Last month, the quantum computing sector celebrated together with IonQ when the company became the first pureplay quantum computing stock to be publicly traded. IonQ completed its merger with dMY Technology Group Inc. III, a Special Purpose Acquisition Company (SPAC), to trade on the New York Stock Exchange (NYSE) as IONQ.
IonQ’s success boosts confidence in the entire sector
It’s true that the achievement is an important testimony to the success of IonQ, which has moved from a lab-based theory to a real-world product within just 6 years, but we think it’s also an indication of the long-term strength and endurance of the quantum computing market as a whole.
When investors feel confident about placing their money in the quantum sector, it has the potential to benefit all quantum computing stocks. IonQ is well in the vanguard of the quantum computing movement, and many people consider that it shows what could realistically be achieved by quantum computers, so its success may trickle down through the ecosystem.
IonQ could shape the market
Industry leaders agree that IonQ offers the most advanced quantum computer to date, at 22 qubits (a qubit is the basic unit of quantum information—the quantum version of the classical binary bit). Although this is more powerful than anything else available at the moment, it’s still a long way away from 1,000 qubits. Most experts agree that this is the barrier that quantum computers need to break if they want to draw even with classical cloud supercomputers. But the company announced plans to release a 64-qubit chip by 2023, which will be modular, making it possible to string together multiple chips to combine their compute power until the system crosses the 1,000-qubit threshold.
IonQ also takes a unique approach to qubit manipulation. Most systems rely on synthetic ions which are strung on wires, but this makes them unstable and prone to misalignment whenever they are touched. IonQ, in contrast, suspends trapped ions in a vacuum and uses photons to manipulate them, which it says makes the system more stable.
Finally, IonQ is currently the only company to sell access to a cloud-based quantum computing system. IonQ’s compute power is available through Google Cloud, Amazon Braket, and Microsoft Azure, and is already in use by the likes of Fidelity financial services and Goldman Sachs investment banking.
These three qualities — a powerful computer system, cloud-based access, and photon manipulation — make IonQ a force to be reckoned with in the quantum computing world, and could set the standard for other quantum computing companies.
Digital encryption systems are eyeing quantum computing with concern
Companies and industries outside of the quantum world are also keeping a careful eye on the success of IonQ, hoping that the company — or another like it — could neutralize the threat that quantum computing holds for cryptography, which lies at the heart of all digital encryption.
Today’s internet websites, secure internet-based communications like WhatsApp and Telegram, and all encrypted documents are based on cryptography, which has proven its ability to withstand attacks. Despite the number of data breaches that make the headlines, it’s rare for hackers to break an encrypted system. Instead, they gain entry through an unprotected portal, or by taking advantage of default and/or weak passwords which are easy to guess.
But quantum computing could change all that.
Encrypted systems are based on one of two main types of cryptography. The first is private-key cryptography, or symmetric cryptography, which requires each user to share the same secret key. It’s thought that private-key cryptography is quantum-safe as long as the key size is large enough.
But the same can’t be said for public-key cryptography, or asymmetric cryptography. Under public-key cryptography, each user has their own secret key, but the public keys are shared freely.
While even today’s quantum computers aren’t able to calculate these keys, it’s widely predicted that quantum computing will eventually mature enough to be able to do so. That means that hackers could steal sensitive, encrypted material today, and wait for quantum computing systems to reach the point where they can decode them.
Many industries are feeling the pressure, but cryptocurrency in particular is watching with mounting anxiety.
For cryptocurrencies, quantum is both cure and disease
Secure cryptography is the basis for all blockchain-verified transactions, which serve as the trust foundation for cryptocurrencies, provenance chains for high-value, often-trafficked goods like diamonds, and decentralized finance (defi) platforms like peer-to-peer lending.
Security, privacy, and decentralization are the essence of cryptocurrencies and the wider blockchain world. If the cryptography on which they depend can no longer be trusted, the entire cryptocurrency ecosystem could come crashing down.
There’s also the risk of a 51% attack, which is when a hacker controls more than half of the blocks on a blockchain and then adds fake blocks to alter transactions, making the whole chain completely unreliable. As things stand, a 51% attack isn’t possible, but with a quantum computer it may well happen.
It’s a given that whatever can be developed legally can — and will — sooner or later be developed under shady circumstances, so there’s no way to put the genie back in the bottle.
Fortunately, quantum companies are working on more secure quantum cryptography. For example, QRNG cryptography uses quantum’s intrinsic uncertainty to produce key codes that are almost impossible even for other quantum computers to replicate; QKD is based on quantum’s antipathy to cloning; and other protocols use quantum puzzles which rival quantum systems would struggle to resolve.
The only obstacle is the need for powerful enough quantum computers, but as mentioned above, IonQ is well on the way to resolving it.
Crypto’s quantum panic could be good news for investors
IonQ’s NYSE debut indicates that quantum tech has staying power, while the fraught hope of crypto and other encryption-reliant sectors for quantum cryptography is testimony to the strength of demand for ongoing quantum computing development. All of this is encouraging for anyone who wants to invest in quantum computing stocks, indicating potential for long-term gains.
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The Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company. Please read carefully before investing. A hard copy of the prospectuses can be requested by calling 833.333.9383.
Defiance Quantum ETF:
Investing involves risk. Principal loss is possible. As an ETF, QTUM (the “Fund”) may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index. A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. This risk is magnified in emerging markets. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.
The value of stocks of information technology companies are particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation and competition. The possible applications of quantum computing and machine learning are only in the exploration stages, and the possibility of returns is uncertain and may not be realized in the near future.
Read more about QTUM here, including performance and holdings: https://www.defianceetfs.com/qtum/. Fund holdings are subject to change and should not be considered recommendations to buy or sell any security. IonQ is not currently held in the Fund.
Opinions expressed are subject to change at any time, are not guaranteed, and should not be considered investment advice.
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