Watch out crypto-bros—it might be time to start moving assets. Researchers are making progress toward quantum computers powerful enough to undermine the mathematical assumptions that currently protect cryptocurrency and other blockchain-based assets.
Because of this, the industry needs to replace its cryptographic infrastructure before the quantum computers arrive.
“The great quantum migration is going to require the entire digital asset industry to participate,” Christopher Smith, co-founder and CEO of Quantus, a quantum-secure blockchain network.
Quantum computing is a fundamentally different approach to processing information. Traditional computers use bits represented as either 0 or 1, and are physically constrained by how tiny transistors can be miniaturized. Quantum computers use subatomic particles and trapped ions to crunch numbers via qubits—allowing the machines to theoretically perform any calculation in a fraction of the time it would take today’s technology.
Until recently, the cryptography that proves ownership of digital assets was considered essentially unbreakable. That’s because today’s classical computers would take too long to feasibly perform the calculations needed for gaining access to a so-called private key that authorizes transactions. According to reports, a standard supercomputer would take hundreds of millions of years to break a cryptography code.
But a sufficiently powerful quantum computer can change that, Smith warned. “Over $2 trillion in digital assets is secured by elliptic curve cryptography, which has been known to be quantum-vulnerable for over 30 years,” he said. That’s nearly the entire overall crypto market, which is worth $2.16 trillion.
The threat from quantum computing may be getting closer, and Smith pointed out that AI is being used to accelerate quantum research.
Google researchers have estimated that the computational resources required to attack the elliptic-curve cryptography used by cryptocurrencies may be lower than previously thought.
According to Smith and Quantus, a giant Bitcoin wallet could be an obvious target for a quantum attack. He pointed to Binance’s Bitcoin cold wallet, which he said contains more than $10 billion.
The administrative key controlling USDT could be a far more dangerous target. The key has authority over the stablecoin’s issuance, meaning a compromise could potentially allow an attacker to manipulate assets in the crypto system.
“This could be used to instantly wreck everything in DeFi,” Smith said.
But Coinbase cautioned against treating the entire crypto ecosystem as equally exposed. The cryptocurrency exchange told Fortune that bitcoin’s core infrastructure is largely safe, adding that the real vulnerability is at the wallet level.
The hard part isn’t the technology
Google proposed a 2029 target for cryptocurrency systems to migrate away from vulnerable cryptography. The National Institute of Standards and Technology has likewise been pushing organizations toward “post-quantum” cryptography, having standardized replacement algorithms designed to withstand attacks from these sufficiently powerful quantum computers.
For the industry, replacing the cryptography may be easier than deciding how to implement the migration.
Adding quantum-safe signatures to a blockchain is a solvable engineering problem, according to Coinbase. The much harder question is what happens to coins whose owners fail to migrate them in time. Coinbase’s independent Quantum Advisory Council recently published a report examining the issue of quantum migration and “abandoned coins,” including the governance questions surrounding assets that remain in vulnerable addresses.
That is what makes blockchain security different from updating the encryption on a centralized service.
A blockchain developer can create a quantum-resistant system. But if an exchange doesn’t support it, users may not be able to move their assets. If a wallet doesn’t implement it, users may remain exposed. If users don’t migrate their funds, vulnerable addresses can continue sitting on the blockchain.
“Custodians, exchanges, mobile and hardware wallet providers, blockchain developers and users will all need to take action to protect digital assets,” Smith said.
Coinbase agrees that the problem requires unanimous industry-wide coordination. The company is a founding member of the Bitcoin Security Consortium, an initiative backed by major financial institutions and Bitcoin companies including BlackRock, Fidelity Digital Assets, Block, Blockstream and Strategy.
Coinbase said it is contributing to a fund supporting Bitcoin developers working on quantum security and is dedicating engineering resources to open-source efforts related to proposals such as BIP-360 and the post-quantum migration path.
The company also said it has published a position paper assessing quantum risks to cryptocurrency and is working with developers and experts to coordinate potential upgrades.
And to be sure, building a machine capable of executing a quantum attack remains beyond current capabilities. But now is the time to get ready.
“Being a year too early is much better than being a day too late,” Smith said.
