El Salvador Splits Bitcoin Holdings Over Quantum Computing Security Concerns

TLDR

• El Salvador moved its 6,286 Bitcoin holdings from one address to 14 separate addresses for security reasons
• The move was motivated by quantum computing threats that could potentially break Bitcoin’s encryption
• Each new address holds a maximum of 500 Bitcoin to reduce exposure risks
• El Salvador claims to buy 1 Bitcoin daily, but IMF says no purchases since February 2024
• The country’s Bitcoin reserve is worth about $686 million at current prices

El Salvador has moved its national Bitcoin reserve from a single address to 14 separate addresses. The Central American country cited quantum computing threats as the main reason for the change.

The country’s National Bitcoin Office announced the move on Friday. They said it was part of a plan to improve security for their Bitcoin holdings.

El Salvador currently holds 6,286 Bitcoin in its national reserve. At current prices of around $109,204 per Bitcoin, this equals about $686 million in cryptocurrency.

The Bitcoin Office explained that quantum computers could threaten Bitcoin security. They noted that quantum computers might be able to break the encryption that protects Bitcoin wallets.

Security Through Distribution

The new system splits the Bitcoin holdings into smaller amounts. Each address now holds no more than 500 Bitcoin. This approach reduces the risk if one address becomes compromised.

Before this change, El Salvador kept all its Bitcoin in one address. The government said this was done for transparency purposes. Now they are using multiple addresses as a security measure.

The move follows standard practices that privacy experts recommend. Most Bitcoin users are advised to spread their holdings across different addresses rather than keeping everything in one place.

President Nayib Bukele previously announced that El Salvador would buy one Bitcoin every day. The country started this program in 2022 as part of building a national Bitcoin reserve.

Conflicting Reports on Purchases

Recent data shows El Salvador bought one Bitcoin on Sunday. However, this conflicts with reports from the International Monetary Fund. The IMF says El Salvador has not purchased Bitcoin since February 2024.

In July, El Salvador’s finance minister and central bank president told the IMF that the government stopped buying Bitcoin. This statement was part of a loan agreement with the IMF.

The IMF deal required El Salvador to scale back its Bitcoin activities. Despite this agreement, the Bitcoin Office continues to announce daily purchases on social media.

Neither President Bukele nor his office has directly addressed the IMF report. The Bitcoin Office website still claims the country buys one Bitcoin daily.

Quantum computing experts say the threat to Bitcoin remains years away. Analysts from Bernstein Research said any practical threat to Bitcoin from quantum computers is still decades in the future.

The Bitcoin Office noted that when Bitcoin transactions are signed, the public key becomes visible. This visibility could potentially expose the address to quantum attacks that might discover private keys.

El Salvador became the first country to make Bitcoin legal tender in 2021. The country has faced criticism from international organizations over its Bitcoin adoption.

The latest address changes represent the most recent development in El Salvador’s Bitcoin strategy as of Sunday’s reported purchase.

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