Bitcoin’s “natural enemy” emerges

In the long run, Bitcoin's rally is actually facing a risk that has become a hot "theme" in the stock market recently, but most cryptocurrency investors may not pay attention to: quantum computing.

This emerging technology has attracted attention from all walks of life after Google announced a breakthrough in its new Willow quantum computing chip this month.

According to Google, Willow can reduce errors exponentially, solving the key challenge of quantum error correction that has been studied in the field for nearly 30 years. In addition, Willow completed a "standard benchmark calculation" in less than five minutes. Even today's fastest supercomputers would take "10 to the power of 25" years to complete this calculation - a number far exceeding the age of the universe.

For the cryptocurrency market such as Bitcoin, a fatal risk behind the development of quantum computing technology is that if the technology is used for hacker attacks, thieves may be able to easily steal Bitcoin from supposedly secure digital wallets, causing the price of the currency to plummet.

Long-term "natural enemies" appear

Relevant researchers say that quantum computing devices powerful enough to crack Bitcoin may still be a decade or more away from being truly available. Nevertheless, unless the Bitcoin developer community can further upgrade its encryption technology, the advancement of quantum technology will pose a long-term risk to Bitcoin.

Arthur Herman, a senior fellow at the Hudson Institute, a Washington think tank, said that if someone gains the ability to develop quantum computer hacks and decides to use that ability to attack cryptocurrencies, then there will be a time bomb waiting to explode in the currency circle.

Analysts also warned that quantum computing attacks on Bitcoin could also have harmful spillover effects on traditional financial markets.

A 2022 Hudson Institute study estimated that if Bitcoin was attacked by quantum hackers, it would cause more than $3 trillion in losses to cryptocurrency and other markets and trigger a deep economic recession. Herman said that since the release of the study, the potential losses caused by quantum hackers have continued to expand as Bitcoin has climbed to around $100,000 and gradually become a mainstream investment asset.

US President-elect Trump has also promised to establish a strategic reserve for the government's holdings of Bitcoin, and has hailed it as the "digital Fort Knox" - Fort Knox is the most important military training base for the US armored forces, and the Federal Reserve's vault is also located here.

However, quantum computing technology may allow hackers to easily raid this "digital Fort Knox"...

In standard computers, all data is fundamentally represented by binary 0 or 1, while quantum computers are different. It uses the strange properties of subatomic particles to represent data with "quantum bits" (qubits), which can exist in a continuous state of mixed 0 and 1.

This allows quantum computers to quickly complete tasks that standard computers would take more than a human lifetime to solve. These tasks might include developing new drugs, predicting the weather or cracking encryption used to protect sensitive data.

How does it affect the cryptocurrency world?

In the cryptocurrency world, for example, the most commonly used encryption method currently involves very large numbers called "public keys," which are multiples of two large prime numbers. These two prime numbers are combined to generate what is called a "private key." Data can be encoded with the public key and decoded with the private key.

Currently, cryptocurrency users keep their private keys secret, but public keys can be published or shared with the outside world. The advantage of this method is that it takes a long time for a standard computer to derive the private key from the public key because "factoring" - finding prime numbers that can be multiplied to get the public key, is very difficult.

But quantum computing will make factoring much easier. In 1994, an American mathematician devised an algorithm that could "factor" huge numbers in a matter of minutes, provided a powerful enough quantum computer was available.

From a cryptographic point of view, this breakthrough would threaten not only Bitcoin but also traditional finance, as many online banking systems use variations of public key cryptography. But security experts warn that Bitcoin could be a particularly tempting target for quantum hackers.

Skip Sanzeri, co-founder of QuSecure, a startup specializing in quantum-safe network security, said Bitcoin would be the target of a frenzy of attacks. Banks have certain regulations, defense mechanisms and the ability to protect their customers, while Bitcoin is almost the "Wild West." If your Bitcoin is stolen, your wallet will not compensate you.

Although hackers have stolen Bitcoin in the past, their attacks generally involved unauthorized access to cryptocurrency exchanges. A quantum computing attack would be more insidious because it would cast doubt on the security of the entire Bitcoin network, not just a handful of poorly secured cryptocurrency exchanges. Once quantum computers become powerful enough, all Bitcoins will eventually be at risk.

Some Bitcoin repositories are particularly vulnerable to quantum hackers. In the early days of Bitcoin, for example, Bitcoins were stored in addresses with exposed public keys, including about 1 million Bitcoins believed to belong to Bitcoin's mysterious creator, Satoshi Nakamoto. About 1.72 million Bitcoins, worth more than $160 billion at current prices, were stored in such addresses before they were phased out, according to Galaxy Digital.

Many cryptocurrency executives have previously said that Bitcoin could be secured in the future by adopting new encryption methods that quantum computers cannot easily crack, but such an overhaul could take years. The bigger problem is that, because of Bitcoin’s decentralized nature, changing its technology requires broad consensus among people around the world who maintain its network — similar upgrades in the past have been slow and controversial.

Even if the crypto community eventually agrees on how to quantum-proof Bitcoin, there’s another hurdle: Existing Bitcoins would need to be transferred to addresses that are resistant to quantum computing. Every individual or business that holds Bitcoin would need to perform such a transfer or risk having it stolen by a quantum hacker.