Warning Sounded: Quantum Computers Threaten Bitcoin Security
Potential Peril in the Quantum Realm: BlackRock Warns of Future Challenges in Bitcoin ETF Proposal
BlackRock, the world's largest asset manager, has added quantum computing as a potential risk to its Bitcoin ETF in their latest regulatory filing. This adds quantium computing to the list of threats for the iShares Bitcoin Trust (IBIT), the largest spot Bitcoin fund on record with $64 billion in net assets.
Lawyers for BlackRock claim that if quantum processors become strong enough, they could potentially crack private keys, putting wallet security at risk. While this risk seems distant, it's common practice in ETF filings to list all potential threats, no matter how remote.
Quantum Efforts Spark Concern
In December 2020, Google introduced Willow, a chip aiming to solve certain tasks that would take today's supercomputers 10 septillion years. A few months later, Microsoft debuted Majorana 1 to tackle long-standing scaling hurdles. These advancements raised alarm bells in the crypto world.
In theory, a quantum device running Shor's algorithm could factor the large numbers behind Bitcoin's elliptic-curve signatures, compromising transaction security. The reality is, we're still in the early, error-prone "NISQ" era, so any attacks are likely years away.
Lost Bitcoin: A Hidden Treasure?
Tether's CEO, Paolo Ardoino, suggested an intriguing angle in February. He hypothesized that quantum hackers could recover roughly 3.7 million Bitcoin considered lost forever by breaking old private keys. Ardoino acknowledged that quantum machines are still far from cracking 256-bit security, meaning no coins will reappear anytime soon.
Crypto analyst Willy Woo speculated on whether Google, a government agency, or a new startup would be the first to seize these dormant assets. Woo believes the $350 billion in lost coins could trigger fresh investment in quantum technology if those keys become vulnerable.
Record Inflows for Bitcoin ETFs
Despite the looming threat of quantum computers, Bitcoin ETFs have seen record inflows. Record net inflows of over $41 billion have poured into these funds since their launch in January. Weekly ETF inflows reached a new all-time high of $40 billion on May 8.
In the face of market jitters, investors appear unfazed by the quantum threat. Mainstream buyers appear more focused on current price moves than quantum questions of the future. As the crypto development community works on post-quantum signature schemes, it remains to be seen how the market will respond when the threat from quantum computers becomes more imminent.
Featured image from Getty Images, chart from TradingView
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Quantum computers pose a significant long-term threat to Bitcoin's security due to their potential ability to break the cryptographic algorithms that secure Bitcoin transactions. The main concerns are:
- Elliptic Curve Cryptography (ECC): Bitcoin relies on Elliptic Curve Digital Signature Algorithm (ECDSA) for transaction security. Quantum computers could use Shor's algorithm to obtain private keys from public keys by solving the discrete logarithm problem, compromising the security of Bitcoin addresses.
- SHA-256 and Grover's Algorithm: While SHA-256, used in mining and hashing, is less directly impacted compared to ECDSA, it is still vulnerable to speedup by Grover's algorithm.
In response to the quantum threat, the Bitcoin development community is working on transitioning to quantum-resistant algorithms, known as post-quantum cryptography (PQC). Major financial institutions like BlackRock are taking proactive measures, such as issuing warnings to investors about the potential risks from quantum computing. Overall, while quantum computers are not yet capable of breaking Bitcoin's cryptography, the threat is real, and ongoing efforts are focused on ensuring long-term security.
Financial institutions, recognizing the potential threat of quantum computers, are taking proactive measures to ensure the safety of their investments. For instance, BlackRock, the world's largest asset manager, has included quantum computing as a potential risk in their Bitcoin ETF filings. Simultaneously, the crypto world is seeking solutions in technology, with developers working on post-quantum signature schemes to secure Bitcoin transactions in the face of advancing quantum capabilities, such as Google's Willow chip or Microsoft's Majorana 1.
