Will Bitcoin Be Killed by Quantum Computing? Investment Monitor

Quantum computers will eventually break much of the current encryption, and that includes the signature algorithm for Bitcoin and other cryptocurrencies. About a quarter of Bitcoin ($ 168 billion) in circulation in 2022 is vulnerable to quantum attacks, according to research by Deloitte.

Cybersecurity specialist Itan Barmes led the Bitcoin blockchain vulnerability investigation. He found that the level of exposure that a large enough quantum computer would have on the Bitcoin blockchain poses a systemic risk. “Yes [4 million] coins are eventually stolen in this way, then trust in the system will be lost and the value of Bitcoin will probably fall to zero, ”he says.

The current cryptocurrency market is valued at around $ 3 billion, and Bitcoin reached a record high of over $ 65,000 per share. coin in 2021, making crypto the best-performing asset class of the past decade. , according to Gemini’s Global State of Crypto report for 2022. However, Bitcoin’s erratic turn in traditional investors’ portfolios coincides with major advances in quantum computing.

Bitcoin’s cyber security vulnerability lies in public keys

Most of the encryption depends on the relationship between public and private keys, called asymmetric cryptography. Quantum-vulnerable bitcoins include those created before 2010, when public keys had not been hashed to another, more secure format. Also at risk are bitcoin addresses that have already been used once and therefore have become visible on the blockchain. There are four million Bitcoin addresses that could in theory be hacked by a quantum computer large enough to derive the corresponding private key to unlock and transfer the value to another address. This is called a stock attack.

The second type of attack – a transit attack – attacks Bitcoin transactions during transit. Unlike warehouse attacks, where only a subset of addresses are vulnerable, all transactions are vulnerable.

In January 2022, a team from the University of Sussex published the spin-off Universal Quantum research on transit attacks, which calculated that it would take a quantum computer with a capacity of 1.9 billion qubits. to crack Bitcoin encryption within the required window in ten minutes (this is the time it takes for a Bitcoin to be extracted). Even at 317 million qubits, it would take an hour and 13 million qubits for a day. In context, IBM’s superconducting quantum computer currently has a 127-qubit processor.

Consensus in the decentralized domain of Bitcoin is difficult

Cyber ​​security is a priority for members of the quantum society, but many industry insiders, including Barmes, believe that there is not enough communication between the quantum computer society and the Bitcoin society to ensure future cyber security on the Bitcoin blockchain. “There are many statements from both communities, indicating a lack of understanding on the other hand,” he says.

Barmes believes that as long as cryptocurrencies migrate in time (for post-quantum cryptography), you should be fine. “It’s not too late to migrate, but such a migration takes time, so it may be too late to wait until the last minute,” he says. Exactly when it will be too late is of course unknown.

Blockchain poses a unique challenge to quantum cryptography due to its decentralized nature and the complications in governance structures that this entails. “Reaching that consensus is extremely difficult, so the governance issues may equate to the complexity of the technical issues – an agreement takes much longer than people realize,” Barmes said. Although not enough is being done on technical solutions, there is also too little attention to management issues, he adds.

Barmes advocates awareness of the problems as the first step to solving the problem. “Then very technical people have to come up with published, demonstrable solutions, not just speculations,” he adds.

For investors without a technical background, quantum security is a difficult topic to assess. Cryptocurrency projects should be more transparent about their plans to reduce quantum risk, Barmes says. “It will provide investors with the information they need to make decisions.” The hope is that this transparency can encourage a more robust mitigation strategy.

Sophisticated investors have already assessed the risk

While more traditional investors may not be aware of the potential security issues stemming from advances in quantum computing on Bitcoin, Miko Matsumura, general partner at San Francisco-based Cryptos Capital, says most savvy investors considered the risk of quantum cyber security breaches. He is not worried about the quantum computational risk because attackers have two ways to break Bitcoin and neither of them poses a disaster for blockchain.

“You could attack Bitcoin’s signature mechanism, which would wreak havoc in an attack, but the attack would be very visible,” Matsumura adds. “If such attacks were to take place, Satoshi [Bitcoin’s architect] had a plan, which was to simply hard fork Bitcoin (a complete protocol change that led to a departure from the original) and replace the signing mechanism.

At the point of consensus, Matsumura is much more fluid than Barmes. “Satoshi has already written about what to do if the signature algorithm is broken, so it’s likely that the community will just agree to do what Satoshi suggested,” he says.

On this more positive note, Duncan Jones, head of cybersecurity at Cambridge Quantum, says the risk talk should focus more on how quantum technologies can improve the security of digital assets. “The focus is often on the threat posed by quantum computers, yet blockchains face complex and sophisticated threats every day,” he says. “We can strengthen blockchains against some of these risks if we integrate quantum technology into the heart of these systems.”

This is a view reiterated by Charles Hayter, CEO and co-founder of CryptoCompare, who believes that the cyber risk of quantum computing is not on the radar of the cryptocurrency investing community. “The optimistic view is that secure quantum cryptocurrency will solve the problems that arise and that is why society is not worried,” he says. “It is seen by many in the industry as a replacement for your car’s engine – there is a solution.”

Cryptography has always been a race against hackers, and there have always been solutions along the way, Hayter says. When it comes to mitigation strategies for quantum cybersecurity on cryptocurrency exchanges, he believes it is far too early for quantum computation to be an issue.

The transition to post-quantum algorithms and the conversations between the Bitcoin society and the quantum computer society will be the key to mitigating the cybersecurity risk of investing in cryptocurrency. As always, timelines around quantum computing seem vague, but now is a good time for Bitcoin investors to notice.

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