In evaluating the potential effects of quantum computing on Bitcoin, CoinShares, a cryptocurrency asset management firm, has concluded that the danger posed is not an imminent crisis but rather a “manageable risk.”
The company notes that while the Shor algorithm could theoretically target Bitcoin’s ECDSA and Schnorr signature protocols, the technological advancements necessary to actualize this threat are currently unavailable. Experts predict it will take at least another decade before such capabilities emerge.
CoinShares’ analysis reveals that Bitcoin’s security framework relies on elliptic curve authorization and SHA-256 hash functions. Although quantum computers may undermine certain cryptographic principles, they cannot change the fixed supply cap of 21 million $BTC or circumvent the proof-of-work system. Additionally, in contemporary address formats like P2PKH and P2SH, public keys remain concealed until transactions occur, which significantly mitigates associated risks. The firm contends that assertions claiming “25% of supply is at risk” overstate temporary threats that can be managed.
A significant aspect highlighted in their report pertains to quantifying this risk. It was indicated that around 1.6 to 1.7 million $BTC, representing roughly 8% of total supply, are stored in older P2PK addresses where public keys are visible; however, most contain minimal balances. CoinShares asserts that only about 10,200 $BTC held in UTXOs could potentially exert substantial selling pressure on markets. Disassembling these remaining assets individually would be highly inefficient both cost-wise and time-wise even under optimistic quantum scenarios.
The report also addressed timelines regarding potential threats from quantum computing capabilities; it stated a quantum computer capable of breaking secp256k1 within one year would need between ten thousand to one hundred thousand times more logical qubits than what exists today. Short-term attacks targeting mempool operations with results expected within ten minutes were deemed technically unfeasible for decades ahead; however long-term attack scenarios might become plausible within a decade but still face considerable engineering challenges.
Furthermore, CoinShares explored possible solutions for enhancing security against these emerging risks by suggesting proactive measures such as soft or hard forks aimed at transitioning towards quantum-resistant (QR) address formats could bolster investor confidence while providing safeguards against unforeseen technological advances. Nonetheless, they cautioned these approaches carry inherent risks due to reliance on untested cryptographic methods which might misallocate limited development resources and provoke discussions surrounding property rights or network neutrality concerning lost or dormant coins.
*This does not constitute investment advice.