The crypto world is ever-changing, with new innovations and challenges arising every day. One of the greatest potential long-term threats to Bitcoin and other digital assets comes from the advance of quantum computing. These powerful machines are still in their early development stages. They could be a threat for blockchain networks because they can break the cryptographic algorithms that currently secure them. Project Eleven saw the threat and acted. They raised $6 million in seed funding to create quantum-resistant cryptography for Bitcoin and the whole crypto-ecosystem. DreamingCrypto dives into the developing saga. Magical protocols energize, as bold entrepreneurs forge their trails through the web3 wilderness, and VC guilds invest in galaxies unseen, and the Web3 dream sings of universes uncoupled.

The Quantum Menace to Bitcoin

Bitcoin’s security comes from strong cryptographic primitives. It heavily relies on the Elliptic Curve Digital Signature Algorithm (ECDSA) and the SHA-256 hash function to secure its transactions. These algorithms are believed to be secure against classical computers, but they are insecure against quantum computers.

Shor's and Grover's Algorithms

A large percentage of the current supply of Bitcoin is at stake because of how early transactions were structured. At the beginning of Bitcoin’s life (2009-2010) a high number of transactions were made with the Pay-to-Public-Key (P2PK) format, where the public key itself was directly revealed. Furthermore, if addresses are reused, a practice that undermines privacy, the public key is laid bare as well. Quantum computers would be capable of breaking these exposed public keys, thereby enabling attackers to steal any Bitcoin associated with them.

  • Shor's Algorithm: This algorithm can solve discrete logarithm problems in polynomial time, effectively breaking ECDSA. If a quantum computer running Shor's algorithm becomes powerful enough, it could derive private keys from public keys, allowing attackers to steal Bitcoin.
  • Grover's Algorithm: While not as devastating as Shor's, Grover's algorithm can still weaken SHA-256 by providing a quadratic speedup to brute-force searches. This reduces the effective security of SHA-256 from 256-bit to 128-bit, making it easier to find collisions and potentially compromise Bitcoin's mining process.

Vulnerable Bitcoin Addresses

It’s been estimated that 25-37% of the total BTC supply is vulnerable because of this. Today, over 30% Bitcoin, over 6.2 million coins worth $143 billion are still sitting in pay-to-public-key (P2PK) or reused P2PK-hash addresses. Moreover, these addresses are disproportionately vulnerable to the emerging quantum threat. At today’s exchange rate, the at-risk Bitcoins amount to more than $40 billion USD.

Multisignature (multisig) wallets, where a transaction needs several private keys to be authorized, provide greater security. Even these highly secure systems aren’t immune to quantum attacks. A quantum computer could potentially break multiple ECDSA keys used in multisig wallets (e.g., a 2-of-3 setup), requiring the hacker to crack multiple keys instead of one.

Multisig Wallets

Project Eleven aims to take quantum threats head on. It designs and manages the implementation of post-quantum cryptography (PQC) for Bitcoin and other digital assets. Specifically, they want to set federal standards high enough no later than 2035. This will ensure that vital systems—such as cryptocurrencies—are safeguarded against quantum threats.

Project Eleven's Quantum-Resistant Solution

This is one of the main initiatives of Project Eleven, working to produce a registry. This registry will be used in case quantum computers, for instance, make current Bitcoin keys insecure. This registry would allow users to prove ownership of their Bitcoin even if their private keys have been compromised, potentially mitigating the damage from a quantum attack.

Developing a Quantum-Resistant Registry

The firm plans to use quantum-resistant encryption in all new acquisitions by 2027. It will require a phaseout of legacy gear between 2030-2031. This phased approach provides an effective and transparent way to ensure that the shift to PQC occurs without upending current systems.

Phasing in Quantum-Resistant Encryption

Project Eleven aims to claim Bitcoin worth an estimated $600 billion currently held in wallets with keys exposed to the public. All of these funds are wasted if cryptographically relevant quantum computers (CRQCs) are developed. If a sufficiently large quantum computer is available, it could steal Bitcoins by deriving the private key from the public key and initiating a competing transaction to its own address. These coins cannot be transferred and are waiting to be taken by the first person who manages to build a sufficiently large quantum computer.

Addressing Vulnerable Bitcoin

The urgency of the threat of quantum computing to Bitcoin is somewhat exaggerated. As cryptography guru Bruce Schneier wrote, Gartner predicts that by 2029 developments in quantum computing will render conventional asymmetric cryptography too dangerous to employ. Within the next 10 years, quantum computers may be sufficiently advanced to threaten today’s cryptographic standards. The new term, “Q-Day”, is meant to describe the moment when quantum computers are actually capable of cracking conventional cryptographic safeguards. Taking the long view—data that should, for example, last five years or more—may already be in danger. Save it today to keep it safe for future generations!

Implications for Bitcoin Holders and the Crypto Ecosystem

Though dangerous, it’s vital to keep this threat in perspective. Quantum computers powerful enough to crack Bitcoin’s cryptography are still a few years out, at least. Even though developing and implementing PQC takes a lot of time and resources, it’s important to begin immediately. Even just one compromised wallet would break 16 years of trust. One badly executed transaction is enough to erase the trust developed over all that hard work.

Balancing Urgency and Feasibility

Here are some steps Bitcoin holders can take to protect their funds:

Recommendations for Bitcoin Holders

Follow along and learn how to be proactive and keep your Bitcoin secure. Join us to take action today and protect yourself from the risks that quantum computers pose to our digital assets in the future. Quantum computing is the biggest fear and challenge to Bitcoin. The crypto community is fighting back against this existential threat on all sides with efforts such as Project Eleven, hellbent on protecting that decentralized dream.

  • Avoid Address Reuse: Each time you receive Bitcoin, use a new address. This minimizes the exposure of your public key.
  • Migrate from P2PK: If you hold Bitcoin in P2PK addresses, move them to more secure address types like P2PKH (Pay-to-Public-Key Hash) or SegWit addresses.
  • Consider Multisig Wallets: While not a perfect solution, multisig wallets add an extra layer of security by requiring multiple private keys to authorize transactions.
  • Stay Informed: Keep up-to-date with the latest developments in quantum computing and PQC.

By staying informed and taking proactive steps, Bitcoin holders can help mitigate the risk posed by quantum computers and ensure the long-term security of their digital assets. Quantum computing presents a formidable challenge to Bitcoin, but with initiatives like Project Eleven, the crypto community is actively working to defend against this threat and preserve the decentralized dream.