What happens if whales are equipped with quantum computers?

The cryptocurrency world is a one-of-a-kind financial wonderland where timing is critical and nothing is certain. When you believe you've got a handle on the market, a billionaire tweets a meme and you're pushed towards one of the margins.

While enthusiasts of rollercoasters and thrill rides may enjoy the experience, investors seeking an escape from the oppression of centralised currency and banking may wish for a less volatile future.

Regrettably, the path forwards is not straightforward. Decentralised digital currencies such as Bitcoin and Ethereum appear to make perfect sense on paper.

If I own a dollar's worth of Bitcoin and the US government decides to deport me and declare my citizenship null and void, I retain that dollar's worth of Bitcoin. However, every penny of fiat currency I currently hold in US markets, banks, 401Ks, and other investments would be completely wiped out.

In a truly decentralised financial paradigm, no single government or other cryptocurrency holder should be able to revoke your holdings.

However, technology is frequently the only thing preventing government agencies from seizing cryptocurrency. What happens if that circumstance changes?

Today, we are assured that our crypto holdings are protected from intrusion, theft, and withholding through the use of literal cryptography. Just as the government is technically unable to read our WhatsApp conversations due to their encryption, it should be unable to access our cryptocurrency holdings.

Furthermore, because Bitcoin and similar massive cryptocurrencies are built on decentralised (but well-managed) blockchain platforms, there is little concern that a government will gain a technological advantage sufficient to seize assets. If, for example, China or the United States develops a quantum computer capable of breaking binary cryptography, the Bitcoin platform is large enough to solicit community support for countermeasures.

However, Bitcoin and Ethereum account for 99.9% of the market. And without cryptography to safeguard the contents of your digital wallet, there is no discernible difference between a complete scam and a genuine cryptocurrency.

If a cryptocurrency is unable to withstand quantum computing attacks from the IRS, FBI, Department of Defense, China's military ministry, and any other entity capable of financing and building a quantum computer, the cryptocurrency's future may be bleak. 

In such a technological paradigm, only a few Bitcoin-sized walled gardens would survive. 

While detractors may point out that quantum computing is still in its infancy, those detractors may not be up to date on the state of the technology.

It does not appear to be a significant gamble to speculate that useful quantum cryptography systems could be fully operational by 2050.

If governments can seize cryptocurrency with even greater ease than they can physically seize people's cash or freeze their fiat accounts, this will be a problem for people who hold crypto solely for its decentralised nature.

The issue is that when only a few cryptocurrencies are available, whales theoretically gain an even greater advantage by effectively becoming "the house."

Elon Musk, for example, can currently sway entire cryptomarkets with a single tweet due to the strength of his position and popularity among crypto enthusiasts.

However, there is some degree of equilibrium in today's market. For every DogeCoin riding the emotional wave created by Elon Musk, there are hundreds of other equally legitimate cryptocurrencies vying for a piece of the next whale's heart and social media feed.

That may seem flippant, but if you're one of the countless individuals who've converted their spare change into Lambo money using nothing more than a couple hundred dollars, a cryptocurrency trading app, and a Reddit account, you probably don't care.

The point is that the current crypto market creates such an illusion of choice that, as long as investors are only interested in short-term financial gain, there is plenty of money to be made by everyone, whether they are guppies or whales.

However, the imminent addition of quantum computers to government agencies has the potential to alter everything. Cryptocurrency holdings currently account for more than 90% of the total funds seized by the IRS in 2020, and the agency anticipates that percentage to increase in the fiscal year 2021-2022. 

We can logically assume that countries such as India, where an outright ban on public cryptocurrencies is currently being considered, and China, where all cryptocurrency activities are currently prohibited, would seize crypto-assets wherever and whenever possible. 

If only the world's largest cryptocurrencies can withstand government seizure and corporate manipulation, even decentralised coins will become artificially centralised in a marginalised market.

When Einstein coined the phrase "spooky action at a distance," he was referring to quantum physics' strange machinations. However, the sentiment holds true for cryptocurrency as well.

It's difficult to envision the next five minutes for the majority of coins. Attempting to forecast the field's future 30 years in advance is impossible.

All we can say with certainty is that actors with a whale position in the fiat market (such as the US government and Elon Musk) are unlikely to abandon it. Whether this results in them cornering or splintering the cryptomarket is determined by their motivations.

Meanwhile, those who support a decentralised cryptocurrency future should urge the communities and development teams behind legitimate coins to begin future-proofing immediately.

If you're waiting for IBM or Google to begin selling quantum computers on Amazon before preparing for the impending encryption nightmare, you're betting on the next 30 years of technological advancements being less eventful than the last.

And, given that Bitcoin was not invented until 30 years ago, that appears to be a huge gamble.

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