Quantum Computing Poses a Threat to Bitcoin, Study Warns

A new paper published by Chaincode Labs on Monday, February 26th, highlights the potential risks that quantum computing poses to the Bitcoin network. The comprehensive 55-page document, authored by Anthony Milton and Clara Shikhelman, is considered the most thorough analysis of the subject to date.

The study underwent rigorous review by prominent figures in the Bitcoin community, including Gloria Zhao, a Bitcoin Core developer; Ethen Heilman, a systems engineer at Cloudflare; Shai (Deshe) Wyborski, a PhD in quantum cryptography; Alan Szepieniec, a researcher specializing in post-quantum cryptography; and Stephen DeLorme, an expert in Bitcoin and the Lightning Network.

The extensive peer review underscores the document’s reliability, positioning it as a valuable resource for addressing this emerging threat.

Up to 10 Million Bitcoins at Risk

The study suggests that the advent of quantum computers could significantly impact Bitcoin. Researchers estimate that up to 10 million bitcoins, currently valued at trillions of dollars and representing half of the circulating supply, are vulnerable.

“Analyses suggest that approximately 20 to 50% of all bitcoins in circulation (between 4 and 10 million BTC), worth hundreds of billions of dollars, are vulnerable to theft by deriving private keys from public keys.”

The vulnerability stems from:

• Outputs controlled by exposed public keys.
• The use of certain vulnerable script types.
• Address reuse after a transaction.

The study emphasizes that exchange and institutional addresses, as well as coins from the “Satoshi era” and other lost coins, are particularly at risk.

Early Bitcoin adopters used P2PK (Pay-to-Public-Key) addresses, which inherently expose the public key. In other cases, the public key is revealed only after an outgoing transaction. This highlights the risk associated with address reuse, a common practice among exchanges and large companies.

Taproot (P2TR) addresses, currently the most widely used, are considered the easiest to protect with a soft fork. However, while they account for 32.5% of transactions, they hold only 0.74% of the total Bitcoin supply.

“If the public keys of one of the less susceptible script types (P2PKH, P2SH, P2WPKH, P2WSH) have already been exposed—for example, through a previous spend from the same address—then these scripts also become vulnerable to long-range attacks.”

Quantum Computing Threatens Bitcoin Mining

Beyond Bitcoin addresses, the study indicates that Bitcoin mining is also susceptible to quantum computing attacks, although the risks are considered lower.

“Unlike classical mining, quantum mining cannot be easily parallelized, making it much more difficult to scale and much less efficient in practice.”

One potential attack involves a quantum miner propagating a new block immediately after it’s discovered by a regular miner.

This could lead to:

• Numerous stale blocks.
• Momentary forks, dividing the network’s honest computing power.
• Increased vulnerability to 51% attacks.

The study also raises concerns about the centralization of mining, similar to the shift from CPU to GPU and then to ASICs, but on a much larger scale.

“Researchers suggest that this inherent flaw in all conventional Proof-of-Work (PoW) systems could reduce Bitcoin mining to just two dominant quantum miners, effectively compromising the decentralized foundation that provides security and censorship resistance to Bitcoin.”

However, the study notes that quantum computers would likely have a lower hash rate and energy efficiency compared to current ASICs.

Timeline for a Solution

Experts estimate that quantum computing could pose a significant threat to Bitcoin and other cryptographic systems within the next 10 years, while others believe it could take longer.

The Chaincode Labs paper suggests that a solution could be implemented in Bitcoin within 2 to 7 years, depending on the urgency. An update would need to be introduced well before the arrival of quantum computers, explaining the current interest in the topic.

“Based on the timelines of SegWit and Taproot, and considering generally what needs to be achieved for Bitcoin to adapt to a post-quantum world, we estimate that a long-term effort would take approximately 7 years to go through the stages of BIP research and development, implementation, and finally, migration.”

“Our visualization of the timeline illustrates how this range results from varying durations in each phase: BIP research and development (~2.5 years), implementation (~1.5 years), and migration (~3 years).”

Given the potential for an earlier threat, the paper proposes a contingency plan.

“We propose that Bitcoin’s quantum resistance strategy adopt a dual approach: contingency measures that offer minimal but functional protection against quantum computers, completed in about 2 years, and a comprehensive path that allows for in-depth exploration of the problem and the development of a complete solution, taking about 7 years.”

Potential Solutions

One proposed solution is BIP-360, which introduces a new address type called P2QRH (Pay-to-Quantum-Resistant-Hash). Its implementation would be relatively straightforward, requiring only a soft fork.

However, the study notes that this solution faces resistance due to the use of numerous post-quantum signature schemes, adding unnecessary complexity. The larger transaction sizes associated with these addresses would also increase competition for block space.

Another solution, QRAMP, has sparked debate due to its aggressive nature.

A more detailed list presents various signature algorithms that could be implemented in Bitcoin, detailing their cost differences.

Lost Bitcoins Could Re-enter the Market

Even with an update, many bitcoins could re-enter the market. A prime example is Satoshi Nakamoto’s 1.1 million bitcoins.

To protect their coins from quantum attacks, investors would need to move their bitcoins to new addresses. However, this is impossible for Satoshi’s coins and many others, potentially triggering a race to steal them.

One proposed solution involves setting a deadline for moving bitcoins from vulnerable addresses to more secure ones. After this period, the coins would become unusable.

An estimated 2 to 3 million bitcoins are lost and could be stolen with quantum computers even after an update. Combined with Satoshi’s coins, this could exceed 4.1 million bitcoins, approximately 19.5% of the total supply.

For comparison, ETFs and public/private companies currently hold 2.5 million coins.

“Therefore, a theft—and subsequent market dump—could cause the price of Bitcoin to plummet.”

Burning these coins could not only protect Bitcoin but also potentially boost its price by reducing the supply to less than 21 million units. However, some argue that this approach would constitute censorship, contradicting Bitcoin’s fundamental principles.

While the threat of quantum computers remains theoretical, its complexity warrants thorough and proactive study.

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