Fintech: JPMorgan's $300MM gamble on the future of quantum computing in finance
JPMorgan spends $15B a year on tech, has a larger engineering workforce than Google or Amazon, and is under constant threat from hackers
Hi Fintech Futurists —
Today’s agenda below.
QUANTUM FINANCE: JPMorgan's $300MM gamble on the future of quantum computing in finance
LONG TAKE: Will BlackRock, Fidelity, Bitwise or GBTC win the Bitcoin ETF launch? (link here)
PODCAST CONVERSATION: Understanding Autonolas, the $2B autonomous agent network running on blockchain, with Valory CEO David Minarsch (link here)
CURATED UPDATES: Payments, Lending, Digital Investing
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Digital Investment & Banking Short Takes
QUANTUM FINANCE: JPMorgan's $300MM gamble on the future of quantum computing in finance
JPMorgan Chase, Mitsui, and Amgen have invested $300MM in the quantum computer developer Quantinuum, valuing the company at around $5B. Notably, JPMorgan has been increasing its interest in quantum computing, as demonstrated by its collaboration with QC Ware last year to explore how quantum computing can enhance deep hedging. The research project focused on reducing risk for portfolios using data-driven models that consider market frictions and trading constraints.
Before we dive in, let's cover some basics. Quantum computing is a computational model that uses quantum bits, or qubits, which can exist in superpositions of states, meaning they can represent multiple states simultaneously. In contrast, the device you are currently using, be it a personal computer or a supercomputer (somehow), operates on a binary system with discrete states of 0s and 1s. In classical computing, each binary digit (bit) can only be 0 or 1, not both simultaneously. However, qubits can exist as both 1 and 0 at the same time, enabling parallel information processing and theoretically offering speed and capability advantages over classical computing. We will skip the more complex stuff like quantum logic gates, entanglement, and the origins of quantum computing for another time. Those topics could easily fill up a whole Physics PhD thesis.
We find the Quantinuum deal intriguing because our world, and universe for that matter, fundamentally operates on quantum mechanics. Computers that compute using the quantum states of particles—qubits—should theoretically be adept at modeling complex real-world phenomena. But although quantum computers do exist, they're largely in the experimental phase. And for quantum computers to start outperforming classical computers in practical tasks, they need to be fault-tolerant. Fault tolerance ensures that a quantum computer can function correctly even when some of its components fail or when it's disturbed by external factors like decoherence, which can disrupt the quantum states. Quantinuum, alongside IBM, Microsoft, Amazon, and Google, and other tech companies, are working on achieving a fully-fault-tolerant quantum system.
Quantum computing has attracted some of the brightest minds and billions in annual investment. Around a decade ago, hedge funds such as Renaissance Technologies, DE Shaw, and Two Sigma delved into the sphere, with DE Shaw going as far as investing in QC Ware.
However, there has been little to no real application in finance so far. Oskar Painter, head of quantum hardware for Amazon Web Services and Caltech Physics professor, points out the tremendous amount of industry hype, making it challenging to distinguish optimism from unrealistic expectations. For more context, we recommend reading "Quantum Computing’s Hard, Cold Reality Check."
Criticism aside, we theorize that JPMorgan's interest in quantum computing is less about portfolio optimization and more about addressing cybersecurity. After all, JPMorgan spends $15B a year on tech, has a larger engineering workforce than Google or Amazon, and is under constant threat from hackers. If a fully-fault tolerant quantum system becomes available, JPMorgan could leverage it to process data at a much faster rate than classical computers, enabling more efficient detection of cyber attacks. On the flip side, a fully-fault tolerant quantum system also opens the door to far more intricate attacks. And so, JPMorgan is making sure it's not the belle of the cyber vulnerability ball, thanks to Quantinuum's tech.
👑 Related Coverage 👑
Blueprint Deep Dive
Long Take: Will BlackRock, Fidelity, Bitwise or GBTC win the Bitcoin ETF launch? (link here)
In this article, we discuss the recent approval of 11 Bitcoin ETFs by the SEC, a decision influenced by judicial intervention rather than regulatory change. This reflects the growing acceptance of cryptocurrency, particularly among younger demographics who prefer crypto over traditional mutual funds.
Bitcoin ETFs are significant as they integrate crypto into the traditional financial infrastructure, appealing to high-net-worth individuals and institutional investors. Despite their fees, these ETFs enable easier access to crypto assets. We also examine the various Bitcoin ETFs available, their fees, and the importance of tracking their performance relative to the underlying asset. The article concludes by highlighting the broader implications of Bitcoin's growing integration into mainstream finance, including its potential in scalable payment solutions and programmability.
🎙️ Podcast Conversation: Understanding Autonolas, the $2B autonomous agent network running on blockchain, with Valory CEO David Minarsch (link here)
In this conversation, we chat with David Minarsch - Co-founder and the CEO of Valory, a team focused on providing research, products, and services at the intersection of multi-agent systems (MAS) and distributed ledger technology (DLT), one of them being Autonolas - a platform that offers an open-source software stack and an on-chain protocol, facilitating secure operations and incentivizing autonomous application development.
In 2019, David served as the Lead Economist at Fetch.ai, focusing on research projects, software development, and team management. His work centered on the consensus and governance mechanisms of Fetch.ai's smart ledger and the design and implementation of an autonomous agent framework.
Curated Updates
Here are the rest of the updates hitting our radar.
Paytech
⭐ LatAm Fintech Pomelo Secures $40MM Series B Led By Kaszek - Fintech Futures
Google Pay India Partners With NPCI International To Expand UPI Payments - Finance Magnates
Wise Accuses High Street Banks Of Hidden Exchange Rate Fees - Finextra
JP Morgan Chase-owned WePay Reportedly Offboards A Number Of Business Clients - Fintech Futures
Neobanks
⭐ Digital Onboarding Grabs $58MM To Help Banks With Profitable Customer Engagement - TechCrunch
Neobank Arc Looks To Fill SVB Gap With Venture Debt Platform - Banking Dive
South African Neobank TymeBank Hits Profitability - Finextra
Lending
⭐ Citigroup Partners With LuminArx To Launch Private Lending Vehicle - Reuters
EquiLend To Be Acquired By PE Firm WCAS - Finextra
Varengold Bank Invests In Dutch BNPL Firm Billink - Finextra
Digital Investing
N26 Begins Rollout Of New Stock And ETF Trading Product - N26
AI-enabled Direct Indexing Platform Alphathena Receives Strategic Investment From ETFS Capital And HPA - Fintech Futures
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Great article, Quant computing some powerful than we can imagine. "Throughout space, there is energy. Is this energy static or kinetic? If static, our hopes are in vain. If kinetic, and we know it is, it is a mere question of time when men will succeed in attaching their machinery to the very wheelwork of nature." - Nikola Tesla
https://open.substack.com/pub/danielduffy/p/unravelling-the-mysteries-of-zero?utm_source=share&utm_medium=android&r=25jsk8