Both the world of tech and finance have been in a frenzy reporting the rather intriguing development from banking giant JPMorgan Chase. The investment behemoth, which constitutes the sixth largest banking organization in the world, has become one of the biggest advocates of blockchain technology. Finding innovative applications for the digital ledger technology will become “one of J.P. Morgan’s three main priorities in 2018.” In fact, JPMorgan Chase has applied for a patent to facilitate payments between banks using the blockchain.
Some observers have been a bit cynical about JP Morgan’s rush to take on blockchain. Almost a year ago, JPMorgan’s CEO Jamie Dimon famously called bitcoin, the cryptocurrency that is based on the blockchain model, a “fraud” and threatened to fire anyone in the company for trading it. “I’d fire them in a second. For two reasons: It’s against our rules, and they’re stupid. And both are dangerous” said Dimon. In actuality, however, these critics miss the point entirely by conflating bitcoin with blockchain. Frankly, from such a perspective, it is not surprising that the advantages of blockchain flew right over their heads.
In fact, the highly circulated news of JPMorgan’s move to blockchain is only the latest in a trend. It is just one more instance showing how companies from a diverse set of industries are picking up the promise of this technology. And how it may be the solution for some very serious emerging problems.
The Blockchain Revolution
When Bitcoin creator Satoshi Nakamoto (whose true identity is still unknown) revealed his revolutionary idea in a 2008 white paper, he also introduced the beginnings of a unique peer-to-peer authentication system that today we call blockchain.
The brilliantly innovative blockchain system at its core is an open ledger that records transactions between two parties in a permanent way without needing third-party authentication. Blockchain provided the global record-keeping network that has kept Nakamoto’s digital currency safe from fraudsters. Blockchain is based on the concept of decentralization, spreading the authentication process across a large body of users. No single piece of data can be altered without the alteration of all other blocks, which would require the collusion of the majority of the entire network.
There were two primary advantages that emerged from blockchain over previous digital record-keeping solutions. First, was organizational. The ledger system, it was quickly realized, could be applied to just about anything, not just cryptocurrency. Altering the original system designed for Bitcoin could produce programs to be applied to a wide range of industries, from healthcare, to insurance, to political elections. It came in stages. First came “new” versions of the original Bitcoin concept. New decentralized systems began to emerge such as those of Ripple and Litecoin. In 2015, one of the original contributors to the Bitcoin codebase, Vitalik Buterin released his Ethereum project also based on blockchain. What these new platforms added to the picture was the ability to record new types of data in addition to currency exchanges, such as loans and contractual agreements. And eventually, diverse sectors got on board. Not surprisingly, finance was one of the biggest categories of business to utilize these new solutions. By 2017, nearly fifteen percent of all financial institutions in the world were using blockchain to secure their systems and aspects of their operations. Today, the number of industries incorporating decentralized systems continues to grow.
While usability and streamlining business was a major contribution of blockchain to digital business, there was another element equally, if not more important, brought to the table.
The Quantum Meltdown
Perhaps no other topic in the world of tech has garnered so much fascination.
Quantum computing, with its exponentially increased computing power, promises huge leaps forward in all fields of computer science, from data analysis to machine learning. But like all of man’s technological achievements, from the combustion engine to nuclear power, harnessing quantum comes with potential dangers as well. Quantum computers have created a slew of unforeseen vulnerabilities in the very infrastructure that keeps the digital sphere safe.
The underlying assumption behind nearly all encryption ciphers used today is that their complexity precludes any attempt by hackers to break them, as it would take years for even our most advanced conventional computers to do so.
But quantum computing will change all of that.
Quantum computers will be leaps and bounds ahead of our most advanced machines. This is no longer a theoretical reality over some distant horizon. In March, Google announced that it began testing their cutting-edge 72 qubit quantum computer. The company’s researchers expect to soon demonstrate with this machine quantum supremacy, or the ability to perform a calculation impossible with traditional computers.
So now we have a serious problem looming. While our current cryptography is great for the computing landscape we have today, with the proliferation of quantum computers, these safeguards will likely become vulnerable. Blockchain is seen by many as a very promising solution to the potential power of quantum. The theory is that a decentralized system would be impervious to a quantum hack, as the consequences of one user identity being compromised wouldn’t be able to overcome the inter-connectivity of the whole system.
Understanding this whole phenomenon gives some possible insight into why financial institutions like JPMorgan are leading the charge for blockchain. Banks and investment firms have more than just sensitive data on their systems. Billions of dollars of company and clients’ assets are being protected by their cyber defenses. It isn’t surprising that these organizations would be more sensitive to threats that would totally undermine their information security.
