There’s a lingering fear among crypto investors that their bitcoin might get swooped by a hacker.
That’s not very likely, but it’s not impossible either, particularly once quantum computing gets into the wrong hands. Last year Google’s quantum computer called Sycamore was given a puzzle that would take even the most powerful supercomputers 10 000 years to solve – and completed it in just 200 seconds, according to Nature magazine.
That kind of processing power unleashed on the bitcoin blockchain – which is a heavily encrypted ledger of all bitcoin transactions – is a cause for concern.
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The encryption technology used by the bitcoin blockchain has proven itself robust enough to withstand any and all attacks. That’s because of its brilliant design, and ongoing improvements by an ever-growing community of open-source cryptographers and developers.
A report by research group Gartner (Hype Cycle for Blockchain Technologies, 2020) suggests blockchain researchers are already anticipating possible attacks by quantum computers that are perhaps five to 10 years away from commercial availability. It’s a subject called ‘Postquantum blockchain’ which is a form of blockchain technology using quantum-resistant cryptographic algorithms that can resist attack by future quantum computers.
The good news is that quantum-resistant algorithms are likely to remain several steps ahead of the hackers, but it’s an issue that is drawing considerable attention in the financial, security and blockchain communities.
Postquantum cryptography is not a threat just yet, but crypto exchanges are going to have to deploy quantum-resistant technologies in the next few years, before quantum computers become generally available.
Phishing is probably a bigger threat
In truth, you’re far more likely to be hit by a phishing scam, where identity thieves use emails, text messages and fake websites to get you to divulge sensitive personal information such as bank account or crypto exchange passwords.
As a user, you should be using LastPass or similar software to generate complex passwords, along with two-factor authentication (requiring the input of a time-sensitive code before you can access your crypto exchange account). Most good exchanges are enabled for this level of security.
There are many sad stories of bitcoin theft, but these are usually as a result of weak security on the part of the bitcoin holder, much like leaving your wallet on the front seat of your car while you pop into the shop for a minute.
Like all tech breakthroughs, quantum computing can be used for good and bad.
On the plus side, it will vastly speed drug discovery, molecular modelling and code breaking. It will also be a gift to hackers and online thieves, which is why financial services companies are going to have to invest in defensive technologies to keep customer information and assets safe.
Most crypto exchanges invest substantial amounts in security. The vast majority of crypto assets (about 97%) are stored in encrypted, geographically-separated, offline storage. These cannot be hacked.
The risk emerges when bitcoin are moved from offline (or cold storage) to online, such as when a client is about to transact.
But even here, the level of security is usually robust. A further level of protection is the insurance of all bitcoin that are stored in online systems. They also have systems in place to prevent any employee from making off with clients’ assets, requiring multiple ‘keys’ before a bitcoin transaction is authorised.
There have been hacks on crypto exchanges in the past (though not on the blockchain itself), and millions of dollars in crypto assets stolen. In more recent years, this has become less common as exchanges moved to beef up their security systems.
In 2014 Mt.Gox, at the time responsible for about 70% of all bitcoin transactions in the world, suffered an attack when roughly 800 000 bitcoin, valued at $460 million, were stolen. In 2018, Japan-based crypto exchange Coincheck was hit with a $534 million fraud impacting 260 000 investors.
As the value of bitcoin and other crypto assets increases, the incentive for hackers rises proportionately, which is why problems such as quantum-enabled thievery are already being addressed.
Read: Moneyweb Crypto glossary