Bitcoin (BTC +1.03%) became the world's largest cryptocurrency because its supply was capped, its mining rewards were halved every four years, and it established a first-mover advantage among retail and institutional investors. But over the past two years, more analysts have claimed that quantum computers could eventually crack Bitcoin's cryptographic keys.
Bitcoin is stored in two parts: a public key, which can be shared with anyone, and a private key, which allows you to access your funds. It's easy for computers to calculate your public key based on your private key, but it would take a supercomputer trillions of years to guess a private key based on a user's public key. That's what makes Bitcoin secure.
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However, quantum computers can accelerate that process with Shor's Algorithm, which finds hidden mathematical patterns in Bitcoin's Elliptic Curve Cryptography rather than guessing trillions of private keys individually. In theory, quantum computers can eventually reverse-engineer any public Bitcoin key to find its private one and unlock those funds.
That sounds like an existential threat to Bitcoin, but a few recent developments suggest those fears are overblown. Let's see why investors shouldn't assume quantum computers will crack all Bitcoins and render the top cryptocurrency obsolete in the near future.
CRYPTO: BTC
Key Data Points
How is Bitcoin shoring up its defenses against quantum computers?
Data scientists have already developed new mathematical locks through Bitcoin Improvement Proposals (BIPs) that even quantum computers can't break. The first major step is BIP-360, a proposal for hiding public keys from quantum computers so they can't be reverse-engineered.
The quantum-proof locks will require much more computing power than Bitcoin's current locks. To prevent these security measures from clogging up the entire blockchain, Bitcoin's developers will use new tools -- including zero-knowledge proofs that compress hundreds of quantum signatures into a single package -- to prove that it can maintain its current speeds.
The second step is to give everyone a grace period of up to five years to migrate their Bitcoins to the new BIP-360 addresses before all of the older addresses are frozen. That migration will prevent quantum computers from cracking the old addresses and selling those dormant tokens.
Today's top-tier quantum systems are still too small and unstable to run Shor's Algorithm at the scale required to crack Bitcoin's current encryption. By the time they're able to reverse engineer the old public keys into private ones, all of Bitcoin's public keys will either be hidden or frozen. In other words, investors shouldn't blindly assume quantum computers will kill Bitcoin.
