There is a lot of speculation when it comes to the future of Bitcoin, blockchain technology, and cryptocurrencies, in general. Particularly, as more and more people begin to explore cryptocurrencies and as value rises, it is easy to focus much more on the “currency” aspect of Bitcoin and less on the “crypto” part. Bitcoin’s viability as a currency, however, depends on encryption.
Blockchain Security
The security and immutability of the blockchain is fundamental to Bitcoin’s value and operation. Maintaining a distributed ledger of historical transactions is what prevents people from being able to spend Bitcoin that they don’t have, spend the same Bitcoin twice, or make false claims about sending or receiving payments.
Each Bitcoin transaction is linked to the previous one through an encrypted time stamp. Identical copies of the blockchain are stored across thousands of computers distributed all over the world. Changing even one item on the blockchain would require changing the entire history of the blockchain across a majority of the distributed copies, simultaneously. This would require computing power well beyond the scope of what is currently deemed possible, even for a sophisticated nation state.
The Threat of Quantum Computing
Quantum computing promises to usher in an age of computer processing that is infinitely more powerful than the systems we use today. Whereas traditional computers process data in a binary way, where bits are either 1’s or 0’s, quantum computers use units called “qubits”, where the possibility of being either a 1 or 0 exists simultaneously in a kind of mind-bending limbo that is outside the realm of Newtonian space (i.e. beyond our general perception of reality). This liminal state of potential to be 1 or 0, simultaneously, is called “superposition.” Quantum computing leverages this to perform incredibly complex calculations at an exponentially faster rate than a traditional computer could ever hope to achieve.
The technological challenge of building and operating quantum computers is massive, but companies and institutions are making headway in this field. Naturally, many people have wondered how potential advancements in technology, like quantum computing, could affect Bitcoin.
Fortunately, Satoshi Nakamoto, Bitcoin’s creator, recognised the potential for technological advancements to impact Bitcoin, and a level of quantum resistance is already built in to Bitcoin’s encryption protocol. While it is impossible to divine precisely what the future of quantum computing will look like, there is a high likelihood that Bitcoin will actually remain fairly unscathed by quantum attacks.
Bitcoin’s Encryption Algorithms
Bitcoin primarily relies on two types of cryptography: elliptic curve and hashing. Elliptic curve cryptography (ECC), very basically, relies on prime number factorisation. This is what Bitcoin uses to generate public/private keys. Under current conditions, the main obstacle in terms of breaking elliptic curve encryption is time. Today, even a high-end traditional computer would take years to perform the calculations required to “crack” ECC. However, there are quantum algorithms, such as Shor’s algorithm, that will almost certainly make ECC vulnerable to quantum computers.
The good news for Bitcoin is that while quantum computing may break ECC, hashing is not nearly as vulnerable. Part of Bitcoin’s design intentionally leverages this fact. Although ECC is currently used to generate public/private keys for Bitcoin, public keys are passed through a one-way SHA-256 hashing function several times to generate a Bitcoin wallet address. This means that while a quantum attacker could, in theory, derive your public key from your private key, they could not get your public key from your Bitcoin address.
When you actually make a Bitcoin transaction, you must broadcast your public key to the blockchain. If you use a new address for each transaction, however, which is recommended, there isn’t much room for a quantum attacker to benefit. The only time your account would be vulnerable would be the brief window between the time you broadcast the transaction (including the public key) to the network and the time it is confirmed. By the time an attacker could break the elliptic curve encryption to get your private key and access your account, that wallet would already be empty. The funds would have gone to the recipient, and anything remaining in the account would be moved to a new address with new keys.
Since quantum computers are so complex and difficult to build, it will likely take many years to build quantum computers capable of performing at the level required to break even Bitcoin’s ECC, let alone its hashing encryption. Satoshi Nakamoto also designed Bitcoin in such a way that hashing algorithms can be updated without disrupting the blockchain. Many experts have suggested that Bitcoin update from SHA-256 to a more advanced algorithm, SHA-384, as a preventative measure against potential future quantum attacks.
