narrative is going to be. Well, the answer seems to be quantum computing. You see, while everyone has been focused on the AI narrative, quantum computing startups have been raising hundreds of millions of dollars from VCs, and the industry is reportedly on the brink.
of a chat GPT moment. That's why today we're going to tell you everything you need to know about quantum computing, including what it is, why it's important, and how it could offer even bigger returns than AI will. Stay tuned.
Okay, so to understand what quantum computing is, you first need to understand how regular computers work. Every single computer runs on something called binary code. As the name implies, binary code consists of two numbers, 1 and 0. Different combinations of 1s and 0s represent different bits of information. For example, 0100001 represents the letter A. The other letters and their binary code combinations can be seen here.
Now, believe it or not, but literally everything a computer does all the applications, functions, processes, etc. are fundamentally based on a very long and complex combination of ones and zeros. If you want to see how that's even possible, then we strongly suggest watching videos about the redstone computers that people have made in Minecraft. Basically, the game introduced items that can function like ones and zeros, and Minecraft nerds managed to build literal in-game computers from this primitive. Nerds, eh?
Now, whereas regular computers ultimately consist of bits of ones and zeros, quantum computers consist of qubits, bits of information that can be a one and a zero at the same time. Obviously, this is even more difficult to wrap your head around, and exactly how this is done is outside the scope of this video. That said though, the easiest way to understand qubits is to compare them to bits.
So, suppose you have two bits, a 1 and a 0. What you have is two bits of information in total. However, if you have two qubits, you have four bits of information in total. This is possible because there are four possible combinations of the 1 and the 0. 1, 1. 00, 01, and 10. Put simply, the amount of information that a quantum computer can produce grows exponentially with the number of qubits.
In this case, it would take four 2-bit computers to create the same number of outputs as a 2-qubit quantum computer. This makes quantum computers exponentially more powerful. So, to put things into perspective, the most powerful quantum computer consists of over 1,000 qubits, a threshold that was only surpassed late last year, despite quantum computing being around since the late 90s. This quantum computer can produce an amount of information equal to 1 with 301 zeros behind it.
Now, as I just hinted, quantum computers are very difficult to build. This is because... qubits are inherently unstable, and they become even more unstable as you increase their number. One way to think about this is to imagine each qubit as a spinning plate on a pole, an appropriate analogy given their nature. For those unfamiliar with plate spinning, it's a popular circus act which consists of, well, spinning a plate at the top of a pole.
For the plate to keep spinning, you must move the pole just right. Now imagine putting another spinning plate on top of the first one. That's what building a quantum computer is like, apparently.
Anyway, it's important to note that quantum computers are technically not competitors to regular computers. That's because there are only a small handful of functions that quantum computers can do better than their regular counterparts, namely very complex maths calculations and models. Other functions...
like for instance watching this YouTube video, are not something that a quantum computer could do better. If you don't understand why this is, look no further than the devices that you use every day. This video is practically the same whether you watch it on an old iPad or a brand new gaming PC, graphics notwithstanding. And by the way, however you're watching this video, if you're enjoying it so far then please do smash that like button to give it a boost and subscribe to the channel and ping that notification bell so you don't miss the next one. I was trapped inside a cage, a cage made out of the daily grind.
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Now, if quantum computers aren't really competitors to regular computers, you might be wondering why they're so important and why the industry could have more potential than AI. One word... encryption. All digital technologies and processes are secured by code that could be cracked by a quantum computer.
These include your email, your phone, your computer, your bank account, and even the internet itself. A quantum computer could even crack a cryptocurrency wallet and steal all its coins and tokens. And this is why it's been a hot topic in the crypto industry for years, albeit one that fell off the radar until recently.
In fact, we can use Bitcoin as an example of how a quantum computer could crack into all the other forms of encryption. As a fun fact, Bitcoin wallets use the same kind of cryptography as emails. The kind in question is called public key cryptography, and it consists of two things, a private key and a public key.
The public key of a Bitcoin wallet is like your email address. It's publicly viewable and can be used to receive emails, or in this case, receive BTC. The private key of a Bitcoin wallet, meanwhile, is like the password for your email address. It's private and is required in order to send emails, or in this case, send BTC. The key takeaway, pun very much intended, is that the public key effectively comes from the private key.
In other words, there is a link between the two. This means that it is theoretically possible to get someone's private key by using their public key, be it an email address or a Bitcoin wallet address. In the case of an email address, this would involve guessing all the possible password combinations.
As another fun fact, the average password is around 10 characters long. The total possible combinations of... 10-character passwords consisting of uppercase letters, lowercase letters, numbers and symbols is a number with 38 zeros. In the case of a Bitcoin wallet, this would likewise involve guessing all the possible private key combinations. And the total possible combinations of private keys on Bitcoin is a number with 78 zeros.
This means that a quantum computer could crack your email. and your Bitcoin wallet without breaking a sweat. Recall that the most powerful one can process information up to 301 zeros.
Now, it goes without saying that this is a very simplistic calculation. It would also be easier said than done because quantum computers can only operate for less than a second at a time, according to a 2022 paper. The thing is that quantum computing is evolving fast, as is the potential threat it poses.
There have recently been reports of multiple breakthroughs in the quantum computing industry related to everything from more qubits to improved qubit stability. In fact, the World Economic Forum even noted quantum computing as one of the biggest risks to watch in its 2024 Global Risks Report. And that reminds me, if you've been keeping track of our coverage of central bank digital currencies, You might recall that one of the reasons why the US has been lagging other countries on CBDCs is because it's been working on making its digital dollar quantum-resistant before it launches. And funnily enough, JP Morgan announced that it was working on a quantum-resistant blockchain around the same time. I'll remind you that bank accounts could also be cracked by a quantum computer.
Thankfully, many of the largest banks are making progress towards quantum-proofing themselves. And if you're concerned about Bitcoin and other cryptocurrencies, well, don't be. Quantum-resistant encryption for private keys could be easily introduced with a soft fork in Bitcoin's case, and some cryptocurrencies have already taken steps towards quantum resistance, namely Algorand. But back to the quantum computing developments. Besides all the news about quantum breakthroughs, there's been lots of news about quantum-related funding, partnerships, and protections over the last year or so.
For starters, IBM, Google, and Microsoft formed a post-quantum coalition last September. In November, a UK quantum computing company announced that it had raised $100 million from Japan's SBI. And earlier this year, Jp Morgan led a $500 million funding round into a US-based quantum computing firm, giving it a valuation of over $5 billion. AI-level valuation.
And what's interesting is that there actually wasn't that much quantum-related funding in 2023. It was 50% lower, in fact, than usual and totaled around $2 billion. A recent report revealed that the crash in funding last year was due to all the hype around AI, and it predicted a significant recovery in funding this year. So far, it looks like this prediction is coming true. but not for the reasons that you'd think.
Just recently, Apple announced that it had made its iMessage feature quantum resistant. The tech giant noted that this was, quote, the most significant cryptographic security upgrade in iMessage history. Now, I want you to take a second to think about why Apple would do this. And while you're at it, Think about why Jp Morgan is suddenly investing hundreds of millions of dollars into quantum security and why big tech giants are starting to form post-quantum coalitions.
Logically, they are concerned about quantum. The real question, therefore, is why now? After all, quantum computers have been around for years and the post-quantum cryptography many of these entities are implementing been around since the 1980s?
Well, the answer is obvious when you zoom out and look at quantum computing through a global lens. In short, the US and its allies have been lagging in quantum computing for over a decade. And can you guess who's been advancing?
That's right, China and its allies. In January last year, China reportedly managed to break classical encryption using its quantum computers. You know, private keys, public keys.
This seems to have been the catalyst for the sudden surge in quantum computing interest from the US and its allies, and it looks like the funding is finally starting to flow. What's fascinating is that the reason why the US is so behind is believed to be due to the incentives at play in free market economies. As we've seen with AI, US companies are very hesitant to share their secret source with their competitors. In China, however, essentially every company is affiliated with the Chinese Communist Party, or CCP. The practical outcome of this is forced collaboration, which is pushing China's quantum computing industry ahead.
And it's not just the environment either. It's also the money. Back in 2018, then-US President Donald Trump announced $1 billion in funding for quantum computing research and development.
The year before, however, the CCP had spent no less than $10 billion on quantum computing R&D. Current estimates are that China is spending as much as $20 billion on quantum computing R&D every year. of the five-year quantum computing plan revealed back in 2021. And the craziest part of all this funding is that it seems to be paying off and the quantum race is heating up. Now, from what we can tell, it looks like the quantum computing race between the US and China first started to heat up in 2017. This was when China announced that it had established the first quantum communication line between Beijing and Shanghai.
Notably, this communication line is apparently impossible to hack. In 2019, Google responded with its own update, noting it had achieved, quote, quantum supremacy. with its 54-qubit quantum computer.
It managed to find the solution to a maths problem in 200 seconds that it claims would have taken 10,000 years for the most powerful regular computer to solve. Two years later, however, China solved the same maths problem using its own quantum computer. The difference was that China's quantum computer did it one million times faster using a 66-qubit computer. In between, China had managed to achieve quantum communication via satellites for the first time.
By the end of 2021, China was using quantum-resistant satellite communication to protect its power grid from cyberattacks. The US power grid has since been hit by multiple cyberattacks, and there has been speculation about the possibility of a large-scale cyberattack that would take down the US. the entire US grid. On that note, you should know that the elites ran some cyber attack simulations not that long ago. More about those in the description.
I digress. Now, in 2022, Chinese companies reportedly began leveraging quantum computers as part of their own operations, a terrifying prospect when you consider their CCP ties. Less than a year later, there were reports of quantum computers being made available for retail use, though these have been questioned. Last year, China revealed a 176-qubit quantum computer as well as a prototype for a 255-qubit quantum computer that's apparently still in the works. Now, of course, this pales in comparison to the over 1,000-qubit quantum computer revealed by a Californian company late last year.
But there's one big... caveat. You'll recall that qubits are inherently unstable, and they become even more unstable as you add to their number. Based on the information we could find, China's 176 qubit quantum computer is very stable, even more stable than the 433 qubit quantum computer developed by IBM last year. Again, this makes sense given that IBM's computer has more qubits, but that's only half the story.
Stability is apparently measured from the first qubit. Thereupon, it's assessed how much more unstable a quantum computer becomes with each additional qubit. With two qubits, IBM's quantum computer has an error rate of almost 4%.
Conversely, China's quantum computer has an error rate of less than 1% with two qubits. Again, it's safe to say that this is an oversimplification, and I'll reiterate that we're not quantum computing experts. It's arguably irrelevant, however, as both quantum computers are more than capable of cracking encryption. As a fun fact, the day that a quantum computer officially cracks encryption is known as Q Day, and quantum computing experts, at least the ones cited by Reuters, believe it will come as soon as 2025. Some believe...
that Q-Day has already happened and that sensitive information is already being leaked. So this brings me to the big question, or rather two big questions. The first is when the quantum computing craze will come, and the second is how can you profit from it?
Well, I'll start by saying that it's very unlikely that quantum computing's chat GPT moment will look anything like chat GPT, assuming this moment does in fact come. This is again because quantum computers are technically not competitors to regular computers. Unless you're running some advanced mathematical models, you don't really need a quantum computer.
This is presumably why there hasn't been a push for retail quantum computers, though a few do exist. What's more likely to happen is that we're going to see a headline in the coming months. about how a quantum computer managed to break the encryption of a significant individual or institution. Remember how experts are predicting this could happen as soon as 2025?
Well, it will probably be sooner. This is again because the pace of quantum computer development has been increasing faster than expected, much like AI. This can again be seen by looking at how quantum computing has changed in the context of crypto. Back in 2019, it was estimated that it would take 20 to 30 years to crack a crypto wallet. By 2022, however, these decades were shortened to years.
and the more recent developments seem to have shortened this timeline even more. When you combine this with the fact that tech giants like Apple are suddenly post-quantum proofing their tech, it certainly suggests that Q-Day is around the corner. And this gives two big answers to those two big questions. The first is that the quantum computing craze is likely to come sooner rather than later, but it will be reactive rather than...
proactive. Put differently, it won't be some exciting retail application like ChatGPT. It will instead be a scramble to quantum-proof encryption. And this ties into the second answer, and that's that cybersecurity companies will likely profit the most from this catalyst if it occurs.
As it so happens, alleged insider trader Nancy Pelosi recently purchased call options on a cybersecurity company after Congress was briefed on a potential national security threat. Hmm, probably nothing. In our estimation though, it's possible that quantum-resistant crypto projects will benefit even more.
That's because once we do get a headline about some bigwig's encryption being broken, you can bet that the scramble to quantum-proof cryptocurrencies will be even more frantic than in the wider economy. And Because cryptocurrencies can move faster than regular companies can, it's likely that we'll get news of quantum-resistant tech being rolled out much faster in the crypto market than in the stock market. As I mentioned earlier, there are already a few quantum-resistant cryptos out there, but the list isn't long. More importantly, the lists that currently exist don't actually seem to include all the quantum-resistant cryptos that are available. As it so happens, we recently reviewed an off-the-radar small-cap quantum-resistant cryptocurrency for our Coin Bureau Club members, and you can find out more about that in the description.
Now, I can't stress enough just how profitable the quantum craze could be. Whereas most companies can optimize their operations with AI in the future, every single company is going to need quantum proofing the moment Q-Day comes, and they will need it. right away, not in a few months or years time.
So any companies or crypto projects offering quantum resistant technology could go vertical as a result. Although there is no guarantee that Q-Day will come anytime soon, I think we can all agree that the conditions are there for it to happen sooner rather than later. Let's just hope we aren't affected directly.
And that's all for today's video, folks. So if you learned something new, smash that like button to let us know. If you want to keep learning, be sure to subscribe to the channel and ping that notification bell. And if you want to help others learn about this important topic, then be sure to share this video with them. Also, if you happen to be into crypto, then you need to check out the Coin Bureau deals page.
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Okay, thank you all so much for watching, and I'll see you in the next one. This is Guy, logging off.