- Efforts to make Bitcoin quantum-proof warrant extreme caution.
- We cannot know whether quantum resistant cryptography works yet, says CoinShares analyst.
- Quantum attacks could take a decade to materialise.
Superfast computers that exploit quantum mechanical phenomena have long posed a theoretical threat to the encryption that underpins Bitcoin.
Yet hastily upgrading the $1.3 trillion network to become quantum-proof could do more harm than good.
That’s the case for CoinShares, a digital assets manager that oversees $10 billion in crypto, as stated in a Friday blog post.
Popular proposals to shore up Bitcoin’s quantum resistance, which include upgrading its cryptography or burning vulnerable coins, warrant extreme caution, Christopher Bendiksen, Bitcoin research lead at CoinShares, said.
“Introducing new address formats before the cryptography underpinning them is fully understood and proven is extremely risky and not advisable,” he said.
“We have to keep in mind that before practical quantum computers exist, we cannot know whether quantum resistant cryptography provably works.”
In recent months, concerns surrounding Bitcoin’s theoretical quantum vulnerability have reached a fever pitch.
Coinbase, BlackRock, and Jefferies have all warned that Bitcoin’s security is entering uncharted waters following several major advances in quantum computing last year.
Pierre-Luc Dallaire-Demers, a scientist-in-residence at the University of Calgary, previously told DL News that he believes quantum computers are approximately five years away from breaking the cryptography that secures some Bitcoin wallets.
What’s the risk?
As quantum computers become more powerful, older Bitcoin wallets that use outdated cryptography will be the first to fall.
This is a problem because such wallets hold about 8% of all Bitcoin in existence, including the $75 billion stash of Bitcoin creator Satoshi Nakamoto.
When one of these older wallets sends a transaction, it reveals a vulnerable public key. A quantum computer could use that key to break the wallet’s encryption and steal the Bitcoin inside it.
It’s not just Bitcoin that’s at risk, either.
Much of the internet, including websites, messaging services, and financial transactions, relies on encrypted communications that are also theoretically vulnerable to quantum attack.
A November memo from the US Department of War mandated that its systems be upgraded to quantum-resistant encryption no later than December 31, 2030.
Conservative estimates
Still, CoinShares’ outlook on quantum computing is more conservative.
To break Bitcoin’s encryption within a practical amount of time — less than a year — quantum computers need to become 10 to 100,000 times more powerful, Bendiksen said, adding that such long-term attacks are at least 10 years away.
More worrisome short-term attacks that aim to steal funds when a wallet initiates a transaction, and therefore need to break the encryption within approximately 10 minutes, won’t be possible for several decades, he said.
To be sure, CoinShare believes quantum computers threaten Bitcoin — just not as soon as others.
“Bitcoin’s quantum vulnerability is not an immediate crisis but a foreseeable engineering consideration, with ample time for adaptation,” Bendiksen said.
“For the perceivable future, market implications appear limited.”
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.