In 1940, one genius completed a puzzle in just 20 minutes that should’ve taken him a million years to solve.
His name is Alan Turing.
You may be familiar with Turing’s story from the 2014 movie The Imitation Game. Benedict Cumberbatch earned a Best Actor nomination for his portrayal of the genius.
If you saw the movie, you know Turing is considered the father of computer science and one of the most important code-breakers of all time.
When World War II broke out in 1939, Turing was assigned to breaking encrypted messages from the Germans.
This was no easy task, as the Germans held the most sophisticated encryption machine at the time, the Enigma.
Credit: ironypoisoning, via Wikimedia Commons
The Enigma’s encryption was far greater than anything before its time.
It became clear cracking the code to the Enigma was going to require an even smarter machine. So Turing built one.
It took Turing and his team nearly a year to build a machine that was powerful enough to decrypt Enigma’s messages. It was known as the Bombe, and it helped the Allies crack 84,000 Enigma-coded messages each month.
Decrypting messages went from taking potentially millions of years by hand to just 20 minutes.
Here’s why I’m telling you this…
Later this year, IBM will release its 1,121-qubit Condor processor. It’s the most advanced quantum computer to date.
Quantum computers such as the Condor can perform billions of calculations per second. So they can find patterns in data that are invisible to classic computers. They have the potential to revolutionize everything from medicine to engineering.
Many crypto skeptics believe bitcoin’s defenses will be broken as quantum computers get more powerful… And it will share the same fate as the Enigma.
But there’s one key mistake that made the Enigma almost certain to fail. And bitcoin doesn’t share that flaw…
The Flaw That Broke Enigma
The reason Enigma failed is because – once it was built – its creators never improved it.
It was only a matter of time before those looking to crack the Enigma would develop better technology.
While the Enigma stood dead in its tracks, Turing made improvements to his decryption machine every day until it became more powerful than the Enigma.
The lesson here is that you always need to push forward. If you don’t, the competition will close the gap.
It’s a lesson bitcoin developers took to heart.
The bitcoin network was developed with quantum computing mechanics in mind. To combat this, the difficulty to mine the next bitcoin block increases as more computing power comes online.
Take a look at the chart below. It shows the hash power, or computing power, of the bitcoin mining network.
Every year, the computing power that goes into mining a bitcoin block (in other words, processing a transaction) increases.
As I mentioned above, IBM will release its 1,121-qubit Condor processor later this year.
According to the University of Sussex, you’d need a quantum computer with 1.9 billion qubits of processing power to break the bitcoin network.
This means you’d need 1.7 million of the most powerful quantum computers built today… Yet the first one hasn’t even rolled out yet.
IBM believes it can get to 10,000 qubits by 2026. Even then, it’ll need nearly 200,000 of these machines to crack the bitcoin network.
How long will it take for companies like IBM to build this many machines? Years? Decades?
Plus, if you want to attack the bitcoin network, you need to control 51% of the network’s computing power.
Today, one of the best bitcoin miners, the Bitmain Antminer S19 Pro, will cost you $2,200. This machine can generate 110 terahashes per second (TH/s).
The bitcoin network uses roughly 384.33 million TH/s. That means you’d need 1.78 million Antminer S19 Pros to overtake the network. That’s over $3.9 billion.
You’d also need to pay for a storage facility to set up these machines. And you’d need to coordinate a massive amount of electricity to the building. These machines consume roughly 3,250 watts per hour.
At an average cost of 23 cents per kilowatt, that would cost about $32 million per day.
But even if you spend nearly $4 billion to take over the bitcoin network, you’d never be able to extract all $500 billion of its value. The moment that you overtake the network, its value would race to zero.
It’s like pirates buying a $4 billion battleship to commandeer a cargo ship carrying $400 million worth of goods. It’s not worth the effort.
And that’s why the bitcoin network is considered “antifragile.” It would cost you more to take over the network than the network would be worth.
Keep Stacking Bitcoin
Every year that bitcoin exists, it moves further and further out of reach of attackers.
So while you might need 1.9 billion qubits of quantum computing processing power to break the blockchain today… You’ll likely need 3 billion qubits of processing power next year. And 4 billion the following year… and so on.
That’s what separates the fatal flaw of the Enigma from the security of the bitcoin network.
When technology like the Enigma just stands still, competition surpasses you.
Bitcoin, on the other hand, is constantly improving its security. It’s never satisfied with where it’s at. Even if it appears to be unbreakable today, it will still be stronger tomorrow.
So when you see quantum computers gaining ground, know that bitcoin isn’t standing still.
That’s why the advances of quantum computers aren’t a threat to bitcoin for the foreseeable future.
So don’t let quantum computing fears stop you from owning a stake in one of the world’s greatest assets.
As always, it’s important to keep risk management in mind when investing in highly volatile assets like bitcoin. You should never invest more than you can afford to lose.
You don’t need to invest much to see big gains. That’s because we’re still in the early stages of this asset’s life cycle.
I know we say that often. But just think about it…
Bitcoin’s market cap is $500 billion. By comparison, the gold market is about $12 trillion.
So we’re still in the early stages of the life cycle of this asset class… which we believe will be the “digital gold” of the future.
Regards,
Houston Molnar
Analyst, Palm Beach Daily
P.S. While bitcoin continues to have considerable upside, Daily editor Teeka Tiwari is paying close attention to a tiny subsector of the crypto market that could see explosive gains from a new trend: the development of a digital dollar.
You see, the Federal Reserve recently launched a program that could lead to a mandatory recall on the U.S. dollar.
According to Teeka, this program could replace the dollar with a new digital version that will be radically different from what you have in your bank account right now.
He’s put together a briefing to explain what this new digital dollar regime means for you and your money… including the name of a crypto project also set to profit from its rollout.
Plus, he’ll also show you the one move you must make when your bank tells you it’s moving all your cash into this new digital dollar. You can watch it for free right here.