By Eray Arda Akartuna
AML, Blockchain and Cyber analyst
During the Covid-19 pandemic, interest in cryptocurrencies has massively increased, sending Bitcoin (the original cryptocurrency) surging to new all-time highs. Already, financial institutions such as Citibank are predicting that Bitcoin might become the preferred currency of the future. As a fast, anonymous, decentralised and global payment method, cryptocurrencies are certain to attract further attention from investors (special shoutout to Elon Musk), underbanked populations and, incidentally, criminals across the world.
Not all predictions about cryptocurrencies are as optimistic, however. Doomsday predictions about a looming ‘Bitcoin crash’ are periodically common, with one future development perhaps causing more concern than others. That development is quantum computing, a technology so powerful that it could render the current encryption methods protecting our Bitcoins vulnerable to defeat.
Quantum computing uses ‘qubits’, as opposed to standard ‘bits’, to vastly improve the speed of computational calculations. Unlike ‘bits’ used in classical computing transistors, qubits can attain quantum ‘superposition’ (allowing them to take a combination of the binary values 0 and/or 1 simultaneously) and ‘entanglement’ (allowing a change in one qubit to also initiate a predictable change the value of a paired qubit). This means that quantum computers can perform complex mathematical tasks that would otherwise be impossible to complete in a feasible timeframe using classical computing, a phenomenon known as ‘quantum supremacy’.
Quantum computers are not yet widely available. The technology is still in early development, with the computers existing today amassing only around 50-60 qubits. Investments by Google, IBM and D-Wave (amongst others) are likely to significantly enhance the computing power of quantum machines in the next decade. Already in late 2020, a 5,000 qubit machine was announced by D-Wave. Both Google and IBM have announced plans to build million-qubit computers by 2029 and 2030 respectively.
So what is the threat to blockchain? When a cryptocurrency transaction is made, a number of cryptographic encryption measures are implemented to secure that transaction, negating the need for a centralised authority (such as a bank) to ensure trust on the network. These include secure hashing algorithms (SHAs) to generate a ‘hash’ for each block on a chain, which makes identifying the inputted transaction information from said hash infeasible in a realistic timeframe. Another security feature is the use of the Elliptic Curve Digital Signature Algorithm (ECDSA). This generates a private key for each user and also derives a public key from them. These keys are needed to sign transactions on the blockchain ecosystem. The ECDSA prevents malicious users from deriving a user’s private key from their public key, as the encryption method (just like hashing) is a one-way process that makes identifying the input key from the output practically infeasible in a realistic amount of time.
De-encrypting the security features on blockchains would involve the trial and error of several billion different hash or key combinations – a feat not possible with classical computing speeds. With quantum computing able to perform calculations at an immensely faster speed, however, the safety of these encryption methods are coming into question. While SHAs are still presumed safe, a quantum computer of around 4,000 qubits would be sufficient to break ECDSA encryptions, potentially in just 30 minutes, allowing users’ private keys to be unearthed from their public ones. This can allow cryptocurrency theft from wallets with known public keys (i.e., any wallet that has previously been involved in a transaction recorded on the blockchain).
Quantum machines capable of reverse engineering ECDSA are due in the next couple of years. However, this does not mean the threat to blockchain is imminent. It will take considerably more time for quantum computers to become mainstream and fall into the hands of criminals. This has not prevented conspiracy theorists from alleging that blockchain-averse governments have secretly developed quantum computers to prevent decentralised currency from becoming more mainstream.
Whatever the case may be, blockchains are not completely defenceless against the quantum threat. There are a number of solutions that blockchain developers can use to upgrade their encryption techniques to become quantum resistant. The three main solutions are patching existing blockchains, creating quantum-resistant blockchains (QRBs) from scratch, or creating quantum blockchains in their entirety.
Patching and QRBs essentially follow the same principle, which is to replace ECDSA with a quantum resistant encryption method. The United States National Institute for Standards and Technology (NIST), an important standard-setter for cryptography, designed a competition in 2020 for quantum resistant encryption techniques. Two main alternatives, namely the Leighton-Micali (LMS) and the eXtended Merkle Signature Scheme (XMSS), have emerged as potential replacements to the ECDSA. The latter is already used by the Quantum Resistant Ledger (QRL), based in Switzerland, which is a QRB that allows the trading of its own cryptocurrency of the same name (QRL). Existing blockchains would only need to ‘fork’ their chains to a new quantum resistant protocol such as LMS or XMSS to prevent quantum-enabled cryptocurrency theft.
A more visionary proposal is to bring blockchains into the quantum space in their entirety. The technology to do this does not yet exist, but a proposal for a quantum blockchain has already been made. Such a blockchain would use a ‘quantum web’, where each block is represented by a quantum particle that is entangled with the particle representing the previous block. The nature of quantum entanglement, which transcends time, would mean that tampering with such a blockchain would be completely impossible without destroying it in its entirety. Not only would such a blockchain be resistant to quantum-enabled hacking, but it would also be more resilient to other types of cryptocurrency crime. The associated technology, however, is still in its infancy and may take time before such vast capabilities of it are trusted and realised.
So will quantum defeat blockchains? The answer is no. Although it has the capabilities to circumvent current encryption techniques such as ECDSA, machines with that level of power are not yet readily available and are nowhere near being widely available for criminal abuse. Even if that day comes, blockchains can readily adopt alternative encryption techniques that are quantum resistant. While the threat may be a fair few years away, blockchain developers and financial services will likely need to address this risk sooner rather than later; encryption techniques used to secure data transmission in the financial sector are also not resistant to quantum computing, and will too require updating. Although quantum is not the end of blockchain, it is nevertheless clear that big changes will soon be necessary, and encryption techniques will need to constantly be updated as computers become faster and more intelligent.
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