There is an ongoing technology race: blockchain versus quantum computing. Theoretically, major advances in quantum computing could undermine the overall cryptocurrency industry – just as this nascent blockchain technology enters the mainstream. But crypto experts are already working on a new quanta-proof encoding.
Blockchain is the technology behind Bitcoin (BTC) and other cryptocurrencies. It works by breaking data into blocks secured by smart cryptography. This cryptography is what makes it possible to remove intermediaries – banks and governments – from financial transactions. This is also what quantum computing could unravel.
Could quantum computing threaten crypto?
If you thought it was hard to understand blockchain technology, quantum computing is a whole different story. It would be easy to say that it could revolutionize everything because, well, it’s quantum. But this is not quite true.
Quantum computing may very well solve some problems, such as millions of times faster than today’s computers. And the challenge for cryptography is that quantum computers will end up being really good at deciphering cryptographic keys.
It’s not there yet. But it’s estimated that over the next 10 years, quantum computers will be able to process data fast enough to solve the algorithms that protect cryptocurrency. Here are two of the big concerns:
- Public-private keys. These keys are a crucial part of cryptography. If you send Bitcoin to someone else, you use their public key – much like an email address – to do so. The recipient uses a private key – such as an email password – to unlock the transaction. Just like having someone’s email address doesn’t grant you access to their account, having a public key doesn’t grant you access to someone’s crypto. However, quantum computing could, theoretically, allow a hacker to do just that in certain scenarios.
- 51% attacks. Another crucial aspect of blockchain is how the blocks that record transactions connect and how new ones are added. If a bad actor introduces a false block with false information, this block is rejected by the other blocks in the chain. If, however, a hacker took control of more than half of the blocks on the network, that could be problematic. There are limits to what a hacker could gain, but in theory the speed of quantum computing could make this type of attack more likely.
It must be said that it is not only cryptocurrency that could be affected by developments in quantum computing. It could impact all kinds of data protected by digital signatures, from government encryption to banks and your personal emails.
What does this mean for crypto investors?
The good news is that this is a known issue. And that won’t happen overnight – quantum computers won’t suddenly make the leap to crack crypto. According to computer experts, we’ll find out long before it actually happens.
More importantly, as quantum computing evolves, so does blockchain technology. Some developers are already studying forms of post-quantum cryptography. This is improved encryption that cannot be deciphered by quantum computers, and specialists are fairly confident that it will achieve it.
That said, one of the main selling points of blockchain is the almost impenetrable security it offers. The possibility of breaking this security is troubling at best, and crypto investors should pay attention to quantum developments.
Individual cryptocurrencies may require an upgrade to post-quantum crypto solutions. It will be worth looking at which digital currency projects stay ahead of this curve.
We will also almost certainly reach a time when cryptocurrency investors will need to move their funds to more secure wallets. And since data company Chainalysis estimates that 20% of Bitcoins are currently lost or stuck in wallets that people cannot access, it is possible that those coins (which cannot be moved) are more vulnerable to attack.
If you keep your assets with a cryptocurrency exchange, this will likely help manage the transition. But if you keep your crypto assets in a decentralized wallet, you may need to be more proactive.
The spectrum of quantum computing
We often talk about regulation as the biggest threat to crypto, but other technologies are also a danger. Just like Bitcoin didn’t exist 12 years ago, other technologies could evolve and make the blockchain obsolete. Or – like quantum computing – remove crypto from cryptocurrency.
Existing cryptocurrency projects already have many issues to tackle, from scalability to sustainability. But, given the scale of the threat, industry must also work now to ensure that quantum computing does not undermine the very security that is its basis.
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Emma Newbery owns Bitcoin.
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