Golden Encyclopedia | Can Quantum Computers Really Crack Bitcoin?

Author: Max Moeller, CoinTelegraph; Compiled by: Bai Shui, Jinse Caijing

1. The Threat of Quantum Computing to Bitcoin

Bitcoin uses the SHA-256 hashing algorithm, which is a cryptographic algorithm developed by the National Security Agency (NSA) of the United States. SHA-256 can prevent brute force attacks against the Bitcoin network, as decrypting with existing hardware may take decades. However, a new threat to SHA-256 is quantum computing, which is a method of computing that utilizes principles of quantum physics and operates at speeds far exceeding traditional computing.

Fundamentally, quantum computing utilizes quantum bits (qubits), which can exist in multiple states. This is in contrast to classical (binary) computing that uses binary bits (1 and 0). In 1994, mathematician Peter Shor proposed an algorithm that enables quantum computers to solve complex algorithms in seconds, while traditional hardware would take decades. At that time, there was no hardware capable of running the algorithm effectively, but recent advancements like Google Willow are approaching this capability.

Quantum computing combined with Shor's algorithm could compromise the Bitcoin encryption system as we know it. Shor's algorithm enables quantum computers to solve complex mathematical problems at super-fast speeds, which could threaten the security of Bitcoin.

2. The Quantum Threat to Bitcoin: How Serious is the Danger?

Bitcoin is susceptible to quantum computing, but how significant is the risk?

When creating a cryptocurrency wallet, it generates two important things: a private key and a public key. The private key is a secret code similar to a password that you must keep secure. The public key is generated from your private key, while your wallet address (similar to a bank account number) is generated from the public key.

You share your wallet address with others so they can send you cryptocurrency, just like you share your email address for others to contact you. However, you should never share your private key. It's like the password to your email account—only you can access and use the funds in your wallet.

Your private key is like the master password that controls your cryptocurrency wallet. With this private key, your wallet can create multiple public keys, each of which generates a wallet address.

For example, if you use a hardware wallet, it has only one private key but can create an unlimited number of public keys (wallet addresses). This means you can set different addresses for each cryptocurrency supported by the wallet, and you can even set multiple addresses for the same cryptocurrency, all managed by one private key.

Although generating a public key from a private key is simple, deriving a private key from a public key is extremely difficult—almost impossible—ensuring the security of your wallet. Each time you send cryptocurrency, your private key creates a special code called a signature. This signature proves that you own the funds and are willing to send them. The system that uses your private key, public key, and signature to secure transactions is called the Elliptic Curve Digital Signature Algorithm (ECDSA).

People believe that quantum computing can reverse this process, generating private keys from public keys. There are concerns that this could lead to many Bitcoin holders (especially whales and wallets from the Satoshi era) losing their funds.

Bitcoin address types and quantum risks

When you send Bitcoin, you use a specific type of address to indicate the payment. Each address type has its unique characteristics that affect security, privacy, and vulnerability to quantum computing attacks (such as Shor's algorithm).

P2PK address type

When you make a payment to someone using Bitcoin, the transaction is typically referred to as "Payment to Public Key" (P2PK). According to a report by consulting firm Deloitte, this was the most common payment method in 2009.

Most of the original bitcoins issued at the network's launch are stored in wallets of the P2PK address type, mainly because they have been sending transactions since the introduction of Bitcoin in 2009. These addresses are long (up to 130 characters), making them less convenient for users to use.

P2PK address type wallets are the most vulnerable to attacks from the Shor algorithm, as it can brute force the private keys in P2PK wallet addresses.

P2PKH address type

There is also a second type of address that has stronger resistance to the Shor algorithm: Pay to Public Key Hash (P2PKH). P2PKH addresses are shorter and are generated from the hash of a public key created using the SHA-256 and RIPEMD-160 algorithms (a unique hexadecimal value), rather than displaying the full key itself.

These addresses are shorter (33-34 characters), start with "1", and are encoded in Base58 format. Such addresses are widely used and include a checksum to prevent typographical errors, making them more reliable.

P2PKH addresses are more resistant to the Shor algorithm than P2PK addresses because the public key is hashed. The public key is only revealed when you make a payment using that address (it will not be displayed when receiving). If a P2PKH address has never sent Bitcoin, its public key will remain hidden, thus better resisting quantum attacks.

However, reusing P2PKH addresses (sending from the same address multiple times) exposes the public key, thereby increasing vulnerabilities. Additionally, when you make a payment from a P2PKH address, the public key is visible on the blockchain, making the transaction traceable.

Taproot address

Taproot addresses are the latest type of address, launched in November 2021 through the Taproot soft fork. They use Schnorr signatures instead of the ECDSA signatures used by P2PK and P2PKH. These addresses start with "bc1p", use Bech32m encoding, and are 62 characters long.

They provide better privacy. Multisignature (multisig) transactions look like single-signature transactions, obscuring the complex spending conditions. However, Taproot addresses expose the public key (or an adjusted version), making them vulnerable to attacks using Shor's algorithm (similar to P2PK).

3. Bitcoin Quantum Defense Competition

Quantum resistance is a real challenge, but it is not impossible.

Quantum computers are still in the early stages of development, but in the future, they may be able to use Shor's algorithm to derive private keys from public keys, thereby breaking the encryption technology of Bitcoin. This would pose a threat to Bitcoin and other systems that use SHA-256 or ECDSA (the algorithms that protect Bitcoin transactions). However, this threat is not imminent, and solutions are already in development.

Quantum computing will not develop in isolation; centralized systems such as government and financial networks may be easier targets for attacks than Bitcoin's decentralized blockchain. These systems use outdated cryptographic technologies, such as RSA, which are vulnerable to Shor's algorithm, and store sensitive data (like banking records). Their single points of failure make them easier to compromise than attacking distributed nodes of Bitcoin.

The International Monetary Fund has warned that quantum computers could disrupt mobile banking, while Dr. Michele Mosca from the Institute for Quantum Computing emphasized the risks of centralized data being "collected and decrypted later" (attackers storing encrypted data today to decrypt it with future quantum computers). In 2024, the G7 Cyber Expert Group urged financial institutions to assess quantum risks and pointed out that if data is intercepted now and decrypted later, the centralized system's data could be exposed.

4. How to Enhance Your Security Against Quantum Threats

Although the threat level of quantum computing to cryptocurrency risks is not as great as people imagine, it is still best to be prepared.

However, if you are concerned about the quantum vulnerabilities of Bitcoin, there are some precautions you can take to protect your cryptocurrency assets.

• Avoid reusing public addresses: Most cryptocurrency wallets allow you to generate a new public address for each transaction. This practice makes it more difficult to track your spending habits.
• Transfer funds to a private wallet: If you have been using the same public wallet address for a while, consider transferring your funds to a new wallet that has no history. This will help protect the privacy of your spending habits.
• Using different blockchain networks: The quantum resistance of traditional networks like Bitcoin and Ethereum is considered inferior to that of newer networks that employ more modern secure algorithms. Please consider alternative networks with quantum resistance.
• Stay informed: Stay updated on the latest news in quantum computing to respond accordingly. The best defense is being informed.

Although quantum risks are not imminent, developers and cybersecurity experts are actively researching solutions to ensure long-term security. Meanwhile, as the network gradually moves towards quantum resistance, users should stay informed about updates to the Bitcoin protocol and best practices, such as avoiding address reuse.