Can Crypto Survive the Quantum Computing Revolution?

In the cryptocurrency world, threats abound. Skeptics and critics cry caution, especially to the millions of people eager to dip their financial toes into the digital currency waters. 

And with good reason. Just like the traditional financial market, the crypto world has its share of challenges. Top of mind is fraud, which was highlighted by the recent FTX Sam Bankman-Fried scandal. The alleged mishandling of customer funds and subsequent lawsuits filed against the Binance and Coinbase exchanges added to its woes. 

But there’s another silent threat to the viability of crypto that many experts fear is the real ticking time bomb: quantum computing. This quickly evolving technology threatens to upend the integrity of the blockchain, which is the crypto engine. Quantum computing’s faster processing could crack the blockchain’s code and potentially steal crypto assets in seconds or less. 

The core of the blockchain is the security of its peer-to-peer transactions, which rely on public and private cryptographic keys for the transfer of assets from one account to another. Once ordered, these transactions are verified through a complex mathematical equation that must be solved by the network. When the equation is solved, the transaction is recorded on the blockchain. These recordings are said to be “immutable” – they are transparent and visible to all on the network. Any attempt to change them would be flagged, and immediately shut down.

Quantum computers, which operate based on quantum theory, are expected to move faster than blockchains to solve these complex mathematical problems. While blockchains rely on classical computer processing using bits (0,1) to solve equations, quantum computers use qubits to run “multidimensional quantum algorithms.”

The speed of quantum computing is seen as a threat to blockchain algorithms. If the quantum computer gets hold of the public cryptographic key and can solve the transaction faster than the blockchain, the assets can be stolen.

“As long as these (blockchain) algorithms are considered to be secure, activities that do not abide by the rules, such as illegitimate cryptocurrency transactions, are discarded, incentivizing actors to behave honestly. They are assumed to be secure against powerful supercomputers, now and for the foreseeable future,” the World Economic Forum reported. “But as quantum computers evolve, this assumption is in danger of being upended _ potentially exposing hundreds of billions of dollars worth of cryptocurrencies to sophisticated cyber criminals.”

Blocking and tackling the quantum computer threat is already in action. 

“Even if everyone takes the same protection measures, quantum computers might eventually become so fast that they will undermine the Bitcoin transaction process,” the firm Deloitte wrote. “In this case, the security of the Bitcoin blockchain will be fundamentally broken. The only solution in this case is to transition to a new type of cryptography called ‘post-quantum cryptography,’ which is considered to be inherently resistant to quantum attacks. These types of algorithms present other challenges to the usability of blockchains and are being investigated by cryptographers around the world. We anticipate that future research into post-quantum cryptography will eventually bring the necessary change to build robust and future-proof blockchain applications.”

New cryptography standards

In the US, the National Institute of Standards and Technology (NIST), a division of the US Department of Commerce, is working to finalize cryptography standards that will protect users against quantum computing attacks and hacks.

“It is intended that the new public-key cryptography standards will specify one or more additional unclassified, publicly disclosed digital signature, public-key encryption, and key-establishment algorithms that are available worldwide, and are capable of protecting sensitive government information well into the foreseeable future, including after the advent of quantum computers,” the NIST states.

Blockchain isn’t the only technology that is threatened by attacks from quantum computing. The traditional financial industry could also be impacted by a quantum attack. In its white paper “Quantum Key Distribution and Blockchain,” Toshiba touts the benefits of QKD.

“QKD is the first step toward removing public-key assumptions from blockchain applications. It is used to distribute the secret keys important for protecting highly sensitive data critical to many industries. It protects data confidentiality in the finance, defense, utilities, and health sectors as well as the critical infrastructure that underpins our smart cities and smart energy grid.”

QKD uses photons (particles of light) to conduct the transaction. “Any attempt to read or copy the photons alters their encoding, allowing the secrecy of each key to be tested and guaranteed. A single photon cannot be split into smaller particles and cannot be copied without altering the information that is encoded within it. The latter is prohibited by the no-cloning theorem described above. This enables the high level of security that QKD provides.”

One of the first companies to endorse QKD is the international financial giant JPMorgan, which collaborated with Toshiba on the research.

JPMorgan has embraced digital currencies and blockchains. The bank launched its JPM Coin in 2019 and just launched its euro blockchain transactions on its network.

“At this time, QKD is the only solution that has been mathematically proven to defend against a potential quantum computing-based attack, with security guarantees based on the laws of quantum physics,” the bank said last year. 

While the quantum computing v. blockchain story is often framed for its downside potential, there is another side to the potential relationship between these two technologies.

Charles Hoskinson, CEO and Founder of Input Output Global Inc. and the Cardano blockchain, is bullish on the benefits of quantum computing on the cryptocurrency industry. 

“I don’t feel that quantum computers have a pervasive negative impact on cryptocurrencies, but instead, they can add a lot more utility,”  he said in a recent interview with Inside Quantum Technology. “While these two innovative technologies could synchronize successfully, their coming together could be more of a head-on collision than a collaboration.” 

For the sake of both innovative technologies, working to ensure collaboration versus a head-on collision will drive the future of crypto. 

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