Quantum Cryptography Poses Threat to Cryptocurrencies
QuSecure commissioned a study designed to show what a single quantum attack would do to cryptocurrencies via the Hudson Institute. A successful quantum attack would be devastating to cryptocurrencies and the U.S. economy.
Cryptocurrencies are touted as the future of money. In simple terms, cryptocurrency is a digital form of currency with a decentralized structure based on a public blockchain ledger. Arising from the financial crisis of 2008, cryptocurrencies have grown dramatically since. Bitcoin (BTC) is still the biggest cryptocurrency and can boast as the third most circulated currency in the world, behind only the euro and U.S. dollar. Other major players in cryptocurrency include Ethereum (ETH), Binance Coin (BNB), and Tether (USDT). Millennials and GenZ are driving the acceptance of cryptocurrencies, choosing to invest more heavily in cryptocurrencies than traditional investments. Investors can choose one of the well-known cryptocurrencies or can opt to invest in litecoins or memecoins, which are more volatile but can yield incredible returns.
After the recession of 2008, people’s faith in the institutions of banking and government was severely shaken. Bitcoin was founded only two months after Lehman Brothers Holdings Inc. filed for bankruptcy. Cryptocurrencies are designed to be independent of any centralized control. Government bodies have proven to be corrupt or incapable. And centralized banking has shown to be dated and inflexible. Blockchain technology also called Distributed Ledger Technology (DLT), and Elliptic Curve Cryptography (ECC) are used to authenticate and secure transactions.
Once a transaction has recorded in the blockchain, it cannot be removed. When a coin is purchased, the transaction is transmitted to the blockchain network. Cryptocurrency miners around the world work to solve math problems or computer algorithms using their computers. There are rewards from completing the algorithm and creating a new block. The purchase is then cryptographically confirmed, and the distributed ledger now logs that sale.
Distributed ledger technology (DLT) is far stronger and more secure than most centralized banking transactions. But Bitcoin and other cryptocurrencies have been developed using current cryptographic methods to protect against current cybersecurity threats. There have been no significant efforts to prepare for the threat of quantum cybersecurity threats posed by quantum computers. As it stands, blockchain uses ECC factorization algorithms that create a signature from the private key of the wallet that owns that cryptocurrency. These algorithms would easily be decrypted by a quantum computer attack. Quantum encryption is needed to prevent this kind of breach.
There are thousands of malicious actors in the cryptocurrency world. Cryptocurrency scams have become incredibly common, with scammers using cloned websites and applications to get investors to input their sensitive account information. Quantum computers in the hands of these kinds of individuals could spell major problems for the security of cryptocurrency. A quantum attack could result in over $3 trillion in damages to the US economy if it happened today, according to a study by Quantum Alliance Initiative (QAI) and Oxford. But quantum computing at that level isn’t expected for another 5-10 years, providing plenty of time for cryptocurrencies to continue to grow.
There are two major hurdles to preventing a devastating quantum cyberattack. The very decentralized nature of cryptocurrencies can pose its own risk. No one owns Bitcoin, so there is no regulation or standardization required among users. Quantum cybersecurity cannot be forced on these communities. The community involved with a specific cryptocurrency will need to decide to adopt quantum encryption rules to protect against new post-quantum cryptography. This is going to require a significant public awareness campaign, led by well-known individuals in the cryptocurrency community. The second hurdle involves the evolving nature of quantum computing. The limits of quantum cryptography are not known at this time. There are no current quantum cybersecurity standards in place, although the National Institute for Standards and Technology (NIST) is working to resolve this. There is a major opportunity here for companies in the cryptocurrency or cybersecurity world, to develop and provide quantum encryption methods and quantum cybersecurity software to protect cryptocurrency assets against quantum cryptography attacks. Quantum encryption would provide the most secure encryption methods available and upgrade the current decentralized ledger technology.