Stefan Thomas, a German programmer and crypto trader, ran into a problem a few months ago. He forgot the password that allowed him to unlock his digital wallet, which contains 7,002 bitcoins (worth $265 million). Now, it is said that quantum computers, which will be millions of times faster than traditional computers, could easily help him crack the code.
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Although quantum computing is still in its early stages, governments and private sector companies such as Microsoft and Googleare working to make it a reality. It is believed that within about ten years, quantum computers may be powerful enough to break the cryptographic security that protects cell phones, bank accounts, email addresses and bitcoin wallets.
“If you had a quantum computer today and you were a state sponsor – say China – probably in about eight years, you could crack wallets on the blockchain,” said Fred Thiel, CEO of Marathon Digital Holdings, which specializes in cryptocurrency mining. That’s why experts around the world are racing to create a cryptographic protocol that would be resistant to such attacks.
Quantum hacking
Currently, what is called “asymmetric cryptography” is mainly used, in which individuals use a private-public key pair to access various services and accounts, such as emails and crypto wallets.
“Every financial institution, every connection to your phone — it’s based on asymmetric cryptography, which is vulnerable to hacking with a quantum computer,” said Thiel. Thiel is a former director of Utimaco, one of the largest crypto companies in Europe.
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The public-private key pair allows users to produce a digital signature, using their private key, which can be verified by anyone who has the corresponding public key.
In the case of cryptocurrencies like bitcoin, this digital signature is called the “Elliptic Curve Digital Signature Algorithm” and ensures that bitcoin can only be used by its legitimate owner.
How could quantum computers be used to hack bitcoin wallets? Theoretically, someone using quantum computers could reverse-engineer the private key, forge the digital signature, and then empty the bitcoin wallet.
“Among the first types of digital signatures that quantum computers will break are elliptic curves, as we use them today for bitcoin wallets,” said Thorsten Groetker, former CTO of Utimaco and one of the leading experts in the field of quantum computing.
"But this could happen if we don't do anything," he said.
Strengthening bitcoin wallets
Experts say they are not too worried about hacking bitcoin wallets with quantum computers.
Nic Carter of Castle Island Venturesstressed that if something like this happens, it will be done gradually.
“We would have received a warning if quantum computers reached the stage of maturity and sophistication that would allow them to threaten basic encryption protocols,” he said. “It’s not something that’s going to happen overnight.”
On the other hand, because it is something that can be done, experts and researchers have already started taking steps and creating encryption that will be resistant to quantum hacking. So by the time they are able to hack a bitcoin wallet, there will be more security.
“The National Institute of Science and Technology (NIST) is working on a new encryption standard,” Thiel said.
“It’s a technical problem and there is a technical solution for it,” Groetker said. “There are new and secure algorithms for digital signatures. … You will have time to transfer your money from one account to another.”
Such a secure encryption standard is expected to be ready by 2024. On the other hand, experts do not expect quantum computers to be able to hack a bitcoin wallet by then.
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“All bitcoin or ethereum holders will move their money from the digital identity secured with the old key type to a new wallet or a new account, which will be secured with a new key type,” Groetker said.
However, this kind of security upgrade requires users to be careful.
“No matter how long it takes, not everyone will move their money in time,” Groetker said. Inevitably, there will be users who forget their passwords or use weak keys.
Source: CNBC
