Recent advances in quantum computing could make it easier for hackers to crack the security codes that protect the privacy of people’s data. That’s a major concern for security experts.
Now, one company thinks it has the answer. UK-based start-up Arqit claims its technology allows users to secure their network devices against sophisticated cyber-attacks – even from quantum computers.
Investors can play along by investing in Centricus Acquisition (ticker: CENH), a Nasdaq-listed special purpose acquisition company, or SPAC, led by former Deutsche Bank deal maker Garth Ritchie, which is set to merge with Arqit at the end of August, in a deal that would value the British company at $1.4 billion.
“It will surprise no one to know that the entire SPAC market has slowed,” David Williams, founder of Arqit, tells Barron’s. “But fundamental long-term investors are clearly seeing the huge upside in Arqit at a valuation which compares well with other SPACs on all metrics.”
The merger comes as appetite for the red-hot sector of the U.S. stock market has started to cool. Shares in Centricus have fallen below its $10 listing price, which suggests that some shareholders have chosen to redeem their holdings for cash rather than finance the deal with Arqit. SPAC completions can be challenged more by the level of redemptions rather than the vote to approve a merger. Centricus has reasonable room. More than 80% of redemptions would breach the minimum $150 million cash closing condition that Arqit set.
Put simply, quantum computers can solve in minutes complex problems that conventional computers, which use bits (binary digits) rather than qubits (quantum bits), would take much longer to crack.
Some of the world’s biggest technology companies, including Microsoft (MSFT), IBM (
), and Alphabet’s Google (GOOGL) are exploring and developing their own quantum computing projects. Google is planning to build build commercial-grade quantum computers by 2029, while IBM has published its own roadmap, revealing that it expects to achieve 1,000 qubits (a major milestone for quantum computing processing power) by 2023. Google, meanwhile, plans to build to a million-qubit computer over the next decade.
Their eventual arrival means that the world’s existing legacy encryption systems, which were invented in the 1970s and are typically supported by Public Key Infrastructure, or PKI, could be highly vulnerable to future quantum attacks.
Founded in 2017 by Williams, a satellite industry veteran, Arqit’s investors include Notion Capital, Seraphim Space, and the UK government. The company’s core product, QuantumCloud, creates one-time encryption keys locally that cannot be broken or stolen.
Although quantum computers can reverse-engineer any calculations, Arqit says it uses physics to create random numbers used as encryption keys. Since there is no math involved, quantum computers can’t attack them. This solution, Arqit says, is currently 1,400 times faster than post-quantum algorithms.
“Quantum-based encryption is now a reality and offers encryption which, backed by the laws of physics, is demonstrably unbreakable,” analysts at Equity Development wrote in a research note on Arqit in July.
The company has already signed more than $130 million worth of contracts, including with the UK Government, the European Space Agency, BT Group (BT.UK) and Sumitomo Corporation (SSUMY), and has a pipeline of $975 million worth of deals. It has also signed a collaboration deal with Northrop Grumman and plans to launch its first quantum encryption satellites in 2023 via Richard Branson’s Virgin Orbit.
Blockchain technologies could add another area of growth for Arqit as advances in quantum computing could place the encryption that underpins bitcoin at risk.
“The customer base is growing rapidly because Arqit is unique in solving the most existential threat to our data, and we see a lot of upside in defence, telecoms, robotics and fintech,” Williams says.
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