The cryptocurrency industry is starting to prepare for the threat of quantum computing, as recent advances raise concerns that this technology could soon undermine the encryption that secures transactions and digital wallets.
- Chris Tam, head of quantum innovation at BTQ Technologies, characterised quantum computing as the “most direct and existential threat towards cryptocurrencies and crypto networks.”
- “There is an engineering challenge ahead, but there are engineering solutions already on the table,” Pandl added, acknowledging the complexity of the task.
Quantum computers have the capability to solve complex mathematical problems at unprecedented speeds, potentially allowing them to decrypt conventional methods of encrypting digital information. This presents a significant risk to the $2 trillion global cryptocurrency market, which heavily relies on traditional cryptography and has already experienced numerous high-profile hacks.
Concerns have escalated following a March research report from Google, which indicated that quantum computers might be able to break current encryption methods sooner than previously anticipated. The tech giant suggested that viable quantum computers could emerge by 2029, a considerable shift from earlier projections that placed this milestone a decade or more away.
Research from Citigroup and other financial institutions has further underscored the urgency, noting that advancements in quantum computing and artificial intelligence could drastically shorten the timeframe in which cryptocurrencies become vulnerable to exploitation.
In recognition of these risks, US President Donald Trump recently issued executive orders aimed at strengthening national quantum capabilities. Meanwhile, several cryptocurrency firms and blockchain developers are formulating strategies to upgrade their networks with quantum-resistant cryptography, a transition that could take years and necessitate substantial changes to the infrastructure supporting digital assets.
Chris Tam, head of quantum innovation at BTQ Technologies, characterised quantum computing as the “most direct and existential threat towards cryptocurrencies and crypto networks.”
Quantum computing: Decades-Old Encryption Under Threat
Most blockchains are built on elliptic-curve cryptography, a technique that has been in use for decades to generate the public and private keys and digital signatures essential for verifying ownership and authorising transactions. Public keys, which are derived from private keys, become visible during transactions, exposing them to potential risks.
While traditional computers are unable to feasibly deduce a private key from a public key, a sufficiently powerful quantum computer could exploit this vulnerability, enabling hackers to forge digital signatures and authorise fraudulent transactions. This risk is particularly pronounced within public crypto networks, where transactions are irreversible, unlike traditional payment methods.
Utkarsh Ahuja, managing partner at Moon Pursuit Capital, emphasised that cryptocurrencies are uniquely susceptible due to the transparent and permanent nature of blockchains. Bitcoin, the largest cryptocurrency by market capitalisation, is deemed especially vulnerable; its 17-year transaction history has resulted in a significant number of visible public keys.
An unpublished working paper from independent researcher Ahmed Raza Muhammad Umer suggests that approximately 35% of Bitcoin’s circulating supply could be at risk from a quantum computing attack, while other studies have estimated this figure could reach as high as 50%. A substantial theft involving a major token could severely impact its market value, with Cristiano Ventricelli, vice president and senior analyst of digital assets at Moody’s Ratings, stating, “Everyone will feel the impact.”
This looming threat has prompted some investors to reconsider their Bitcoin holdings. Christopher Wood, global head of equity strategy at Jefferies, recently removed a 10% Bitcoin allocation from his model portfolio, citing the long-term “existential” threat posed by quantum computing.
Preparing for the Quantum Leap
Despite the pressing nature of these concerns, experts believe it will take several years before quantum computing can effectively breach blockchain security. Many in the industry are optimistic that they can transition to new “post-quantum” cryptography methods that will withstand such attacks.
However, there are warnings about the potential pitfalls of premature adoption. Post-quantum cryptography is still evolving and often involves larger digital signatures, which can increase storage needs and bandwidth requirements. This may elevate costs and hinder user experience, particularly on blockchains with fixed block-size limits like Bitcoin, as noted by Zach Pandl, head of research at crypto asset manager Grayscale.
“There is an engineering challenge ahead, but there are engineering solutions already on the table,” Pandl added, acknowledging the complexity of the task.
One senior cybersecurity executive at a major crypto firm estimated that it could take two years for their company to become fully quantum-resistant, likening the challenge to the Y2K bug, which required over $300 billion globally to rectify.
Addressing these vulnerabilities is complicated further by the decentralised nature of blockchains, which are operated by communities that may struggle to reach consensus on the best course of action. Currently, none of the top 20 blockchains have implemented a post-quantum signature algorithm, with Bitcoin developers and market participants divided over potential solutions and timelines. The Ethereum Foundation has set a target of 2029 for full quantum protection.
As the Algorand Foundation gears up to implement a post-quantum roadmap, chief technology officer Bruno Martins stated, “It felt right to start doing (something) now, because it’s responsible to have a plan.” With the quantum threat looming, the race to secure digital assets has never been more critical.
