Myth: Quantum computing will break the cryptography used to secure bitcoin rendering it worthless.
Truth: Quantum computing is a technology that is likely decades away from becoming a viable threat to any current encryption techniques. Should quantum computing become a reality, the wallet addresses would potentially be at risk of theft but the historical ledger that underpins bitcoin would not be impacted. Furthermore, there are methods already in development to upgrade the way we store bitcoin that would be quantum resistant.
Quantum computing is an area of science focused on developing computer technology based on the principles of quantum theory. In classical computing, such as your current laptop or smartphone, data must be processed in a binary state at any one time. This is expressed as 0’s or 1’s in computer code and although switching states can happen in a billionth of a second, there is still a physical limit to how quickly these devices can be made to switch state. However, in quantum computing, data could theoretically exist in multiple states simultaneously thus enabling enormous gains in processing power and speed. It basically would allow the computer to perform all its tasks simultaneously rather than sequentially.
Given this potential leap in processing power, many have theorized that quantum computers would render current encryption technology useless. That includes the SHA-256 algorithm, an algorithm that encrypts private key information when two bitcoin wallets transact with each other. Thus, there is a narrative that has spread over the years that quantum computing will eventually break bitcoin.
Before we dive into the specifics of how quantum computing would impact bitcoin, we must first recognize that quantum computing is in its infancy. Although we have some very early iterations of quantum computers, there is no quantum computer remotely close to threatening any current encryption technology. The quantum computers today are only able to perform a small set of very limited tasks.
This myth is based on a forward-looking projection that one day, we might develop a quantum computer capable of breaking SHA-256. The truth is we are likely decades away from that being a reality and there is no guarantee that quantum technology will become a viable computational platform. The foundation of this myth is based on a belief about the future state of the world many years from now and as history has shown time and again, we tend to be terrible at predicting that far into the future. We were all promised flying cars back in the 1980s and yet we still drive around on four wheels. Should we abandon a technology that works today because of a theoretical future technology? Of course not. Just like we haven’t discarded our cars today because of the potential to have hovercrafts in the future.
But let’s assume for a moment that at some point in the future we do develop a quantum computer powerful enough to break bitcoin’s hashing algorithm. Even in this future state, the rationale behind this anti-bitcoin argument is fundamentally flawed as it fails to distinguish the technology powering the mining of bitcoin versus the technology used to secure transactions between wallets.
Miners contribute computing power to the network to secure and operate the Bitcoin Blockchain and are rewarded with bitcoin for doing so. Even if quantum computing existed, the underlying ledger that maintains the historical record of who owns what, would remain intact and functioning. Quantum computing would not be able to unravel the history of transactions or prevent the blockchain from operating.
What quantum computing does potentially threaten is the security of private keys. An individual bitcoin address has a public key that anyone can safely see, this is how others know where to send a bitcoin. In addition, a bitcoin address has a private key that only the holder should know and allows the owner of that private key to access and control the bitcoin in that address.
What quantum computing might enable is the ability for a bad actor to use someone else’s public key to derive that individual’s private key (something that is not feasible today). In theory, this would allow a hacker to gain control of the funds in a particular wallet thus giving them the ability to steal bitcoin from various holders.
Thus, the mistake this argument makes is that it if you render a feature of the system useless the whole system dies. This is simply not true. Quantum computing would threaten the security of individual addresses, but that historical ledger would remain unchanged, and the underlying technology would still work as intended. Simply put, quantum computing does not threaten the fundamentals of the network operating, it threatens the current storage standard that people use.
Admittedly, the ability to derive a private key would undermine the usefulness of BTC. However, it is possible to develop a signature system that can withstand quantum computing. In fact, there are already methods in development today that would make bitcoin more “quantum resistant.” Should quantum computing become a threat, bitcoin developers will likely be able to upgrade the system to support addresses that quantum computing would not be able to break.
By the way, this isn’t solely a bitcoin issue. If we had quantum computing at scale tomorrow, everything digital would be at risk. Our banking infrastructure, power grid, communication platforms, and even the internet would all be vulnerable. Bitcoin would likely be the least of our worries.
So, there will be (and already are) a lot of smart people working on this challenge. Not just for bitcoin but for all industries. Its far more likely that quantum breakthroughs will gradually develop over a long period of time so there will be opportunities to react and develop counter measures. The beauty of bitcoin’s architecture is that the system was designed to be upgradable in a forward compatible way. As new security measures are identified and discovered, bitcoin will continue to adapt with the times. As new threats emerge, so too will new defensive measures.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
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