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BTC253: Quantum Computing and Bitcoin w/ Charles Edwards (Bitcoin Podcast)
00:54:22
Quantum computing is evolving fast and Bitcoin might not be ready. Preston and Charles explore quantum breakthroughs, risks to cryptographic security, and what the crypto world must do next.
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You're listening to tip.
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Hey, everyone. Welcome to this Wednesday's release of the Bitcoin Fundamentals Podcast. Today I'm joined by Charles Edwards to talk about quantum computing, what it really is, where it's headed, and what it means for bitcoin security. We break down the differences between physical and logical qubits, the debate around how soon QDay could arrive, and how upgrades like BIP360 might protect the network. We also explore the broader impacts that quantum tech could have on AI, material science and finance. This is one that you will not want to miss. So let's jump right into the conversation.
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Celebrating 10 years, you are listening to Bitcoin Fundamentals by the Investors Podcast Network now for your host, Preston Pysh.
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Hey, everyone. Welcome to the show. I'm here with Charles Edwards, and we're talking about a pretty difficult topic, but we're going to try to make it accessible, and we're going to try to talk through the reality of whatever it is or whatever we think it is, and we're talking about quantum computing. This is going to get pretty bitcoin heavy, but obviously the topic goes beyond bitcoin. And Charles, as a person that's investing in this space in particular, I'm very curious to go down the paths that go beyond just bitcoin itself. But in short, welcome to the show. Excited to get into this with you.
- [01:33]
C
Yeah, likewise. Great to be a person. It's been too long. I think it's been about four or five years.
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B
Yeah, it's been way too long. Been good. Been good. I'm excited to have you back on the show, Charles. So let's start here. So I made a video about Quantum probably back in maybe January of 2024. No, of this year of 2025. And where I started, I was just trying to define, like, what in the world is it? How does it work? Just so I could wrap my own head around it. Because if you can't kind of like describe what it is and what it's doing, it's really difficult to understand what problems or things that it's going to solve in the real world. So this is a really hard question, and you would think it'd be the easiest thing to kind of COVID but I find it to be one of the hardest things to cover is what in the world is quantum computing? How does it work? Give a layman's overview from your point of view as to what this is.
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C
I suppose it's, you know, at the most simplistic level, traditional transistor Chips work in ones and zeros and you can have one state or the other, as in most things in life, you can be here or there, but you can't be in both places at once. Things get weird at the quantum level. And Albert Einstein always struggled with this and basically wrestled with it his whole life even it doesn't make logical sense anymore. And you get down to that atomic level that things can have multiple states at the same time or it's probability based. So essentially a quantum computer is trying to replicate the quantum state and physics, which is, you know, potentially being in multiple values at the same time. So that where that becomes interesting in programming and especially what we're talking about here, encryption is you can essentially model multiple values at the same time and zero in on an optimization really quickly. So if you're trying to guess a password, you know, if it's just a pin code and a lock and you're just scrolling through the numbers and you know, if it's got three different number options, you can get there eventually it'll take you a while, but with a quantum machine you can basically simulate all of them at once, more or less and solve things really quick. And so Google had a really big headline about a year ago, I think it was with their Willow chip where they solved a mathematical equation which using any supercomputer today would take more time than the entire universe. So like trillions of years, numbers that we can't even comprehend in our mind. So it gets really exciting I suppose on the industry level where we can now unlock new innovations that were just deemed impossible and solve functions and models that were just considered not unsolvable years ago. And yeah, it's expected across multiple industries, basically every industry to have an impact in multiple improvements. So drug discovery, AstraZeneca has been using it and done trials with it and found there's, you know, significant percentage improvements in speed and optimization there. The defense has also been using it a bit. It's also useful for communications, but you know, even landmine detection, that sort of thing. HSBC also has done a case study approving it's improved bond optimization processes. So a lot of people say, oh, quantum is not here today, it's got no practical use. It is here and it does have use today. It's still very neat. Early in its development. It's like if you would use ChatGPT5, six years ago, even Altman, the creator of it, said it was a terrible product. Right. So Quantum is still like a really basic iteration of where it's at today. So it's just really kind of, it's already proven those use cases and it's on that trajectory in my mind on the, in the early stages of the hockey stick of any kind of technical adoption.
- [04:55]
B
Amazing job. It's a very hard thing to kind of put into words, especially because it's so complex and so abstract. The use cases there that you were talking about at the end of your comment, I just put up a slide for people that are only listening to the audio. And before we recorded this I just was kind of curious myself as to what the top uses are for quantum moving forward. And the top four things really kind of come down to material and chemistry simulations which can lead to all sorts of new innovation. You could have new batteries, you could have semiconductors, you could use this in pharmaceuticals to come up with new molecules, you know, that can help people recover from whatever type of illness. It's going to be really good at optimization problems for logistics. So shipping routes, supply chains, traffic flows, fluid, I can only imagine in like fluid dynamics and like really complex interactions between things that just, you know, either it's humans or nature itself, migration patterns, call it, you know, whatever. Obviously in the crypto security thing, which we're going to cover at nauseam probably in the discussion here, so I'm going to leave that one aside. And then finally just in machine learning and AI acceleration, when we look at all the parallel processing that's happening with the Nvidia chips and all of that, this could potentially be massive in the implications of what that could do. Yeah, go ahead, Charles. Looks like you had something else.
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C
Yeah, and I totally agree. Might have also pulled up a couple of slides on my side. You know, the multiple firm seeing performance records across many utilities today. So protein folding, drug discovery talked about. So yeah, there's multiple use cases across quantum. So you mentioned a lot of them. I've got a list here on my screen, but I can share later maybe. But it's cryptography, drug discovery, disease risk predictions, financial modeling, as you touched on traffic optimization. Anything where you need to optimize on something or scenario analysis, you can really zero in infinitely faster design optimization and post quantum communications. Basically every industry is touched on in some format.
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B
The one thing I wanted to add on just kind of defining what it is or what kind of the key components are that enable it and then maybe something that can help people visualize how this works. When I was doing the research for the video that I made, which I'll also have a link in the show notes if people want to Watch this. But there's three key components. You have to have the superposition. You have to have entanglement of these two atoms or electrons that are in this superposition state. They have to become entangled. And then the interference that occurs between the entangled qubits is how you're able to arrive at what, you know, I would refer to as an immediate solution or an immediate answer to what you're trying to solve for. So for people that have done eigenmath, have you ever done equations where you got basically like three unknowns? You got three equations and then you line them up into a matrice, and then you're solving for the answers of the three different variables? For anybody that's ever done this in math, kind of think of it in this way where you've got these three equations, you got the three variables, and instead of having to go through line by line, first you're solving for A, then you're solving for B, then you're solving for C, and you're substituting them all in there. Imagine kind of lining up those three equations and the interference of those three variables as they're interacting with each equation immediately produces the answer, as opposed to having to go line by line in a very ordered way to solve each one of them and then piece it all back together through the physics of this superposition, entanglement and interference, you're able to get that immediate answer. Now, just think of it, more than three equations, you're doing this with countless lines of variables and whatnot.
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C
Yeah, exactly. I think that's a good analogy. And what kind of plays into that today is error rates. So, yeah, there's a difference that, and this often comes up as a debate on Twitter, and people often think I'm referring to the wrong thing. But there's physical qubits and logical qubits. And this is a set done very simplified. It's basically the processing power of a quantum machine. The difference between physical and logical is essentially there's a large error rate, and on most current physical qubits, so that what we're trying to get towards is a logical qubit, which is basically error free. So whenever I refer to qubits, and probably in this conversation, I'm referring to logical. It's a much smaller number, you know, orders of magnitude smaller, because there is an error rate today. And most people will say, oh, well, you need millions of qubits to solve X, y, Z equation or to break Bitcoin or any encryption. It's actually a much smaller number At a logical qubit level, it's a couple of thousand, that sort of magnitude. And what people don't realize is the error rates are really dropping significantly in recent years. And they're finding that the more qubits you add, the error kind of compresses. So it's kind of. It scales better. So that's just kind of a sort of a brief summary on the processing units of quantum machines.
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B
I think that this is a super important point, and mostly because a lot of these labs that are working in this space, they're publishing their numbers in the news, and the numbers that I always see are physical qubits. And they're saying, oh, we're going to have this many hundreds of thousands of physical qubits. And they don't say physical, they just say qubits by date, whatever. And what people fail to realize, going back to this interference piece, the three pieces that I was mentioning earlier, when you entangle the cupids and you're creating these interference waves to get this immediate solution, the problem that kind of arises from this is this noise factor that Charles just brought up. And so when you're doing this with a few, the noise factor is a little bit easier to control. But imagine doing this with tens of thousands of physical qubits that are all entangled and you get any type of heat, you get any type of vibration or anything like that. And immediately, because they all have to stay entangled in order to provide these. Go back to that eigenvector math. Imagine one of the equations getting fuzzy, and you can't really know what's even in the equation because of this disturbance or this noise. Well, you can't solve for the entire system of equations because that one is out of sync or diffic to see or visualize compared in relative to all the other ones that are entangled. So this is what makes it really challenging. I also think that this is what makes the timeline of this really difficult to predict or know with a lot of precision and why there's such a wide range. And I know, Charles, you're very bullish on the timeline. And I'm sure I could go find somebody else very smart on the topic that would be very bearish on the timeline. And it just seems like this understanding of the noise factor and how that's going to progress or get resolved in the coming decade is really kind of at the heart of the debate. Would you agree with that? And do you think that I properly quantified it?
- [11:52]
C
Yes and no. So I think currently the rate of qubits is progressing faster than Moore's Law. So if you plot. It's like the bitcoin chart on a log scale, right? It's a straight line on a log scale where progression is really consistently improving every year. That's it. There's. And this is already a couple of years old, but the trend is not slowing down. And the number of qubits is doubling about every 18 months. So faster than Moore's Law. And at the same time, each year we're seeing like an extra 9 or an extra granular level of lower error rates. So it's moving a lot faster than people think. I think the people that say the timelines I talk about are pretty. You've got a slide. It looks like the one before slide three. These are kind of four sources I like to reference. There's another one you can add to this list, which is the Department of War in the US They've recently said that they think there's a tangible risk of Q day within three years. Now, that's pretty aggressive, but it shows a really big confluence of people converging on this, becoming a tangible risk to encryption within the next couple of years. So this slide here is talking about when could it be a risk for Bitcoin, right? So Bitcoin, the first thing to notice Bitcoin's secure, the weakest link is elliptic curve cryptography and Bitcoin's encryption. And the first thing to note is that's weaker than rsa. And so what we're talking about here is when can we break that? And these four sources kind of converge in around two to nine years from now. The Jameson Lott is a bitcoin developer, is deep in the space, works in the code. He's run the security business in bitcoin for many years. He says it's a 50% risk in four to nine years. And remember, if it's 50 and 49 years, what if it's a 30% risk? That's obviously earlier than that. You know, there's always some risk earlier than these timeframes. Pierre, look, here's a PhD in maths and physics, specializing in quantum. He thinks it's two to six years away. McKinsey, obviously one of the biggest think tanks in the world are saying Q day, that's RSA broken is two to ten years away. And again, remember, bitcoin's ECC breaks years in advance because it's not as strong as rsa. And then one of the big papers on this matter is that 2070 quantum paper at the bottom. And they're saying you only need 2,330 qubits. That's the logical ones to break Bitcoin's encryption. And most leading firms right now are projecting that capability within four to five years. And that's again written by multiple Doctors at Microsoft IonQ, the biggest quantum company in the world, and meta. So all these time frames converge in the sort of two to nine year bracket with a very high probability in the sort of four to five years. Which is why I talk about us having until 2027 to 2029 to solve this risk for Bitcoin. And that considers also, you know, we need to think also about lead times for implementing any change on Bitcoin. So that's a whole other topic to discuss. But there's two major discussions and decisions that need to be had in my view on the Bitcoin front. First is obviously agreeing the technology to upgrade to quantum proof encryption and wallet systems. And then probably 70, 80% of network will happily move across to that when that decision's made. And then the second decision is what do we do with the lost coins, the 20 to 30% of coins which are on really old addresses like Satoshi's coins, PGPK hash systems, and also any coins that, yeah, any coins have been lost or you know, just sitting in safes or just fail to upgrade in time, those will be taken with certainty by a quantum machine. There's nothing we can do about it. And so we need to decide as a community, do we just let that happen or do we initiate some kind of process to burn that in the code? So there's a few two main discussion points that need to be, I think, seriously taken in the next 12 months. Let's take a quick break and hear from today's sponsors.
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C
All right, back to the show.
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B
So where I want to start, I first want to push back on the timeline just to kind of provide a counter argument for people, because a lot of people hear this, they're going to immediately be like, oh, my God. And I think we kind of want a little bit of that for moving forward with, like, call it BIP360 in Bitcoin and get things moving in the right direction. So I want to provide a counter argument for people to hear, but I also want them understand the importance of everything that you just said and whether you know the timeline, because we don't know what the timeline really is going to be here. But my first pushback would just be when I look at a lot of the people that are providing these accelerated timelines. And by the way, I agree with the 2300 roughly logical cubits as far as, like, what it'll take to break the elliptical curve cryptography, I think that number is pretty accurate based on all the research that I've done. So Whether that is 23,000 physical qubits to 200,000 physical qubits, I don't know. But it would be somewhere in that ballpark for people that are hearing numbers that are mostly in marketing jargon online, to get the 2300 logical, you'd probably need anywhere from 20 to 200,000 physical qubits to do that. But my pushback comes from everybody that's listed seems to have some type of financial incentive to either get more funding for their lab to, you know, just kind of move along the entire movement of quantum, as opposed to people that are outsiders that have a lot of expertise, which is really hard to find, by the way, because everybody that has a lot of expertise is deep in this, and they have an incentive to make sure that it's moving forward and successful. So, like, that's the first thing, and then the other, like, counter argument or where I would push back. I'm just going to pull up a slide from a little bit of research, research that I did. Charles. And what this is doing is it's showing the current layout of, like, where we're at today as far as physical qubits for various organizations that have built a quantum computer, what the physical qubits are, and then what the logical qubits are today. And again, this research isn't real extensive, but like finding anything that has logical qubits in excess of 24 to 28 is really difficult to even find where from my understanding, we haven't seen any quantum processor that has exceeded 100 logical qubits today yet. And I'm curious if that's what you understand to be true as well, Charles. But the big one for me was it seems to be IBM is one of the front runners here. What I had read was that they were going to have in excess of 100,000 physical qubits by 2029. And off the IBM website they're targeting 200 logical qubits by 2029. And this is coming from, you know, in my opinion, a company that is probably one of the biggest marketers in the space as far as like what it is they're going to do and when they're going to do it by. And so four years from now, three years from now, they might be at 200 logical qubits. And that's, in my opinion, probably their best case scenario based on what they're literally telling the market. So I'm curious how you view this and whether I'm out to lunch and again, I'm not really deep in this stuff. I'm just looking at it really from an outsider's lens. And I'm just kind of curious how you see that.
- [22:35]
C
I think that's what we have to be careful with because if you survey, there's about 10 to 12 pure quantum companies that are public traded, there's about another 20 like Google's, Amazon's, where they partially have a quantum team. And then there's another sort of 30 private. So there's about 60, roughly firms working on quantum at the moment. And if you do a survey, a lot of them are not very progressed, but some of the leading ones are very progressed and that's what we kind of need to be looking at. So there's another slide now I can bring up a screen I'll send later. But IonQ is projecting 8,000 logical qubits in 2029, more than you need to solve this. Psi Quantum is a private company, so they're not having the same incentive. They're saying they're going to have a million physical in 2028, which is way more than you'll need to break Bitcoin.
- [23:19]
B
But what does that equate to in their logical. So I hear the really big numbers on the physical side, but then they never say what their noise factor is, whether it's 10 to 1, 100 to 1, a thousand to one.
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C
They just, if you go on that, I don't have that in front in front of me. But if you go off the, the relative ratio for the others, it's definitely in the order of thousands. So yeah, Huera is projecting a hundred in 2026, so 100 logical in 2026. So then again it's 30 this year. So 3X. So if you keep multiplying these numbers, again the trend is linear. So if we focus on the numbers today of you know, 10 to 100 or 10 to 50 or 10 to, you know, those kind of range of logical, it doesn't sound that concerning but the point is of the exponential growth and then OQC is saying they're going to have 5,000 logical in 2031. So we're looking at like somewhere between 2028 and 2031. And we obviously, we don't need everyone to get there. There needs to be one firm that. The other factor is that China is spending double the US on quantum. And they're one of the latest quantum machines that came out there was a million times more powerful than Google's and that was a few months ago. So did they. Everything that goes on in China, we don't, you know, there's record breaking capital being committed to this industry. There's also 55 billion being committed to globally to Quantum and some rumors that Trump's going to release an executive order on this because obviously there's a critical urgency to be a Quantum leader, to have quantum supremacy because once you're ahead of the game in that you obviously have a really significant power in terms of what we call Q day, which is unlocking secrets, potentially financial information and other hacking capabilities of course. So it's like it's an informational warfare capability as well. And that's why I think basically the allocation of money to this industry is only going to go through the roof. And yeah, and the other thing with these forecasts of qubits is that they, these leading companies have actually been beating their targets the last couple of years. So yeah, they've been hitting these, their timeframes early. So they're not really the firms I mentioned. They're not actually wishful thinking. They've actually been beating their historical forecast. So yeah, again we don't know the exact number but anywhere between the two to eight years with a really high probability in the four to five year mark. And I think anyone who's kind of working in the industry will kind of Confer that that is the trajectory it's on. And the tech improvements and tech advancements we're seeing every month and quarter are pretty breakthrough changes and capability and improvements.
- [25:47]
B
So Charles, one of the things that I'm just looking at AI and AI specialty is being able to find patterns, right? And when we look at one of the biggest issues which we've talked about here is the noise factor. It seems like you could somehow apply AI to help dampen or try to figure out how to remedy a lot of the noise factors with respect to this and which could accelerate some of these timelines in ways that we're not expecting today. Is this something that you've read? I mean this is just an intuitive sense. Is this something that you've read is being real or.
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C
Yeah, I believe it was rigged a couple of months ago, had an announcement and this is I think the second biggest public quantum company in the US they basically said that they've been able to use AI to really fast track optimizations and how they calibrating the quantum machines, right. So where it would be a lot more manual and human driven, you know, algorithm based, but still slower it can be they're seeing significant speed improvements on that. So I helped speed up the development of Quantum and then Quantum ultimately will help speed up different processes for AI in the future. So they really kind of interdependent and kind of grow off each other.
- [26:59]
B
One of the things that you said earlier in the conversation that confused me a little bit because when I was doing research on the entanglement piece of this, one of the things that became clear is you can't take, let's say you could figure out how to do it with a thousand physical. And it gives you, you know, let's just say it's a 10 to 1 factor that gives you 100 logical qubits right there. And then you kind of stitch those thousand physical qubit processors together in order to build out a much larger quantum computer. And what I read, or what I think I understand is that's not how this works. Being able to kind of stitch together groups of thousand, a thousand physical here, a thousand physical there, doesn't get you over this curve. They have to be completely entangled all of the qubits in order to be able to solve these much bigger problems. Call it like cracking the encryption on Bitcoin. Is that true? And if not, is there a way that you can partially do it or just help us kind of understand the mechanics of that? Because I think for a lot of people, they'll start thinking in that direction because that's how normal day processors, you have dual core, you have quad core products processors and they're thinking that maybe they can apply that to quantum and I just don't suspect that it works that way.
- [28:12]
C
Yeah, it is a bit different. I'm probably not the right person to be getting into the, the technicals of the quantum engineering side before other businesses I'm focusing on. But I suppose my high level comment would be that the announcements I've been seeing the last year from these firms is that they are seeing an improvement in error rates when they add in qubits to the equation. So it does have a scaling benefit and they're also seeing each year like a reduction in error rates. So it's very easy to focus and pick holes like in any problem technology. Right. Same thing could be said for AI5, six years ago. Oh, it's not capable of this or it doesn't scale that way or the results are garbage, it's spitting out or it's got lots of downtime. A lot of these things are parallels I think with Quantum and you know, McKinsey BCG. They're expecting multi trillion economic value across industries within 10 years. And as well you've got Q day very highly likely within 10 years. And I believe as I said, based on those forecasts it's sort of two to five year range. And then if we have that, we have a bit of a hockey stick moment, a chatgpt moment if you will, in the sort of coming years which it's very easy to focus on problems and humans are really good at generally solving problems. And you know, we're programmed to think pessimistically and then focus on problems. But usually the innovation of these kind of things will win. And as I said, it's really looking at that log chart where the progress is exponential and faster than Moore's Law that I'm confident a lot of these things are just going to be continued to be solved on as they have been each year.
- [29:38]
B
I'm going to pull up a chart. We're going to transition a little bit more into Bitcoin and how this impacts Bitcoin. And then I would be really curious going beyond Bitcoin, what you think some of the implications are, but to frame this up for people. I've got a chart here that lays out the type of key that the public key, private key relationship that Bitcoin is built around for all the addresses and the output type that you have. When Bitcoin was first Founded and stood up. We were using P2PK. And this is pay to public key. And this is the primary set of keys that are the issue. And with my research, and I'm curious if this is what you also have found as well, Charles, is it's about 25% of the Bitcoin that currently exists are in this key type, which makes it vulnerable to Shor's algorithm if a quantum computer with the size that we talked about about earlier existed. So, yeah, that's a significant portion. Now. I think it's also important from 2010 to 2017 that they went to a pay to public key hash. So you would take that public key, you would hash it so that it's not known what the public key is unless you actually sign a transaction. And so anybody that has. And this is a majority of the Bitcoin, 75% of the Bitcoin are already in this P2PKH or higher configuration. And so it would be protected in the interim, as long as you didn't spend anything that. That would be.
- [31:10]
C
Interim.
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B
Interim. Very, very interim. Giving you a little bit of assurance, I guess, is the way to frame that. But I wanted to put this slide up so people can kind of see the timeline of when these different types of key outputs were or the address outputs were used and what they've migrated to through the years. And let's talk about Charles, what the solution is, because people are looking at this, they're probably hearing this conversation and saying, oh my God, this sounds really scary. But there's BIP360. Beast Hunter was the main author of this, and it's out there for public Purview to audit and look at. And as a soft fork to Bitcoin, meaning nodes that are running the older software. There's no issue with running the older software if people would upgrade or migrate to this new version that he's proposing with the bip360. But talk us through what that is and how that would work and kind of in application. What would that mean for people that currently hold Bitcoin and their own keys to migrate over to something like this?
- [32:16]
C
Yeah, I think so. I agree with you. The 25% ballpark figure for the earliest key hashing process of the P2P K. I think it was the end screen at the top. So let's tosh this coin and there's about 125 billion of those. And then other wallets. The key thing with that is that when they write the blockchain, it's exposing or showing their public address. So everyone doesn't know. Everyone who is in Bitcoin has a public address and a private key and the public address obviously is your wallet. And then the private key allows you to access it and move funds. If you know a public key, then a quantum machine can theoretically kind of back calculate what your private key is. And technically computers today could do that. It would just take infinite amount of years and you'd never get there right in our lifetime. So that's not a risk. And that's how all encryption essentially works today. But given what we talked about, the quantum it can configure multiple options at the same time. It can close in on a solution to the private key very quickly. Again, once we get to that sort of 2,3000 qubit level. So those first wallet address systems like the Stoche coins are exposed, but it's also any public keys that are published. So a lot of the exchanges, for example, have their wallets and public addresses. No one. So again all those can move across to a new system like bit360 and the quantum bip. This is a again the code improvement suggestions of a couple of bitcoin developers. So there's solutions to get the active addresses across, but there are still other public key exposed wallets which may not necessarily move across in time. So yeah, as you kind of mentioned Preston, the solutions to this, especially for the wallets that are active and managed and can move across, my point is that the stochiest coins, you know, largely everyone believes is not going to be moving those coins ever again because maybe not around anymore. And a lot of the other early coins are just lost. Right? People lost their wallets, they lost hard drives into the landfills and all sorts of funny stories back in the day. So a lot of those coins will be unlocked no matter what we do by a quantum machine in that sort of 2 to 8 year range. And that's sort of 20 to 30% of supply. We don't know the exact number, but in that region. And that's again as I mentioned, that's something we need to discuss the community and how we're going to manage that. For the quantum solutions that are out there, the BIPs, my kind of take on it is I'm not here to say what's the right solution. You know, there's a few proposals out there. I just want to get the community talking about this and closing in and zeroing in on a consensus. Because as you and I know, consensus in Bitcoin is a viable takes years, you Know, I basically want to initiate like block wars, but for quantum, because I'm basically just concerned about the timelines at this point, right? So technology solutions are there and I think if we all agree today on the solution, we could, I think we could agree and get it out in time. But the problem is that if we did agree today, the lead time to get everyone across to this new wallet infrastructure, or the soft fork or hard fork or whatever it is, is going to take six to 12 months. And that's limitations of transaction throughput. So if you look at the flow through a bitcoin in 30 days and this is capped based on 10 minute block times, the number of transactions the network can actually process. If everyone with say over $100 in their wallet was to say, I'm going to move across to a new wallet which is this quantum proof encrypted wallet, that's going to take 30 days, assuming no other traffic. If you want to do a test transaction, as we usually do, because we, you know, you might have a significant sum of money on there and you don't want to lose it, then that double as 60 days, right? Add in organic traffic, probably double it again. You're basically at six months in a best case scenario of everyone like agreeing and moving at the same time. So where I get concerned is that we know consensus takes time, probably best case a year. Which is why I'm basically posting all the time, I want to see a solution agreed in 2026. If we get it solved in 2026 and agreed, then we might have a year to get 2027 to roll it out. And that's at the kind of leading edge risk frontier I suppose, for when a quantum machine could break bitcoin. Right. Hopefully it's further out. But if we have the kind of blase approach that oh, it might be four years, it might be 10 years or 15 years if we're one minute too late on upgrading this and getting everyone across. The whole trust system of Bitcoin is built on its trusting the code and its security, right? Like it took us 16 years for Bitcoin to get to 2 trillion. And it's hard to gain trust and easily lost. So if we were to see 10, 20, 30 or whatever percent of supply unlocks all of a sudden over a 12 month period, whether that be in two years time or three years time, or five years time, and we hadn't solved on this, I think the whole trust system of network collapses. So basically I'm just trying to sound the alarm on all of this because we need to get to consensus in my view next year to roll out and deploy everything within two years from now so that we're on the leading edge and we're not one minute late. Let's take a quick break and hear from today's sponsors.
- [37:07]
D
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- [40:35]
C
All right, back to the show.
- [40:37]
B
So, Charles, I think you're being really conservative with these numbers that you're saying as far as how long the migration would take. Because I've run this math back when I made my video back in January, and then I just, while you were talking, I ran it again because the numbers that I remembered were much longer than that. And when I ran it again for any type of pub key that has over a hundred US dollars worth of value in it, if you were going to migrate all of those addresses that have over a hundred dollars worth of bitcoin in them, starting right now, it's saying that that would take anywhere from 10 to 30 months in order to migrate all of that over. And I think part of the issue is just the sheer size of the transactions now. So when you migrate over to. And this is using bip360 as kind of like let's say that was passed and you can see it here on the slide post. Quantum signatures are huge, often 1 to 20 kilobytes versus the 70 bytes that they are today. So when you're comparing the block size and you're making these transactions into the current block, assuming that the block sizes don't change, there's not nearly as much space to put these in there. And then you just kind of assume if everybody's making that migration that you kind of need to do it right now. Assuming that this, that the timeline, this, and again, these timelines, who knows what the timelines actually are, Folks we don't know what the timelines are, but let's say it's four years from now. Let's say it's five years from now. And we need to shoot for an aggressive timeline to get the engineering in place and the testing and people to start migrating their keys over to this. It could take a while for everybody to rotate their keys out. And this is something that I don't hear anybody talking about at all. It's like how long the migration will take once the solution is there and we're not even talking about the fighting that's gonna happen.
- [42:32]
C
It's gonna be chaos.
- [42:33]
B
It's gonna be chaos. Yeah. It's not gonna be.
- [42:36]
C
Yeah.
- [42:36]
B
Pleasant.
- [42:37]
C
I don't think if I do a tweet just on this topic, I get blasted.
- [42:41]
B
Yes.
- [42:41]
C
By like, totally polar views and total. It's inconvenient on both sides.
- [42:47]
B
It's inconvenient. That's what I found because I talked about it. In fact, I know this episode's gonna create all sorts of drama just by posting this. People are.
- [42:56]
C
Yeah.
- [42:56]
B
And you know what I've discovered? It's an inconvenient thing to talk about. People don't. Which tells you that's where you need to be focusing your attention as opposed to a filter discussion. Like, this is a real thing that needs to be solved and it needs to be worked on. And I'm not saying something needs to be passed today, but the amount of rigor and attention that's been looked at with respect to bip360, I think is really, like, been neglected, I guess, is my point of view.
- [43:25]
C
Absolutely. And that's why I've been really getting loud on this. You're right. But my timeline of migration of 612 months is super optimistic. I think you had almost one year to three years. Right. Or in that realm, sorry, five years. Potentially one to five years is what you're saying.
- [43:39]
B
Yeah. And I'm sorry, I use the word conservative and that's probably not the right word. The word is. It's an optimistic view of, like, how long. Yeah.
- [43:46]
C
So. And I was trying to be a bit optimistic, but, you know, you've obviously considered even the size of each block in the bip 360 solution. And that's a good point. It is bigger. And so that's something we haven't really thought about. And maybe it needs to reopen the block size discussion as well in order to allow a faster migration.
- [44:05]
B
And you want to talk about serious drama.
- [44:07]
C
Yeah. Thing like, if the migration time is five years. I think we're done. Right. Like, because we're not going to get to agreement for at least a year. Yeah. So this is why we need to be talking about and say, okay, well, if that's not going to work, then maybe we need to increase the block size or change this or that, whatever it may be, to make sure the timeline is achievable. So at the end of the day, I'm optimistic we'll solve it in time. But it's not going to happen unless we have these hard discussions now. And it's kind of like, you know, a little bit of pain and, you know, difficult discussions now in order to avoid a nightmare scenario in five, six years or two years or in the future. So I think you're right. We just need to bring light to this and create conversation to this and a centralized, probably a centralized place to be resolving this. It's not really even clear to me where do we all converge to solve on this. Right. And something. Right. Like, at the moment it's just a tornado of arguments where, you know, I see half the people are starting to agree with it now. Like, whereas I, when I was tweeting about this a year ago, I'd get zero engagement. And now people, okay, yeah, this kind of starts to make sense. And that's where it was for me. I've been watching this for a few years, like quietly, occasionally posting about it for a few years, starting to get myself a quantum hedge in the last few years. And then now I'm like, I just can't wait any longer because I've invested all of my time and energy, like life and death basically in the last eight years in Bitcoin, building models for Bitcoin, open, open source on chain models for Bitcoin. Try and value it, find transit value for it, living and breathing it, effectively being leveraged long Bitcoin in my sort of personal situation for that time frame. And it's like, I want this to survive. And so like, we have to have this hard chat now to get to that solution or it's just all for nothing. Yeah.
- [45:48]
B
I think another big challenge with it is most people just have, myself included, just have no clue how this actually works. Like, I've done some research, I try to understand the terminology, but at the end of the day, I truly do not understand quantum and how it really works and all of that. I think it's such an esoteric idea and people hear it and it's always just been this canary in the coal mine that was like A false cue in the past and anytime it was brought up, everybody just rolled their eyes and like walked away. But the impetus for me to make the video. Back in January, I saw Elon Musk retweet the Microsoft announcement when they did the Majorana one topological Qubit processor. And this was kind of a breakthrough in how they were going about trying to build it from a physical standpoint. And they hadn't achieved any type of logical qubits at that point. But there was an announcement by the Microsoft CEO that by, I think he said 2027 they were going to have a million qubit processor, was the quote. And this really got my attention because I knew some of the basic numbers that you've kind of put laid out in some of the slides here. And I heard a million qubits. Well, like, how many logical qubits is that? And of course I couldn't get an answer anywhere I looked online. But this June is where I found that IBM had talked about hitting 200 logical, but I still don't know where the Majorana One Microsoft One is going to go. So, like, part of the challenge in understanding this space and why I think a lot of people will immediately just roll their eyes as opposed to take it serious is I think that the industry is hiding a lot of like what their actual logical qubits are. There's confusion in the terminology, there's confusion in the tech. And because there's so much posturing and trying to get dollars for their labs and like all of that, I think nobody takes it serious. And I think everybody's just like, ah, it's nothing. But I agree with you, it might be AI 2021 when everybody was like, oh, that's nothing, that's never going to be anything. And look at where we are four years later. It's like we're talking about AGI.
- [47:56]
C
I mean, that thought process to me reminds me a lot of how everyone else thought about Bitcoin five to ten years ago. Yeah. Where the common consensus is kind of zero. It's a scam. It's, you know, it's money for drugs, whatever. It's the common approach. I'll research it and Google it for 10 minutes and look at a few news articles and they agree with what I'm saying. And so therefore I'm done. Whereas is, you know, I think Mark Saylor said you need to spend whatever it be a hundred hours or many hours to really understand what's going on. And if you do it and you go into the annual reports the statements of what these, all these companies are doing, those logical qubit numbers are not really that hidden. A lot of them are available and the timelines are pretty available too. Right. You know, some of the ones I touched on. I'll share some slides as well after this. But yeah, I just think it's coming and if we put our head in the sand because we're not educated on it, that's a big problem. And it's, it's many comparables, like AI. It's bitcoin a few years ago. Right. It's doing the work. You don't have to be an expert on quantum engineering to assess the real risk of this. Putting together the analysis of the results of others are experts in the space.
- [49:03]
B
Yeah. Yeah. I think the one thing we can all agree on is like, why are we not making this a bigger conversation point and why is the community not kind of rallying around getting a solution in place?
- [49:15]
C
And I think it's starting to happen now. Yeah. Getting a lot of energy around it in the last couple of weeks especially. And that's. I think that's good. And it just needs to get a lot louder to get the discussions going and the right people in the right places to converge and solutions, people reviewing the code. Right. You know, if people don't agree with different elements of the code, that, that all needs to be happening now so that we can converge on a solution next year.
- [49:41]
B
Let's go into this part of the conversation and then we'll wrap it up. You're investing in this space. Okay.
- [49:46]
C
Yeah.
- [49:46]
B
You know, for the, I mean, this is an investing podcast. We're always looking for investment opportunities. Help us wrap our head around like the investment side of this. I could only imagine how capex intensive some of this research is with, for all intensive purposes, and correct me if I'm wrong, zero utility today. Like, you're not going out and using any of these quantum processors that like, actually no businesses are using these things yet. But, you know, based on the timelines and the things we're looking at, that day could be on the horizon, call it in five years, within five years that it's actually being put into practical use and it's helping people make money and provide value into the market. So how do you think about this when we're so early in the timeline with a bit of fog there, kind of understanding where the hockey stick curve is going to start bending and turning into real value for customers?
- [50:38]
C
Yeah. So the first thing to note is that revenues these companies are going up between 50 and 100% a year. So there is. How is that revenue? Because you can use it. So quantum is on every major cloud platform today. Google, Azure, aws, so you can hire and use quantum machines. Now there's some stability issues, there's all sorts of other issues. But like, like we talked to through, there's multiple use cases today that firms are using it in drug discovery, in financial optimizations and it's showing improvements in those processes already today. So that's another common misunderstanding is that they think there's no use case. The other thing is there's a whole sector of quantum security which is, you know, a whole industry of consulting, but also services, sorry, tech to roll out quantum proof encryption across every asset class. So the biggest mistake some people make is that, oh, if they're going to break Bitcoin, they'll just break the banks or they'll break some other tech first. But traditional banks and other traditional institutions are mostly quantum proof already. They're either already started to upgrade their encryption to be quantum proof, but even where they haven't, most banks and platforms stay at 2fa. And 2fa is quantum resistant. Because you only get a few attempts at 2fa, you can't simulate an infinite number of solutions to solve a 2fa key. Again, this is assuming you're storing it all in the right way and that sort of thing. But a generic login today is much more quantum resistant than Bitcoin. And then you have the fact that these networks are centralized and they can always roll back if something goes wrong. The whole philosophy of Bitcoin is that is not a thing. So Bitcoin is the number one asset class on the chopping block. It's also the biggest honey pot and it's also got the nearest front edge risk horizon of basically every asset class. Jumping back to your question on revenues, they're still very small today and the valuations are not justified by the revenues. But as I said, they're doubling in many cases year on year. And I don't think it's reasonable to value an emerging tech that has limited utility on its revenues today. Because if you did that with AI five years ago, it would be worth zero as well. You have to really look at where the trends of where the development's going, the qubits, the error rates, what the mathematical papers are saying the capabilities will be when you get to multi thousand qubit capability, the variety of industry applications and just the jump step in innovation that's going to happen when we have that capability in the next few years and Q day also in the next few years being the risk to all traditional encryption. So you have to value it in that scenario. Right. So if a quantum firm can, and again this is. The legality of this is very questionable, but if a quantum firm was to take 100 billion of Satoshi's coins in three years, that would fund all of quantum development for the last decade. So, you know, and maybe that may not happen by a US firm, but I'm sure there's other countries that'd be very happy to do that. Yeah, and that's, I'm not saying we should value it based on crime, but that's the kind of level of unlocking capability and value that I believe is coming in the very near future.
- [53:35]
B
Do you find that like we were talking about the Microsoft's majorana one and you just look at the sheer capital that a company like Microsoft has to put behind further and further investments in R and D to see this as a reality. Do you find that they're going to have a huge advantage relative to some of the smaller firms that are going after this? Or is this kind of a. With intelligence today, it's just so accessible via AI and just kind of immediately sniffing out what the other competitor's doing. Is there a competitive mode around the intellectual property and like what's happening inside of some of these smaller labs versus the larger ones that have tons of capital to throw behind them?
- [54:17]
C
Yeah, great question. Like the world today is much less siloed. It's hard to conceal information and it's easy to leverage others work, which probably also speeds things up a little bit. But yeah, I think it's really hard to pick who the winners will be. With bitcoin and crypto 5, 10 years ago, it was pretty obvious that bitcoin was the king and we all were pretty aligned on that. Whereas with this asset class, like I said, there's about 60 different players. How do you know, know who's going to be the leading edge of this? Especially when they're often they're working on completely different technology solutions to come about the same. So different processes to come about the same solution, very different directions and some of them probably will fail. So I don't have a great answer to that. I think obviously the big tech firms will have huge budgets to deploy in R and D and that will continue to scale. I think you're seeing Nvidia like Jensen, the start of the year he said quantum is 15 to 30 years away and a couple years, a couple months later, he said I was wrong about the timeline. And then in June he said, we're at an inflection point for Quantum. And then last month has been investing billions in Quantum.
- [55:13]
B
So I really like this slide. I think you did a great job presenting this in a presentation you did recently. And I'm just throwing it up so people can see it. You can see this progression happen within months of him saying it's 15 to 30 years away. And that, that was in January, back when I made this video, that video I keep referencing. And then in March, he says, I was wrong about the timeline. June, we're at an inflection point and then he's investing. What is it? He's investing billions of dollars into the space.
- [55:42]
C
Yeah. So for me, this is also a lot like bitcoin because we saw Jamie Dimon and various other banks years ago saying, oh, it's never going to happen.
- [55:49]
B
Yeah.
- [55:50]
C
Ray Dalio is saying, oh, it's a joke sort of thing. Or what, you know, zero allocation. And then suddenly like, click, like a year or two later, either they're unleashing all their ET or they're recommending it in their portfolios or they're saying, I personally own it. It's the same thing. Like you, it's so easy to dismiss ideas and concepts when you look at it superficially. But then when you dive in, you realize, wait a minute, this is something significant. And as always, you follow the money. Right. Often these guys will say one thing and then if you follow what the money's doing on their side, it's doing the exact opposite. So, yeah, I can't say who the winners will be. And that's why for me, a diversified allocation, this is important. As you said, I hold quite a bit of bitcoin. Some people think maybe I'm short or having some weird positioning about. No, I actually want this to work. I am long bitcoin. I have more bitcoin than quantum. I think bitcoin will go higher in the near term provided we solve on this. But with that, that needs to be acted on really quickly, I think in the next sort of 12 months to get towards a solution. And for me, at the same time, it's important to have a quantum hedge. So a diversified basket of these assets, there's not really a great way to do that. And that's why we've spent last few months building an index of quantum assets and of pure quantum companies. We've published that live on our website and we're currently in the works towards making a US listed quantum etf. So I think this is an important hedge for me. I still obviously ultra committed towards solving this for bitcoin and I said that my position in bitcoin is significant, but I can't take that risk anymore and that's why I've been speaking up about this so much recently.
- [57:23]
B
Well, Charles, at the very least, getting the conversation going is super important and I think that you do that really well. You present the facts as they exist. We both acknowledge we don't know the timeline, but to sit here and act like it's not going to happen I think is the fool's errand more so than anything. And you know, like you, I just want to see people start taking this very seriously and start working towards the solution because, I mean, the BIP360 is already out there. Let's beat that around and let's kind of figure out a way to get it implemented or get something that's even better implemented. But yeah, yeah, love it. We'll have links in the show notes to all the things that you mentioned there. Anything else that you want to highlight before we close this out?
- [58:05]
C
No, I think that's it. I just keep reiterating the same points. But yeah, as you say, we got to talk about it. We got an hour in the solution. We got to critique the solutions, provide better ones if it's necessary and just. And get consensus as soon as we can.
- [58:19]
B
Love it. Well, thanks for coming on today and great to see you again. It's been way too long and I really enjoyed it.
- [58:25]
C
Charles, my pleasure. I enjoyed it too. Thanks, Preston.
- [58:28]
A
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