Quantum Simulations Predict that Merchant Crypto Adoption Could Spread in ‘Cliques’
Multiverse Computing and the Bank of Canada conducted quantum computer simulations using researchers which showed that crypto adoption among merchants can spread in “cliques of firms”, as individual firms are inclined to follow the actions of their partners.
The study was conducted by a team of researchers from the University of Luxembourg, University College London, and the École Polytechnique Fédérale de Lausanne in Switzerland. It was published on the arXiv pre-print server on April 20.
The researchers from the simulation said it was the first time a central bank from a G7 country used quantum computing in crypto-related research. The simulation showed that such cliques’ adoption of crypto would not be all good for the industry.
“While the Bank of Canada does not endorse any particular cryptocurrency, we believe that quantum-resistant algorithms will be required to secure cryptocurrencies in the future,” said the bank’s senior deputy governor Carolyn Wilkins.
The research was undertaken as part of the Bank of Canada’s ongoing efforts to better understand how crypto assets and related technologies could affect the economy and financial stability.
The simulation found that if a group of central banks were to adopt cryptocurrency, it would likely lead to other groups following suit in a domino effect.
“While there may be some benefits associated with wider cryptocurrency adoption. The researchers said that it is important to stimulate the use of crypto to increase the efficiency of the booming industry. This would, in turn, ensure that crypto payment services were made available for everyone who wants to use it.
The research was conducted as a part of a proof-of-concept project carried out in partnership with Canada’s central bank, the simulations were done using a D-Wave Systems quantum annealer. The simulation was able to study financial networks as large as 10 players, with up to 2^90 possible network configurations, according to an announcement from the company. The reason for using the D-Wave Systems quantum annealer was that solving this with classical computing solutions would have been practically impossible.
In terms of the results of the simulations, the researchers said that the cost of crypto adoption will be “a lot higher” for individual actors if their partners are reluctant to adopt crypto.
“We find that even if a single player is reluctant to adopt crypto, this can lead to cliques of players who never adopt crypto emerging in the network. Our results show that, in order for full adoption to happen, some key players must be willing to go first and incur high costs,” the researchers said.
The researchers further added that it could also be interesting to study how pressure from regulators in different countries affects crypto adoption among merchants.
The study comes as the crypto industry is seeing a renewed interest from merchants. Recently, major online payments processor BitPay announced that it had processed over $1 billion in bitcoin payments in 2019. The firm also said that it had seen a 300% growth in transaction volume last year.
Sam Mugel, chief technology officer at Multiverse Computing, said that they are proud to be a partner of “the first G7 central bank to explore the modeling of complex networks and cryptocurrencies through the use of quantum computing.”
He also said that their technology will help the central bank “understand how cryptocurrencies might spread through society in the future.”
The Bank of Canada is not the only central bank that is exploring the use of quantum computing for modeling complex financial systems. The European Central Bank (ECB) has also been working on a quantum-based project called Unveil, which is aimed at developing a better understanding of how financial markets work.
The ECB has said that quantum computers could help them “uncover hidden correlations and structures in high-dimensional datasets.”
It is clear that central banks are taking an interest in quantum computing for its potential to help them understand the behavior of the economic markets.