The cryptocurrency industry is bracing for the threat posed by quantum computing, as recent breakthroughs have intensified fears that the technology could soon break the cryptographic safeguards protecting transactions and digital wallets. Quantum computers, capable of solving complex mathematical problems far faster than conventional machines, could potentially unravel the encryption methods that secure digital information. This poses a significant risk to the $2 trillion global cryptocurrency market, which relies on blockchains secured by traditional cryptography and has already experienced major hacks.
Accelerated Timeline for Quantum Threat
While quantum computing remains largely experimental, concerns within the crypto sector have escalated since March, when research from Alphabet's Google suggested that quantum computers might be able to break existing cryptography sooner than previously anticipated, according to executives and analysts. Google has stated that quantum computers capable of breaking encryption could arrive by 2029, a timeline that is much earlier than the previous estimate of at least a decade away. Recent research from Citigroup and other institutions has also concluded that quantum computing, alongside advances in artificial intelligence, has compressed the timeframe in which cryptocurrencies will become widely vulnerable to hackers.
In response to the risks, U.S. President Donald Trump last month issued executive orders to bolster the nation's quantum capabilities, acknowledging the threat to both the public and private sectors.
Existential Threat to Crypto Networks
Some crypto companies and blockchain developers are already formulating plans to upgrade their networks with quantum-resistant cryptography, a potentially years-long endeavor that could require sweeping changes to the infrastructure underpinning digital assets. "It's the most direct and existential threat towards cryptocurrencies and crypto networks," said Chris Tam, head of quantum innovation at BTQ Technologies, a company focused on quantum security.
Most blockchains rely on decades-old elliptic-curve cryptography to generate public and private keys and digital signatures used to verify ownership and authorize transactions. Public keys are mathematically derived from private keys and become publicly visible once crypto assets are used in a transaction. While conventional computers cannot feasibly derive a private key from a public key, a sufficiently powerful quantum computer could potentially do so, enabling hackers to forge digital signatures and authorize fraudulent transactions. This risk is particularly acute for public crypto networks where transactions are irreversible.
"Crypto especially is uniquely exposed because blockchains are transparent and permanent," said Utkarsh Ahuja, managing partner at Moon Pursuit Capital, a crypto investor.
Bitcoin's Vulnerability and Market Impact
Bitcoin, the largest cryptocurrency, is considered particularly vulnerable because its 17-year history of transactions has generated a large number of visible public keys. Roughly 35% of the token's circulating supply could be exposed to a quantum computing attack, according to an unpublished June working paper by independent researcher Ahmed Raza Muhammad Umer. Other research from last year estimated that figure could be as high as 50%. Just one incident in which a hacker steals and sells a large amount of a token could tank its price, said Cristiano Ventricelli, vice president and senior analyst of digital assets at Moody's Ratings. "Everyone will feel the impact," he added.
The risk has already prompted some to rethink bitcoin investments. Christopher Wood, the closely tracked global head of equity strategy at Jefferies, removed a 10% bitcoin allocation from his model portfolio in his January newsletter due to the long-term "existential" threat of quantum computing.
Blockchain Upgrade Plans Take Shape
To be sure, Ahuja and others said they believe it will still be a few years before quantum computing can crack blockchains, and that the industry will be able to upgrade to new "post-quantum" types of cryptography resistant to the technology. Many crypto executives also warned that moving too early could create vulnerabilities because post-quantum cryptography is still rapidly evolving.
Post-quantum digital signatures are generally much larger than traditional signatures, increasing storage and bandwidth requirements. They could raise costs and degrade user experience, particularly on blockchains with fixed block-size limits, such as Bitcoin, said Zach Pandl, head of research at crypto asset manager Grayscale, although he added he had confidence blockchains would ultimately address the issues. "There is an engineering challenge ahead, but there are engineering solutions already on the table," he said.
That challenge could take years to overcome. One senior cybersecurity executive at a major crypto player said he expects it will take two years for his company to become fully quantum-resistant. He and others described the potential work as akin to a Y2K-style overhaul when more than $300 billion was spent globally fixing the "millennium bug."
Decentralization Complicates Upgrades
The problem is especially thorny for blockchains, which are mostly decentralized, meaning they are operated by a community that may not be able to agree on a path forward, said Tam of BTQ Technologies. None of the top 20 blockchains have implemented a post-quantum signature algorithm, according to people interviewed for this story. In the case of bitcoin, developers and market participants are divided over which fix to adopt and when to move, executives said.
The Ethereum Foundation, which supports the blockchain that underpins ether, the second-largest cryptocurrency, says it is targeting 2029 for full protection from quantum computing. "The sort of disaster scenario is that it happens way sooner than we think," said Christopher Smith, CEO of Quantus, a blockchain that already uses post-quantum cryptography.
The Algorand Foundation, which supports the Algorand blockchain whose native token has a market capitalization of around $780 million, is among the early movers. Last month, it published a post-quantum roadmap and plans to start supporting post-quantum accounts later this year, said Bruno Martins, Algorand Foundation's chief technology officer. "It felt right to start doing [something] now, because it's responsible to have a plan," Martins added.
