Why privacy tech is immune to quantum threat coming for Bitcoin, says Coinbase

Crypto privacy protocols are immune to the threat of quantum attacks on Bitcoin and other digital assets, researchers have found.

Zero-knowledge proof systems, including networks such as Aleo and Aztec, and mixers such as Railgun and PrivacyPools, rely on information-theoretic systems which are secure even against infinitely powerful attackers because of how information is structured and shared, not because of encryption.

That makes them mathematically immune to quantum attacks, according to a Coinbase-led study co-authored with researchers from Stanford and the Ethereum Foundation, and shared with DL News.

Their findings come amid growing concern over rapid advances in computing hardware that are expected to impact cryptographic systems.

That threat has been heard at the top of Wall Street. In January, finance leaders, including UBS CEO Sergio Ermotti, Jefferies’ head of equity strategy Christopher Wood, and hedge fund manager Ray Dalio, all sounded the alarm on Bitcoin’s vulnerability.

In March, Google shook the crypto world with a report warning that new quantum computers could crack the encryption that protects Bitcoin, Ethereum and other cryptocurrencies in as little as nine minutes.

“We firmly believe that a large-scale fault-tolerant quantum computer will eventually be built, and that blockchains need to prepare for this eventuality,” the study said.

At the same time, the report makes clear that the threat is not imminent and that preparation — not panic — is the correct response.

It is a recommendation shared by brokerage firm Bernstein, which described quantum computing earlier in April as “neither existential, nor novel, and also not limited to crypto.”

Who’s most vulnerable?

The most exposed assets are those secured by elliptic-curve signatures, in which the public key is already visible onchain, the researchers found.

Bitcoin is a prime example, the Coinbase researchers say. Roughly 6.9 million coins are held in addresses whose public keys have been revealed. About 1.7 million of those are old pay-to-public-key outputs, including early “Satoshi-era” coins.

Once a sufficiently powerful quantum computer exists, those keys could be harvested and broken. The largest whale addresses — some holding more than 1,000 Bitcoin — would be the first logical targets.

The report suggests these addresses function as the canary in a coal mine. If they move unexpectedly, markets will know something seismic has happened.

Research from Chaincode Labs suggests that between 20% and 50% of all Bitcoin — some $900 billion worth — could be vulnerable in such a scenario.

Meanwhile, Bitcoin contributors are advancing proposals such as BIP360 to address signature vulnerabilities before they materialise.

The Ethereum Foundation has published its own four-part roadmap to upgrade its $260 billion network by the same date.

Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email him at [email protected].