Category Archives: Technology

Computing, Digital Economy, Technology

Quantum computing threatens crypto’s future

CRYPTOCURRENCIES

Intro: Bitcoin et al are increasingly becoming more insecure – and not just because of price volatility

In Robert Harris’s The Second Sleep, the novelist imagines a world hundreds of years in the future where humanity has regressed to a medieval standard of living, population, and way of thinking.

Towards the end of the book, we learn what might have caused this calamity: not a pandemic, meteorite strike, or nuclear war, but a complete collapse in the digital economy.

From payment systems to Just-In-Time supply chains and the wealth of machinery that sustains us, the modern economy is almost wholly dependent on digital instruction.

If everything went down all at the same time, a state of anarchy would rapidly establish itself. In the ensuing chaos, it would be every man for himself with likely devastating consequences for lives and civilisation more widely.

It is hard to imagine what combination of circumstances might completely and lastingly disable the digital economy. However, cyber threats are very much a real, present, and fast increasing danger.

You only need to look at what happened to Jaguar Land Rover last year to see the dire consequences when firewalls are breached. It closed the UK automotive company down for more than a month.

Growing resources and time are being devoted to further securing these systems in more or less every walk of life – a prime example of the diseconomies of technology if ever there was one – and not least in the wild-west world of cryptocurrencies, wholly dependent as they are on complex encryption to safeguard value and assign ownership rights. The threat posed to these assets by advances and developments in quantum computing has long been a main topic of debate in the Bitcoin community. The issue has recently gone viral after being raised in Christopher Wood’s much-followed Greed and Fear investment newsletter.

As the head of equity strategy at the investment bank Jefferies, Wood points out that deriving a public key from a private key is computationally simple. Bitcoin and other forms of cryptocurrency rely for their security on the assumption that the reverse operation would take trillions of years, even for a sophisticated supercomputer. But as Wood says, “This asymmetry collapses with the arrival of cryptographically relevant quantum computers, potentially reducing the time to derive a private key from a public key to mere hours or days.”

The launch by Microsoft of the Majorana One quantum chip may have accelerated so-called “Q-Day” – the date when quantum computers become powerful enough to break most current public-key encryption – by several years. A report published early last summer by Chaincode Labs estimated that up to 50pc of all Bitcoins in circulation (four to 10 million of them) could be vulnerable to theft, with reused addresses and “Satoshi-era” wallets thought to be the most exposed. These were named after Bitcoin’s anonymous founder.

They call Bitcoin “digital gold”. A better description might be fool’s gold, for the whole construct depends crucially on a constantly expanding pool of demand.

Once that demand stabilises or falls then the whole store-of-value illusion begins to collapse. Whether the threat from quantum computing is real or not, it’s giving plenty of pause for thought. It also appears to be quite seriously damaging attempts by Donald Trump’s White House to normalise crypto as a respectable asset class.

BlackRock flagged quantum computing as a key risk when launching its iShares Bitcoin Trust ETF last year while El Salvador, the first country to adopt Bitcoin as legal tender, has seen fit to split its reserves of the virtual currency between 14 different addresses as insurance against potential theft.

Wood himself was an early convert to crypto, but he appears to have lost the faith, reallocating the entire 10pc of his synthetic portfolio once occupied by Bitcoin to physical gold and gold-mining stocks.

Not that you need to crack the encryption code to steal Bitcoin. Contrary to the sales pitch, cryptocurrencies are already one of the most insecure forms of money around – and not just because their price is so volatile.

North Korean hackers managed to swipe $1.5bn (£1.1bn) from the crypto exchange Bybit in February last year. For the year as a whole, a total of $3.5bn of Bitcoin is reckoned to have been stolen. Particularly vulnerable are those who brag acclaim about their crypto wealth on social media: extortion or kidnap can quickly follow.

And because the whole purpose of crypto is to be free of government oversight and interference, it makes the funds virtually impossible to recover once a wallet has been opened and drained by someone else.

In any case, some quite extreme solutions to the quantum threat have been proposed, including simply burning the vulnerable coins in an attempt to preserve the currency’s underlying integrity.

Extreme, yes, and also a root-and-branch betrayal of individual property rights – a bit like telling half of all sterling account holders that their money had been cancelled. In such circumstances, the pound would never be trusted again.

It is not just crypto that is at risk from quantum computing. The entire payments system, which is similarly just numbers on a computer screen, would also be exposed.

Harris’s imagined societal collapse in his novel may not be as fanciful as it seems.

From its early origins in Caesar’s cipher, encryption has been a constantly evolving and improving form of security. Maybe money, both crypto and fiat, can indeed be made quantum resilient.

But there is no compelling answer to the quantum threat yet and the two underlying forces that have sustained Bitcoin and its mini-mes from the start – worries about debasement of fiat currencies and the appeal of self-custody – will lose their value if it turns out your wallet can be easily stolen. There has never been an exact correlation between the price of Bitcoin and that of gold but up until the past several days, the two seemed to have completely decoupled, with the gold price surging ahead over the past year but Bitcoin flat or falling.

Digital gold it is not, and that’s possibly got something to do with the threat posed by quantum computing.

Despite enthusiastic backing from the Trump White House, crypto has so far failed to achieve the credibility among institutional investors that promoters were hoping.

For all its faults, fiat currency – backed by the taxpayer and underwritten by the central bank – continues to be a more secure form of money than the snake oil of a decentralised ledger.

Like almost everything else, crypto has become part of the culture wars divide, such that true believers are far more likely to be on the American Right than the Left.

Yet, any hopes Trump might have had of enriching himself, his backers, and his supporters by fully embracing the crypto revolution have so far proved misplaced.

Recent falls have wiped out the entirety of the gains seen under Trump’s swashbuckling, deregulatory agenda. It’s not the end of the world – but nor is it the reinvention of money once promised or hoped for.

Standard
Art, Artificial Intelligence, Arts, Culture, Society, Technology

AI-generic-slop is theft from real artists

CREATIVE ART

Intro: Art generated by online tools is painfully bland and is leading us down the path to cultural stagnation

Pablo Picasso, one of the most influential artists of the 20th century, admitted that “Great artists steal.” The Spanish genius assimilated African mask imagery into modern art, and many other greats throughout history have done something similar. Essentially, this is how creativity works. But behind their masterpieces are struggle, friction, and unique vision. Enter another entirely different beast, the theft by proliferating AI engines. These are killing creativity, harming real artists, and fuelling an epidemic of unoriginality.

By serving prompts to generators such as Midjourney or DALL-E, people can generate images on screen, in just a few seconds. Anyone can conjure up a Vincent van Gogh-styled still life or Leonardo da Vinci-inspired selfie and at once exhibit it online. Social media platforms such as X are filled with fans of this technology who declare: “AI art is art.” But this doesn’t make it true.

In fact, AI “art” doesn’t even exist – it is an illusion. AI models work on pattern recognition, not artistic decision making. While an “AI artist” may serve prompts to this technology, they cannot be considered the author of its output. It has simply been remixed from ready-made imagery without thinking, feeling, intent, or ingenuity. Absent from AI “art” is creative process, which should take more than a few seconds. This is apparent in the low-quality, generic slop that’s produced. Lacking a distinctiveness of style and voice, it can only offer a dynamic of smooth homogeneity.

It bypasses craft, which is what great artists develop – with brushes and paint, pencils and paper – over months, years, and even decades. AI artists celebrate the power of technology to make creativity accessible, and this forms their central argument and tenet as to why it’s so great. True craft, however, takes dedication, consistent practice, and experimentation.

John Constable not only worked tirelessly inside his studio but made countless studies en plein air – as revealed in Tate Britain’s current exhibition, Turner & Constable. Celebrating two of Britain’s greatest painters, it shows what being an artist really takes. On display are watercolours, oils and sketches, as well as paint-covered palettes, paintboxes, and even a sketching chair.

Among Constable’s masterpieces is his 1836 work Hampstead Heath with a Rainbow, where prismatic hues glide through menacing clouds. His technique looks effortless but was suffused with genius-level skill. And behind it, unseen by the average enthusiast, are more than 100 cloud studies he created in an attempt to capture their transient energy.

Where AI generates pictures in an instant, Constable was committed to an ongoing process; the experience gained through observation and documentation was ultimately of immense benefit to him.

Similarly, JMW Turner made around 37,000 sketches of landscapes he’d seen with his own eyes. Determined to evoke the raw power of nature – from blazing sunsets to howling storms – he pushed realism towards abstraction with an excitement that’s visible in his energetic brushstrokes.

In contrast to Constable and Turner’s radical compositions, AI’s aesthetic is flat, twee, and often old fashioned. Defined by a saccharine palette of candy colours and hazy tones, automatically generated landscapes are hollow, sanitised, and no match for Britain’s great painters and artists. Working some 200 years ago, they painted emotive, not idealised, places of both personal and historic significance.

What is more, both Constable and Turner began their paintings by looking, and really observing the world. This fundamental act is absent from the process of AI’s so-called artists who are more like a client giving instructions to a graphic designer than an artist painting at their easel. AI engines are also doing real harm to contemporary artists and their hard work.  

Among those who have already experienced its damaging effects is Australian painter Kim Leutwyler. She says her distinct style has been copied by app-generated portraits. “My issue isn’t with AI itself, but with the unethical way it has been trained without artists’ consent,” she said. “The right to opt in or out of having your data scraped for AI training should be fundamental, not optional.” This view is widely held across all of the creative industries.

AI, then, is pilfering from artists, the very people it relies on. It harms us all with its blandness. Rather than moving art forward, like Turner and Constable did in their day, it contributes to what has been termed “cultural stagnation”.

Anyone infuriated by Hollywood’s endless remakes of viewer favourites has a similar impact. It threatens both originality and individual thinking. And because future AI will only draw from more of this generated material, it will continue to create typical rather than unique visions.

AI art isn’t art, it’s a mirage, and it won’t be looked at for longer than a doom-scrolling second. In our world of efficiency and productivity, creative pursuits are one of very few remaining places where human endeavour is vital. Behind the brushstrokes of Turner and Constable are years of looking, thinking, making and struggle, and that’s what creative art is.

Standard
China, Economic, Taiwan, Technology, United States

Taiwan’s disintegrating £7.5tn secret weapon

TAIWAN’S SILICON SHIELD

Intro: The term “Silicon Shield” refers to the geopolitical theory that Taiwan’s dominance in the global semiconductor industry acts as a deterrence against a Chinese invasion. But the dynamics are complicated; there is now a diversification risk, and experts differ on the safeguards of Taiwan’s security

Behind the nondescript grey buildings that line the streets of Hsinchu lies one of the most important pieces of technology in the world.

Whirring away inside are rows of white machines that are so advanced – and so secretive – that only a select few have ever been allowed inside.

This is Taiwan’s “Silicon Valley” and these facilities produce the majority of the world’s semiconductors – small microchips that power virtually every electronic device in use today, from coffee machines to fighter jets.

Every country in the world relies on these chips, including China, which despite threatening to “reunify” Taiwan by force, imports nearly half of the island’s semiconductors.

Economists warn that an invasion of Taiwan would cost the world’s economy £7.5trillion. That’s far more than the cost of the Russian invasion of Ukraine or the Covid-19 pandemic.

It is argued that this very fact would act as a key deterrence against Beijing following through on its threats. China knows, too, that if it does invade, its economy would take a direct hit from the fallout.

Known as the “silicon shield”, the theory implies that Taiwan’s semiconductor industry offers a de facto security blanket, which would stop China from invading – both because of its own dependency on the computer chips and the US’s, which would come to Taiwan’s defence.

Taiwan’s former president, Tsai Ing-wen, popularised the theory in 2021 when she wrote that the silicon shield “allows Taiwan to protect itself and others from aggressive attempts by authoritarian regimes to disrupt global supply chains”.

Nonetheless, leading Taiwan companies within the semiconductor industry have been moving production sites to countries such as China and the US.

Experts have warned that this is effectively disintegrating Taipei’s valuable economic deterrence, making it more likely that Beijing would attack Taiwan.

The monopolistic position

Taiwan produces approximately 60 to 70 per cent of all the world’s semiconductors and more than 95 per cent of the advanced chips.

While thousands of companies are involved in semiconductor production, in Taiwan the industry is synonymous with one name – Taiwan’s Semiconductor Manufacturing Company (TSMC).

Founded in 1987, the company now makes up more than 60 per cent of the global market share and 9 per cent of Taiwan’s GDP. It is the most important company to the country’s economy and, in many ways, its national security.

It is one of more than 400 companies based in the Hsinchu Science Park, a concentrated industrial zone in central Taiwan often compared to Silicon Valley in the US.

The park’s unique “ecosystem” is one of many reasons that Taiwan has become a global leader in the semiconductor industry. Analysts speak of the “cluster effect” because of the availability of spare parts, equipment, material, design, software, integrated circuit manufacturing, and assembly tests all situated in one place. There is a complete supply chain, a complete ecosystem.

TSMC’s monopoly over the industry in Taiwan and around the world is often linked to its unprecedented structure as a foundry model. This means it manufactures chips for other companies but is not responsible for the designs. Instead, companies like Apple and Nvidia come to TSMC with orders for products they want to build. By choosing not to design, manufacture, or market any semiconductor products under its own name, the company ensures that it never competes with TSMC’s customers.

A wake-up call to the growing threat

While most of its production is still based in Taiwan, the company has gradually been opening fabrication plants, factories where semiconductors are made, in China, the US, and Japan.

There is one under construction in Germany, which is set to begin operations by the end of 2027. TSMC announced in March that it plans to invest an additional $100bn (£75bn) to grow its US manufacturing operations.

It is believed that TSMC and other companies in the supply chain are moving production out of Taiwan in response to the growing threat from China. Beijing’s increasingly hostile rhetoric towards Taiwan, and its routine shows of force toward the island, has spooked foreign governments and semiconductor customers.

Researchers on Taiwan at the US-based Hoover Institution, propagate that the Covid-19 pandemic served as a wake-up call for many companies reliant on chips from Taiwan and had to scramble overnight when their supply was interrupted.

It offered an insight into what would happen if China launched an attack against Taiwan, which could result in the supply of chips being permanently cut off.

The Institution says that by having over-concentration from one supplier located in one place is a big problem for TSMC’s business model in the new world. It also points to the economic benefit of having some supply or some production that’s closer to its ultimate customers.

Kowtowing to the US

Pressure from the US government and the Trump administration specifically has also been a factor in moving production out of Taiwan. Trump’s MAGA – Make America Great Again – is wholly directed to bring manufacturing back to the United States. That’s a prime reason why America intends to build its own manufacturing infrastructure for semiconductors.

But this means that Taiwan could lose an element of its deterrence. If the US is making its own semiconductor chips, rather than relying on Taipei’s, it may be less likely to come to Taiwan’s defence in a war.

The US is Taiwan’s main defence supplier, responsible for equipping the island with virtually all of its military technology. Taiwan is beholden to the US in its ability to make or break a future conflict with China.

War game simulations have shown that the US’s decision to come to Taiwan’s defence could be the difference between the country remaining autonomous and it falling under the auspices of Chinese control.

However, TSMC has kept an insurance policy. It has made sure that only its mature chips will be manufactured overseas. The production of advanced chips will remain in Taiwan.

In fact, in October, Taiwanese officials criticised and highlighted a proposal by the US commerce department, who said that Washington was talking to Taipei about a “50-50” split in semiconductor manufacturing. The response from Taiwan was swift: “No one can sell out Taiwan or TSMC, and no one can undermine Taiwan’s silicon shield”.

Diversification risk

While the diversification of TSMC’s production and the semiconductor industry more generally offers a safety net for other countries, experts disagree on how this affects Taiwan.

Some believe that increasing the number of TSMC fabrication plants around the world strengthens Taiwan’s ties with other nations. By investing outside of Taiwan – such as in Europe, America, or Japan – these countries become bonded with TSMC. Others have also said that by operating fabrication plants in other countries will give them a stronger incentive to care about what’s happening in the Taiwan industries and provide increased vigilance of security threats than previously would have been known.

In theory, at least, this could support the second branch of the silicon shield argument. This stipulates that the US and allies are more likely to come to Taiwan’s defence in the event of a conflict, thereby deterring China.

However, other experts are concerned that if reliance on Taiwan’s chip production decreases, and China is able to source its semiconductors outside the country, there will be less standing in Beijing’s way.

Those within the industry are also worried about Beijing’s habit of stealing innovations from other countries. Building a competitor that can beat you through technological pilferage are efforts to undermine the island’s defences.

Standard