Quantum Computing's Threat to Cryptocurrencies May Be Overstated

Chinese Researchers Breach Encryption Algorithms

Recent reports suggest that Chinese researchers have used a D-Wave quantum computer to break encryption algorithms that safeguard bank accounts, military data, and cryptocurrency wallets. This has raised concerns in the crypto world. According to a peer-reviewed paper by scientists at Shanghai University, this is the first time a real quantum computer has posed a substantial threat to multiple full-scale Substitution-Permutation Network (SPN) structured algorithms currently in use. The paper discusses the breaking of RSA (Rivest-Shamir-Adleman) encryption, a widely used public-key cryptosystem.

Implications of Quantum Computing on Cryptocurrencies

Details about the research are still emerging, making it difficult to determine the extent of the threat to cryptocurrencies and blockchain technology. If the researchers' results are verified and can be replicated, it would mark a significant step in the evolution of quantum computing. However, it remains to be seen whether the password-protection mechanisms used in many industries, including banking and cryptocurrencies, might soon be vulnerable.

Quantum Computing's Evolution

Quantum computing, which uses atomic "spin" instead of an electrical charge to represent binary 1’s and 0’s, is believed to be evolving at an exponential rate. However, full-purpose quantum computing devices have yet to emerge at scale. The D-Wave machines used in Shanghai are capable of conducting specialized tasks only. If universal quantum computers do emerge, they could potentially threaten the elliptic curve cryptographic structure which has served Bitcoin and other cryptocurrencies well until now.

Why Prime Factorization Matters

Factorization is a process where a number can be written as the product of smaller whole numbers. Efficient prime number factorization is considered crucial for breaking an RSA public-key cryptosystem. RSA is more than just encryption; it is also a key generation scheme that typically involves multiplying large prime numbers. While it is easy to multiply two prime numbers, it is very difficult to find the two prime numbers that are factors of a product, especially as the numbers get larger.

Crypto Keys Are Safe for Now

Assuming that the Shanghai scientists have found a way to use a quantum annealer to successfully breach cryptographic algorithms, the impact on the crypto industry may not be as severe as feared. Symmetric ciphers such as AES-128 used for data encryption are not vulnerable to this kind of attack as they do not rely on number factorization. However, properly encrypted passwords and other data will remain encrypted even if the approach presented in the research scales up and becomes widely available.

Quantum-Resistant Cryptography

Ethereum co-founder Vitalik Buterin suggested that a "hard fork" could subvert a quantum attack on Ethereum. However, executing a hard fork would be complex, require broad community consensus, and may not restore all lost assets or fully repair trust in the network. Therefore, it’s crucial to implement quantum-resistant cryptography before such an attack happens to avoid this situation.

Need for Safeguards

There is a consensus that current cybersecurity defenses need to be revisited. More attention needs to be paid to network capacity loads and password protection in a world with quantum computing. The blockchain world must prepare for the arrival of dangerous quantum computers by planning a transition to post-quantum cryptography and developing safeguards that can resist attack even by a fully-fledged quantum adversary.

Bottom Line

While the development of quantum computing is a significant leap in technology, its threat to cryptocurrencies may be overstated. The crypto industry has shown resilience and adaptability in the face of technological advancements and threats. It's important to remember that the industry is still in its infancy, and there is much room for growth and improvement. What are your thoughts on this issue? Share this article with your friends and join the conversation. Don't forget to sign up for the Daily Briefing, which is every day at 6 pm.