Report: The Impact of Quantum Computers on Bitcoins

The Impact of Quantum Computers on Bitcoins
  • Google has acheived quantum supremacy this year and it poses a potential threat to bitcoin.
  • Deloitte in it’s latest report warns about google’s quantum supremacy  and risk to bitcoin’s blockchain.

Since Google claimed quantum supremacy later this year, the impact of quantum computers on bitcoins and the blockchain network has much speculated. Deloitte in it’s latest reports Quantum computers can break the mathematical difficulty underlying cryptography and can thus put the bitcoin operations under risk. Let us look into how this pans out.

 The secret private key used to create a digital signature that can be verified using the public key and secured through the mathematical principle called “one-way function.”

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Under this principle, the public key can be derived from the private key, but the other way around requires an astronomical amount of time and is hence not practical. But, in 1994, mathematician Peter Shor published a quantum algorithm that can break this security feature with a sufficiently large quantum computer.

Bitcoin is a decentralized system of transferring value where a digital signature is generated by the user to authorize transactions. But if someone with a public key could falsify this signature, they could potentially spend anyone’s bitcoins. The bitcoin network runs on the decision of miners who form chains of bitcoin blocks.

The simple person-to-person payments using bitcoins classified into two categories. The ‘pay to public key’ (p2pk) was used in the earlier days and had drawbacks such as long addresses, considerable processing time, etc. But the major problem with this address type is that anyone can obtain the public key, which can, in turn, used to derive the private key using quantum computers. Thus, all transactions under this address type are under risk.

The second type is where the address is composed of a hash that does not directly reveal the public key and implemented through the ‘pay to public key hash’ (p2pkh). Here, the public key is not visible until the user initiates the transaction, which means that as long as addresses are not reused, the private key is safe. But addresses are often reused, putting such transactions under risk.

Data suggests that almost 4 million bitcoins worth 40 billion USD are currently under risk. That is 25% of the total bitcoins available. One way to secure these will be to reach a common consensus within the community not to use p2pk addresses and move all vulnerable coins from p2pkh addresses to safe, unused addresses. It is difficult because of the sensitivity of the issue and many users have forgotten their private key.

Even if we assume that this is done, in non-reused p2pkh transactions as well, there is the window of opportunity to steal coins between the time the transaction initiated and it is completed (10 minutes) when the public key is available. Currently, it takes 8 hours for a quantum computer to derive the private key, but with technological progress, nothing is out of danger.

Image Source: Deloitte

 As quoted in Deloitte’s latest report on the quantum computing and the bitcoin blockchain.

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Steve Anderrson
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

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