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Paper Type

Complete

Abstract

Cryptocurrencies such as bitcoin rely on proof-of-work mining to secure the underlying blockchain protocols. The appearance of quantum computing could mine blocks that classical computers cannot compete with, thus threatening the decentralization and trustfulness of blockchain technologies. We study the financial incentives of double spending for quantum miners. Double spending increases the money supply of total bitcoin, diluting the value of bitcoin. Our novel model of bitcoin price formation linked with double spending suggests that killing bitcoin is not optimal for money-driven quantum miners as the short-term gain from double spending comes at a long-term cost of deteriorating bitcoin value. We derive the optimal range of double spending that allows quantum miners to gain from double spending while providing sufficient incentives for regular miners to participate in the network. With emergent quantum computing, this research offers insights to better understand the economic underpinnings of blockchain and cryptocurrency security.

Paper Number

1577

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Aug 16th, 12:00 AM

Is Quantum Computing the Bitcoin Terminator?

Cryptocurrencies such as bitcoin rely on proof-of-work mining to secure the underlying blockchain protocols. The appearance of quantum computing could mine blocks that classical computers cannot compete with, thus threatening the decentralization and trustfulness of blockchain technologies. We study the financial incentives of double spending for quantum miners. Double spending increases the money supply of total bitcoin, diluting the value of bitcoin. Our novel model of bitcoin price formation linked with double spending suggests that killing bitcoin is not optimal for money-driven quantum miners as the short-term gain from double spending comes at a long-term cost of deteriorating bitcoin value. We derive the optimal range of double spending that allows quantum miners to gain from double spending while providing sufficient incentives for regular miners to participate in the network. With emergent quantum computing, this research offers insights to better understand the economic underpinnings of blockchain and cryptocurrency security.

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