Is the Quantum Threat to Bitcoin Real or Not? Galaxy Digital Just Pledged $5 Million to Boost Bitcoin's Quantum Resistance.
Key Points
Bitcoin's encryption is theoretically crackable with a powerful enough quantum computer.
Those computers don't exist yet, but they might within a decade or less.
The main obstacles to mitigating the threat are social and organizational in nature, not technological.
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On July 21, asset manager Galaxy Digital pledged to spend up to $5 million to defend Bitcoin (CRYPTO: BTC) against a future quantum computer that could crack the cryptography guarding everyone's coins. No such computer exists yet, and there probably won't be one for at least five years at the earliest. Even so, the quantum threat to Bitcoin already appears as a disclosure in the risk filings of BlackRock's iShares Bitcoin ETF.
So is the quantum threat to Bitcoin real, or is it an academic issue that's become overblown?
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What could a quantum computer actually do to this coin?
Bitcoin's mining and ledger are built on SHA-256, a hash function that quantum computers cannot efficiently break. That means nobody, not even someone with a sufficiently powerful quantum computer, will be able to mine all of the as-yet unmined coins all at once, nor will they be able to change the details of the past transactions on the chain.
The weak spot is its system of digital signatures, known as the elliptic curve digital signature algorithm (ECDSA), which is used to prove ownership whenever coins are spent. A powerful enough quantum computer could work backward from a wallet's public details to recover the private key that controls it and then drain the coins inside.That would likely cause an utter stampede of people trying to sell it if it were confirmed to be happening.
About a third of all Bitcoin already has its public key exposed on the chain, which is one opening a quantum codebreaker could use to steal those coins. But how soon could that vulnerability be exploited?
Guesses range from five years at the low end to Blockstream's Adam Back, who predicts it'll take 20 to 40 years.
The real challenge is herding all the cats
Bitcoin's developers are aware of the quantum computing threat, and a couple of Bitcoin Improvement Proposals (BIPs) outline how to address it.
BIP-360 proposes adding a wallet address type that protects future coins stored at that address. But it does nothing for the currently exposed wallets, including the 1.1 million BTC thought to be tied to Bitcoin's enigmatic founder, Satoshi Nakamoto. As there can only ever be 21 million Bitcoins, Satoshi's stash holds enough of the possible supply that leaving it vulnerable would introduce a significant risk to its price.
One extremely controversial proposal, BIP-361, would retire the coins with old signatures, including Satoshi's, after a five-year countdown. It's contentious because it would require rejecting the property rights of many dormant holders. And that's why the technical challenge of protecting Bitcoin from quantum computing isn't nearly as difficult as the challenge of getting its developer community to organize around a consensus that offers a sound path forward; there's already newer cryptography that quantum computers can't break.
Therefore, the quantum threat to Bitcoin is indeed real, but it's no reason to sell the asset tonight.
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Alex Carchidi has positions in Bitcoin and iShares Bitcoin Trust. The Motley Fool has positions in and recommends Bitcoin, BlackRock, and iShares Bitcoin Trust. The Motley Fool has a disclosure policy.
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