Wednesday, July 26, 2017

Former Plunge Protection Team Member Warns Quantum Computers Can Break a Bitcoin Password In Less Than a Minute

EPJ friend  Pippa Malmgren, a former member of the Working Group on Financial Markets, aka The Plunge Protection Team, said during an interview with Erik Townsend on the MacroVoices podcast:
 So everybody in government circles have been watching the Indian experience because the prime minister stepped up to the platform in early November and basically said we are going to move all of you, a billion people, off paper money and onto electronic money, and we are going to do it in three months. They did it, and they did it successfully. Now governments everywhere are saying we want to do that because, guess what happens when you move to e-money. First of all, you really eliminate the black market because you can’t transact anymore without it being seen. And so, for example, the European Union are talking heavily about moving to electronic money because then all this black market activity that happens in Greece and Italy where there’s no tax, we will be able to get all that tax revenue off it. That’s one reason. The second reason is with blockchain you have total transparency over every single step of a transaction, complete providence of every single transaction. The question is who gets to see it. I think this is where governments are suddenly a little schizo because on the one side they think they are going to have the ability to see every transaction that you and I and all the listeners are engaged in, but Ethereum has created this platform where actually they won’t necessarily be in government’s hands, maybe in private hands.

The question is can you trust the private hands who are issuing Ethers as much or more as you trust governments. So governments are being to say let’s create our own version, and that’s where you get the PBOC saying we’ve got to control this. Because otherwise, you are going to end up with private sector currencies that possibly are trusted more than government currencies, and that will lead to transactions offline that governments can’t see. There was a report going around the Internet recently about some guy who made $200 million bucks trading on Ethereum in a month, and the question was who will tax that. The answer is nobody. That freaks governments out to say the least, particularly given their debt situation. So I think this is a huge, huge thing, and all investors have to think very carefully about it. I will say one last thing about it. You have got to get familiar with quantum computing, and there is loads of stuff on the net about it. But the reason it matters is because of the speed at which you can process information. We now have quantum computers. The Chinese apparently have the fastest. There is D-wave out of British Columbia, but basically you can break a block chain password or a Bitcoin password in like less than a minute if you have a quantum computer. The question is who is going to have them, and the answer is mainly governments but big corporations are buying them like crazy. Volkswagen just bought one. We are going to see major corporations buying that computer power.

The question then is who has most transparency over the block chain and e-money, and I would argue it is going to be whoever has the most and fastest processing  power, which may be governments at times, it may be private at times, it may be fluid. That’s what we have to think about as investors.
You are really delusional if you think Bitcoin or any other e-currency is going to protect your transactions from snooping eyes.



  1. here's the problem. If such a report was to appear anywhere else one might bother to read it and allow it to influence how one feels about the blockchain.

    But it's from EPJ - so it can't be trusted

  2. I agree with Robert's concluding statement, but there is a difference if the snooper is a private company vs. if it's the state. In the former case it has to be funded voluntarily, which creates a financial constraint, and if the fact of snooping becomes public, the private company's reputation can be severely tarnished and customers can boycott it, potentially bringing it down. If the snooper is the state, funding is forcibly extracted from taxpayers, so there is little financial constraint, and if the fact of snooping becomes public, there might be outrage and calls for action, but in the end nothing much will change because the state can't be forced to shut down (exhibit 1 is the NSA post-Snowden).

  3. Malmgren is also delusional if she thinks government could prevent a black market of currency from arising. Has any government ever been successful at preventing a black market of anything? Also, if the quantum computers are good at cracking passwords, I bet they make very good miners as well. Who would buy them for that? Perhaps a guy who made $200 million tax free in a month.