Welcome to Little Learnings, a series of educational posts I release every Friday. The intention behind these is to break down some new interesting topic or development happening in the crypto space. God knows there’s enough happening in crypto, and it’s often complicated — so I’m here to try and simplify it a bit.
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Quantum computing has been in the news quite a bit lately, with some people suggesting that it is one of the main reasons BTC is underperforming. Some financial advisors at large investment banks are already advising their clients against investing in BTC due to quantum related fears.
I’m going to simplify this as much as possible, but basically: regular computers store information as bits, and each bit is either a 0 or a 1. Quantum computers use qubits, which exist as 0 and 1 at the same time through a property called superposition. This lets quantum computers solve certain problems exponentially faster than traditional machines.
Think of it this way: a regular computer trying to crack a code can only check one combination at a time. A quantum computer can check many (many) combinations simultaneously.
As we all know (or should know), Bitcoin relies on cryptographic algorithms to secure wallets and transactions. The most common is called ECDSA (Elliptic Curve Digital Signature Algorithm). If a bad actor was trying to break or hack Bitcoin and steal people’s coins, solving or hacking this algorithm would take traditional computers thousands or even millions of years.
A sufficiently advanced quantum computer could theoretically break ECDSA in hours or days. This means someone with a powerful quantum computer could derive private keys from public keys, and steal funds.
The good news is that current quantum computers are nowhere near powerful enough. Breaking Bitcoin’s encryption would require millions of stable qubits. Today’s best machines have a few thousand at most, and they’re not stable (they’re very error-prone).
Most estimates put the timeline at 10 to 20 years before quantum computers pose a real threat, but the knowledge and fear that the threat is looming is seemingly enough to spook market participants.
The other good news is that developers are already working on quantum-resistant cryptography, with new algorithms designed to withstand attacks from both classical and quantum computers.
The bad news is that while I’m optimistic that a solution will be found, it might not solve everything. In particular, the approximately 6 million BTC that are held in lost or inactive wallets (ie Satoshi’s wallet with 1.7m BTC) are at the highest risk, and might not be able to be saved.
You thought it was bad holding a token where there were team and investor unlocks coming up and feared the sell pressure of those tokens being dumped on your head? Imagine what would happen to the price of BTC if one day some entity is able to hack the 6 million BTC and begin to market dump that 😭.
There are solutions that can solve for even this scenario (ie a soft fork of the chain), but that is far from an ideal solution for other reasons (violating the entire immutability merits of Bitcoin).
All in all, this is a very real threat. It’s something to be mindful of, and to keep in the back of your mind — perhaps even the forefront of your mind.
If you want to read more, these two excellent posts by Murmurations II go into much more detail.
Thanks for reading, see you next week with another little learning!