Are quantum computers a threat to crypto?

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Media outlets have been spreading fears about quantum computers and their potential impact on the crypto industry. But is this really a threat? In this article, we examine whether quantum computing poses a risk to blockchains and cryptocurrencies and if the industry is ready to face new challenges.
When the first quantum computer prototypes hit the market, journalists wasted no time in spreading doomsday scenarios. They claimed that the crypto industry would collapse, and blockchain technology would fail. According to their articles, quantum computers could crack the private keys of major players and take control of their assets. These computers could also break all blockchains through 51% attacks and mine all unissued coins in record time. Their immense computing power was said to be the ultimate threat. 

Quantum computers can indeed perform calculations millions of times faster than even the most advanced conventional machines. However, does this really mean they pose a genuine threat to the blockchain and crypto industries? Let's delve deeper into this issue.

Understanding Quantum Computers

Quantum computing involves using the principles of quantum mechanics to process data. In conventional computing, information is stored in bits, which can be either 0 or 1. Quantum bits, or qubits, can simultaneously hold both 0 and 1 values. This is made possible by the phenomena of quantum superposition and quantum entanglement, which essentially allows subatomic particles to exist in multiple locations at once and even teleport.

Thanks to these groundbreaking technologies, quantum computers can perform calculations much more rapidly than traditional PCs or high-powered servers. They are significantly more effective when tackling tasks such as decrypting cryptographic algorithms, breaking various codes, simulating quantum systems, and solving computational optimization problems. Experts predict that by the close of this decade, quantum computers will be capable of executing incredibly complex calculations, a feat that would take conventional computers millions of years to accomplish.

The Potential Threat of Quantum Computing to Cryptographic Systems

Cryptography is a fundamental technology underpinning secure communication. It relies on mathematical algorithms to safeguard the confidentiality and integrity of data, including that within blockchains. Quantum computing systems could pose a threat to these algorithms if they are utilized to crack them.

Cryptography employs mathematical algorithms for encrypting and decrypting data (for example, RSA, ECDSA, and ECC), rendering it unreadable to unauthorized parties. These algorithms have been designed for conventional computers. However, the emergence of quantum computing renders them far more susceptible to being broken.

Blockchain is a decentralized distributed ledger technology responsible for recording and verifying digital transactions. The operation of blockchains fundamentally depends on cryptography to ensure the data's integrity and authenticity stored within them. Nevertheless, the advent of quantum computing has the potential to create a significant security risk for cryptographic blockchain technologies.

Potential Risks of Quantum Computing

For example, a quantum computer with enough computational power could potentially carry out a 51% attack on a blockchain network. During such an attack, the malicious actor would gain control of more than 50% of the network's computational power. They would then be able to manipulate the blockchain's consensus mechanism, execute double-spending of digital assets, cancel transactions, or even rewrite the entire blockchain history.

Bitcoin addresses have varying levels of resistance to quantum computing. Satoshi Nakamoto created two types of Bitcoin addresses: P2PK (Pay-to-Public-Key) and P2PKH (Pay-to-Public-Key Hash). P2PK wallets were believed to be vulnerable to quantum computers because they could compute the private key from the public one. To avoid this, the public key should not be revealed until the coins are spent. It's also essential to avoid reusing the same addresses.

P2PKH wallets, which create digital signatures using the private key, were thought to be resistant to quantum computing. However, Deloitte experts point out that quantum computers could crack both types of addresses if they were used more than once. On the other hand, P2PKH addresses that have never been used to spend bitcoins will remain protected. In other words, if you transfer your bitcoins to a new P2PKH address, they will not be vulnerable to a quantum attack. The issue is that this process can take nearly 10 minutes. According to preliminary estimates, a quantum computer would need between 30 minutes and 8 hours to determine the private key. But if quantum devices can do this faster than 10 minutes, nothing will be able to safeguard the Bitcoin blockchain from potential hacking.

Deloitte's analysts estimate that if a quantum computer already existed, 21% of the total number of issued BTC (almost 4 million coins) would be at risk.

From the beginning of the crypto industry, many Bitcoin wallet owners have lost (misplaced or forgotten) their private keys. It is believed that nearly 3 million coins may be lost forever. However, with the help of a quantum computer, they could be recovered from wallets.

So, is the crypto industry really in danger due to the development of quantum computing?

Debunking the first myth – Quantum computing is not a threat to mining

The fear that quantum computers will mine all possible coins is unfounded, mainly due to the unique features of various hashing algorithms. Miners can breathe a sigh of relief. For instance, Bitcoin uses SHA-256 for its issuance. Mining Bitcoin with a quantum computer would be less efficient than using specialized ASICs. As a result, employing quantum computers for gaining a competitive edge in mining is impractical. Thus, this scenario isn't a cause for concern.

Debunking the second myth – Quantum computing doesn't pose a critical threat to decentralization and blockchains

It's also not feasible to alter transaction data in blockchains with quantum computers. Such changes would only be possible if a majority of network participants approved these actions.

Even if we assume that someone will attempt a "51% attack" using a quantum computer, it's unlikely to be successful.

Firstly, blockchains implement various consensus algorithms that provide control mechanisms over bad actors. These mechanisms could involve the removal (blocking) of a node trying to monopolize the network by altering blocks or tracking down the attacker's wallet.

Secondly, the architecture and algorithms of blockchains make any modifications to successfully completed transactions and "51% attacks" impossible.

Thirdly, there are ready-made software solutions from different development teams. In the event of such an attack, these solutions can be deployed and applied to both PoW and PoS blockchains (Horizen, Komodo dPoW, PirlGuard, etc.).

Countering Quantum Computers in the Crypto Industry

Crypto industry experts are actively working to address the potential challenges posed by quantum computing, rather than passively waiting for quantum dominance and potential attacks. Almost every cryptocurrency project with its own blockchain has made progress in this area.

Currently, blockchain technology significantly outpaces quantum computing advancements. Experts believe that this gap will never be closed. If industrial quantum computers become a reality in 5–10 years, the crypto industry and blockchain developers will be prepared to defend against attacks, as they consistently stay several steps ahead.

To counter these threats, quantum-resistant cryptographic algorithms, post-quantum cryptography, and quantum-resistant signature schemes are being utilized.

Quantum-Resistant Algorithms

Developing cryptographic algorithms resistant to quantum attacks is a potential solution for reducing risks associated with quantum computing in crypto and blockchain technologies. These algorithms employ mathematical structures that are difficult for quantum computers to decipher, making them resistant to quantum attacks.

Post-Quantum Cryptography

Research on post-quantum cryptography is ongoing and includes proposals for lattice-based cryptography and multivariate cryptography.

Lattice-based cryptography relies on the complexity of solving a specific mathematical problem called the shortest vector problem. Multivariate cryptography is advantageous due to the difficulty of solving certain types of polynomial equations, which are also out of reach for quantum computers.

Quantum-Resistant Signatures

Using quantum-resistant signature schemes based on hash, code, and lattice methods can help protect blockchain network transactions from quantum attacks. These schemes are founded on mathematical problems that are challenging for quantum computers to solve, thereby securing transactions within blockchain networks.

Final words

As we can see, there is no need to fear that one day we'll wake up to find all blockchains and cryptocurrencies cracked by quantum computers. Most importantly, blockchain technologies continue to evolve, developing much faster than quantum advancements. The quantum threat, therefore, motivates further improvements to blockchains, making them even more reliable. By the time quantum computers pose a real challenge to the crypto industry, it will already be quantum-resistant.

The development of quantum-resistant algorithms and signature schemes, as well as ongoing research into post-quantum cryptography, will likely lead to the emergence of practical solutions in the near future.