Quantum computing is often discussed in terms of its potential to revolutionize scientific discovery and to challenge cryptographic paradigms [1], but it could also change our relationship with money. By using quantum states, quantum currency could solve the double-spending problem and address throughput issues associated with distributed ledgers (blockchain), paving the way for the digital cash of the future.
Digital Banking vs. Digital Currency
To understand quantum currency, we should first distinguish “digital currency” from electronic banking. Credit/debit cards, electronic checks, and digital payments (e.g. Cash App, Venmo) are familiar examples of “digital money.” While such services entail electronic infrastructure, they involve credits/debits made in relation to digital money held by private banks and corporations. This system is contrasted with cash, which circulates peer-to-peer with oversight by an issuing authority to address counterfeiting and effect controls aligned with national policy. “Digital currency” has been defined as electronic cash [2, 3], a secure representation of value controlled by users in peer-to-peer transactions over electronic infrastructure. As electronic cash, digital currencies are faced with a unique challenge: How to make digital information that is easily transferred but not easily copied?
The “Double-Spending” Problem
Obviously, it shouldn’t be possible to spend money more than once. This “double-spending” problem is addressed in current banking systems by centralized ledgers and intra-institutional verification. In contrast, digital currencies that enable peer-to-peer transactions with no third parties require a different mechanism.
Distributed Ledger Technology
Blockchain cryptocurrencies (e.g. Bitcoin [4]) and many of their central bank digital currency (CBDC) counterparts [2] prevent double-spending by distributing transaction histories in nodes of a public network. Through a consensus mechanism, subsequent transactions are approved once a majority of the network has verified their uniqueness. While distributed ledger technology is effective and has gained efficiency since its inception, throughput remains an issue, particularly for CBDCs that are intended to encompass large portions of the economy. This scaling issue has caused CBDC researchers to lean towards incorporating centralized ledgers in hybrid systems [2], compromising privacy and security for the sake of efficiency. The current debate involving digital currencies therefore centers on trading security and privacy for throughput and scalability.
Quantum Digital Currency
Quantum currency [3] is created through a minting process that produces a banknote with a public key and an underlying quantum state. The public key facilitates destruction certificate generation and allows the public authority to maintain a classical record of the number of banknotes in circulation. In a transaction, the public key and quantum state combined are used to verify the legitimacy of the banknote during a transaction. This configuration has the following near-term advantages:
Security: The quantum principle of no-cloning [5, 6] means that the double-spending problem is solved, not mitigated. Transaction independence: In contrast with distributed ledger technology, transactions are validated on an individual basis, addressing the performance bottleneck imposed by consensus mechanisms. Stability and control: In contrast with cryptocurrencies, the issuing authority’s awareness of total currency in circulation allows quantum currency to serve as a national policy instrument in line with CBDC, affording it the stability and macroeconomic properties of national currency.
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