There are people who prefer to exist in a cash economy for reasons other than their negative economic analysis of central bank monetary policies or an attachment to the iconography of banknotes. Criminals and corrupt politicians, for example. Cash works rather well for them, but can sometimes be quite inconvenient.
Last year I wrote about two Californian working-from-home pharmaceutical freelancers who were arrested after police caught them dumping nearly $1 million in cash which was intended to buy Mary Jane for business purposes. Dumping a million bucks in notes is time-consuming and inconvenient, which set me thinking.
I can understand why the disconnected, marginalised poor in remote parts of the world eschew the benefits of electronic payments for the currency of choice for the global criminal on the go, the $100 bill. But in California? Don’t they have Bitcoin there? Given the huge hassle of counting, bagging and transporting the Benjamins, why didn’t these wacky baccy impressarios simply buy a few Bitcoins, drive to the drop zones and press the “giddy up” button when the goods were in place!
They stayed analogue. They packed up the greenbacks and set off in their car. It could have been that they’d read that quantum computers will be able to break Bitcoin’s cryptography next year and decided that the trunk of a car was the more secure alternative. The point is they were not interested in friction-free instant dollar dollars. So I must ask the obvious question: if drug dealers won’t use Bitcoin for purchases, who will? How can it be more convenient to cart around great wodges of cash than to zip some magic internet money through the interweb tubes?
It is important to note that Bitcoin is far from being a perfect solution for criminal on the go, though. Speaking at this year’s virtual Davos, Glenn Hutchin (co-founder of global technology investment firm, Silver Lake) said that Bitcoin is not the best choice for criminals and that “a drug dealer, for example, would not want to have to speculate on the price of bitcoin while selling his wares”. This clearly not true for all drug dealers: a counterexample being the Irish drug dealer who wisely decided to invest in cryptocurrency rather than euros and who amassed a fortune in digital loot. He hid the passwords to the digital wallets holding his ill-gotten gains in his fishing rod.
The drug dealer in question, Mr. Collins, was stopped but the Irish police in the early hours of the morning by chance. Unfortunately for him, he had €2,000-worth of weed in the car and he was arrrested. His properties were searched, and industrial scale cannabis farming was discovered.
He got five years.
Meanwhile, his 12 Bitcoin wallets, containing 6,000 Bitcoin (then worth $50m-ish but now worth $200m-ish) were seized by Ireland’s Criminal Assets Bureau (CAB). Unfortunately the fishing rod with the scribbled passwords had “gone missing” but CAB believes it is “only a matter of time” before computer advances allow them open the digital treasure chest.
Presumably, by “only a matter of time” they mean that they are waiting for the quantum computers to come along a unlock the wallets. They are in good company, because a great many other people (eg, organised crime, unscrupulous “whales” and the tax authorities of many nations) are waiting for them too. Now, code-cracking quantum computers will happen (as I wrote 15 years ago), but they won’t happen tomorrow. Professor John Martinis, who used to be the top scientist in the Google quantum computing team, says that Google’s plan in this field is to build a million-qubit system with sufficiently a low error rate that error correction will be effective. He says that at this point, about a decade away, then the system will have enough logical quits that the system will be able to execute powerful algorithms that attack problems that are beyond the capability of classical supercomputers.By “only a matter of time” they mean that they are waiting for quantum computers to come along a unlock the Bitcoin wallets. Click To Tweet
For technical reasons to do with public keys and things, the accountants Deloitte reckon that about four million Bitcoins could be stolen by a quantum computer. With Bitcoin at $30,000 that means a pot of a hundred billion dollars or so is at the end of the quantum rainbow. Well worth spending a few billion to build such a device if you are a criminal, well worth spending tens of billions or even hundreds of billions on such a device when Bitcoin has taken over and has become the need digital gold worth $1m each or whatever.
It’s a serious threat, and plenty of people have already started work on plans to migrate Bitcoin to more quantum-resistant forms of cryptography (see, for example, “Committing to quantum resistance: a slow defence for Bitcoin against a fast quantum computing attack” from 2018) but these schemes still need access to the old, vulnerable wallets to transfer the cryptocurrency to the new, less vulnerable wallets.
The idea of using quantum technology to make better electronic money is not a new idea, b the way. As the Swedish Central Bank’s recent working paper on Quantum Technology for Economists points out, out the original concept of quantum money (dating back to the early 1980s) exploits “the no-cloning theorem” proven by Wootters and Zurek (1982). This means that it is not possible to clone an unknown quantum state so a counterfeiter with unlimited resources will still not be able to copy a quantum coin. Therefore quantum cryptocoins can act more like actual coins (that cannot be double-spent) and that opens up some pretty interesting thinking. As my digital currency technology tree (below) shows, this opens up an interesting third way to pan-galactic digital currency in the future: we can prevent double spending of person-to-person digital cash in hardware (using chips), in software (using blockchains) or in nature (using qubits).
Still, assuming that the Irish police get hold a quantum computer before the Mafia do, there is a tidy amount sitting not only in Mr. Collins wallets (as there is in Mr. Satoshi’s) and the next time the Gardai pull someone over in the middle of the night it will be in a Lambo.
[An edited version of this post appeared on Forbes, 10th January 2020.]