Summary Report
- Quantum computers may be able to break existing blockchain encryption, putting billions in cryptocurrency assets at risk, according to a quantum policy expert.
- Quantum-resistant cryptography and random-number generators are emerging as key solutions to protect blockchain networks from quantum attacks.
- Companies are already rolling out secure blockchain technology to counter these future threats.
Cryptocurrencies are growing.
Quantum computing is mature.
Both crypto and quantum are gaining the attention of presidential candidates and international policy makers, who want to access both the power of this new technology, as well as the wider communities of advocates.
In particular, professionals in these fields may be happy with this development. However, the two deep technologies are on a collision course.
Quantum computing is poised to disrupt many different industries, and the world of cryptocurrencies is no exception, points out Arthur Herman in a recent op-ed in the Korea Herald. Herman, a senior fellow at the Hudson Institute and director of the Quantum Alliance Initiative, wrote that the same technology that could unlock massive computing power could also bring existing cryptographic systems, including those that protect blockchain networks, to bear. , vulnerable to attacks.
This alarming possibility, he argued, should be a wake-up call for the cryptocurrency industry and anyone who relies on blockchain technology.
Herman’s analysis highlights the inherent risks that digital computing brings to blockchain and cryptocurrencies. Currently, blockchain relies on Distributed Ledger Technology (DLT), a form of decentralized encryption that allows for secure, anonymous transactions.
“Cryptocurrencies prefer to use blockchain or DLT because it allows all parties to track, verify, and agree on transactions, even while the individual participants are anonymous,” Herman explained in the piece. .
Although critics like to minimize cryptocurrency and blockchain as mere speculative tools, other experts disagree that they see the technology as enabling entirely new economies and business models.
Chris Dixon, the general partner of Andreessen Horowitz, who leads a16z crypto, which invests in web3 technology, wrote that the blockchain gave birth to two cultures: the computer and the casino.
Dixon writes: Two different cultures are interested in blockchain. The first sees blockchain as a way to build new networks. I call this practice computing because, at its core, it is about blockchains that enable new computing activities. Other cultures are often interested in speculation and money-making. Those in the right mind see blockchain only as a way to create new business tokens. I call this practice a casino because, at its core, it’s really just gambling.”
Herman pointed out that big companies are among the advocates of the traditional computer camp.
“Microsoft, Walmart and JPMorgan have already started deploying their own blockchain networks in which partners, suppliers or customers are allowed to participate, providing thousands of transactions per second,” he wrote.
However, as quantum computers become more advanced, the encryption methods that protect transactions may become obsolete. Herman pointed out that classical cryptographic methods, including Elliptic Curve Cryptography (ECC), can be easily broken by numerical algorithms such as Shor’s algorithm.
“In short, blockchains that use the same cryptographic architecture as other forms of DLT will have the same risk of computer risk as other digital technologies,” Herman wrote.
The potential damage from this scenario could be catastrophic. According to a study by the Quantum Alliance Initiative, a successful quantum attack on Bitcoin alone could lead to the loss of at least $3 trillion, a blow that would send a wave to the world economy.
Herman warned, “The real danger about the future of blockchain is that it will be used to build critical digital infrastructure before serious security vulnerabilities have been fully explored. Imagine a large insurance company with huge costs.” providing all its customers with a blockchain-based network, then three years later they have to tear it all apart to install a more secure network, in its place.
Despite the negative outlook, Herman offers a solution within the technology that poses the threat. Quantum cryptography, specifically random-number generators and quantum-resilience algorithms, can provide the protection necessary to protect blockchain networks from quantum attacks.
Random number generators are already implemented today by banks, governments, and private cloud providers. Adding quantum keys to blockchain software, and all encrypted data, will provide unbreakable security against both classical and quantum computers,” he noted.
Moreover, the US National Institute of Standards and Technology (NIST) has stepped up to address the issue by releasing standards for post-cryptography. Many quantum-resilient algorithms are designed to resist attacks from quantum computers, making them an important part of the next generation of blockchain security.
“Just as asymmetric encryption uses hard math problems to solve on classical computers, post-quantum cryptography uses hard math problems to solve on quantum computers,” Herman explained.
The transition to quantum-resistant blockchain systems has already begun. Herman cited the example of Quantum Resistant Ledger, a UK-based company led by Dr. Peter Waterland, which is working on developing DLT systems that can withstand quantum attacks. Such efforts suggest a broader shift towards securing digital assets against the coming quantum threat.
Looking ahead, Herman suggests that an integrated approach combining crypto, blockchain and quantum technologies could open a new era of digital finance and security.
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