Quantum Computing Threat To Cryptocurrency

Can a quantum computer threaten the bitcoin network?

From the outside it looks like many other supercomputers: a shiny black container with white light picking out its name.  To George Rose, CTO and inventor of the D-Wave quantum computer, it’s far more than just another  number cruncher.

The D-Wave is the world’a first commercially available computer which harnesses the properties of the quantum world to crack large scale and very difficult maths problems. Before now these were the realm of massively parallel processing devices. By focusing of high speed data transfer with the computer and on the algorithms needed to break up these problems into small chunks, standard or near-standard processors could be brought to bear on the problems in vast numbers.  The worlds fastest computer, Tianhe–2, now has around 34000 processors, all working in parallel.

However, this can only scale by adding processors, a relatively expensive method that has limitations.

By contrast, quantum computers work on fundamentally different principles.  Again time is spent on writing an efficient algorithm, but this is applied to only a single processing array.  That array operates at near to absolute zero to enroll the counter intuitive properties of fundamental particles. In effect this allows the processor to try all possible answers in parallel, settling on the correct one in a highly efficient way.

Quantum Computing threat to Cryptocurrency

Following the 2013 funding round for D-Wave, Dr Rose put it like this.

“In less than a century, computers have completely transformed what humanity can envision and achieve. Quantum computers have the potential to again transform human capabilities. We’re not interested in incremental advances. We want to enable a future as different from today as today is from the turn of the 20th century.”

The D-Wave is at the vanguard of this new area. To be first the approach has been entirely practical; this is a device specifically designed for problems which involve getting closest or best fit answer to a complex question. It’s not a general purpose device, but early scepticism is being eroded by an impressive list of tech-savvy investors, including Jeff Bezos, founder of Amazon, and significant reference customers including the CIA, Google and Lockheed Martin.

The D-Wave is expensive - $15m each - and limited in what it can do. However, the interest in the technology is not limited to this device but for what quantum computing could do if a general purpose quantum gate, the basic unit of all processing, could be produced. At that point many things must change.

One of the first areas that would be revolutionised would be cryptography, and with it cryptocurrencies like Bitcoin, cryptoassets and any of the distributed processing tasks which rely on strong encryption.

The algorithm used by most cryptocurrencies is a maths problem based on the properties of certain types of curves. These maths problems are easy to set, but difficult to crack. To do so requires long periods of time or vast numbers of processors. Moreover, as processing power increases they can easily be made more difficult by using longer ‘keys’, strings of numbers used as inputs. This makes them ideal for cryptography where the key size can be increased until the processing needed to crack them is entirely beyond reach.

However, elliptic curve cryptography is vulnerable to Shors algorithm, a quantum algorithm which if run on a quantum computer would be able to crack the code in short periods of time.

D-Wave cannot run Shors. The design is specific to a different type of problem. It is also not possible to re-purpose D-Wave; although using quantum effects it uses classical processors to guess answers which are then assessed by the quantum processor. It is not a general purpose quantum gate.

However, D-Wave is available commercially far earlier than expected. Quantum processors of any type are only a few years old, and for many years remained only a few QuBits in size. (A QuBits is the fundamental chunk of data in quantum computing.)

By contrast D-Wave has 512 QuBits. A general purpose quantum computer of around 1500 QuBits would be sufficient to run Shors algorithm.

If this were to be achieved it’s likely that Bitcoin would be abandoned. The first Shors capable device would quickly come to dominate all coin mining, making a 51% attack possible. As more came on they would quickly dominate, pushing all others out and potentially leading to an arms race with only a few major players involved. This trend is already being seen in classical mining.

All sides know this. Although quantum computers are too specialised to replace a normal desktop, in applications such as cryptography it’s only matter of time. This is why both Intelligence agencies and cryptographers are spending considerable time now both to hasten that outcome and prepare for it.

For cryptocurrency the most likely response would be the deployment of encryption methods that are not susceptible to a Shor’s attack. Although this may be possible to implement in an existing cryptocurrency like Bitcoin it would more likely need the old block chain to be abandoned in favour of an entirely fresh one.

Moreover not all cryptocoins are susceptible to mining centralisation. There are already alterations to the basic decentralised bitcoin scheme which makes it impossible. These then would be the crypto coins to survive.

So quantum computing is a threat to Bitcoin, but not to the concept of decentralised cryptocurrencies.  A move to a new dominant cryptocoin would be difficult to complete rapidly without what amounted to a massive overnight currency crash. However, the market would quickly right itself. There would be winners and losers in such a flight, but the concept of decentralised cryptocurrencies would survive.

Willy Report Banned by has moved quickly to ban a micro site set up to publish the Willy Report.  The report, an analysis of the Mt Gox logs which claimed to show attempts to fix the exchange rate of bitcoin, was published published only the day before (25 May).

The rapid and unexpected move points to concerns that the report will attract litigation by the former Mt Gox CEO, named as a potential conspirateur. 

The report follows the leak of the entire Mt Gox log into the public domain earlier in February. Analysis since then has shown that a number of automated bots were making significant trades at key times, effectively moving the market as a whole. On one occasion this included a single trade which reversed a downward trend in the currency. The bots highlighted as fraudulent on the report claim to have been funded by editing the database directly rather than buying in to the position with fiat currency.  In total $112m appears to have been traded.

It’s likely that the report will appear elsewhere as the anonymous author attempts to republish. It’s also likely that others will attempt to analyse the data set to independently verify or dispute it’s findings. Given’s move, however, any publication is likely to attract legal attention.



Cryptocurrency explained in 60 seconds - The Basics of Bitcoin

This entry is part 1 of 8 in the series Cryptocurrency Basics


CryptoCurrency Explained - Cryptocurrencies like Bitcoin are often described as complicated and technical. They’re not: the core concept is simple.

If you have 60 seconds to spare read the explanation below and ‘own’ that concept forever.

CryptoCurrency Explained in 60 seconds

First of all we start with an analogy. Until just over 100 years ago the people of Yap, a Pacific island, used large stone disks as coins. The picture on this page shows some.
Cryptocurrency Explained - Yap Island BitcoinYappians used these stones for large expenses such as dowries. Because the stones were large the islanders didn’t bother moving them about. They just transferred ownership. People knew who the current owner was because it was public knowledge.

This made it difficult to commit fraud.

  • You couldn’t spend someone else’s stone, because everyone knew who owned the stone.
  • You couldn’t spend the same stone twice because everyone would know.
  • You couldn’t fake the currency, because to do that you’d need to carve a new stone - which anyone could do anyway.

It was a great system. It just didn’t scale up well.
Cryptocurrency Explained - bitcoin logoBut cryptocurrency works in exactly the same way, and does scale up.

Here’s why they’re the same.

Bitcoins don’t move around. They stay fixed on a public ledger, the “block chain”. Anyone can check ownership by checking this ledger.

This makes it difficult to commit fraud:

  • You can’t spend someone elses bitcoin, because everyone knows who owns them (from the ledger.)
  • You can’t spend the same coin twice, because the network keeps the ledger up to date and there’s only one ledger. If you did try to spend it twice, everyone would know.
  • You can’t fake the currency, because to create a bitcoin you need to break a difficult maths problem. A new problem is set every 10 minutes, and the winner gets a brand new bitcoin as a ‘prize’. There’s no way to fake the answer - you’re either right or you’re not, so there’s no way to fake a bitcoin.

Openness is at the heart of both the Yap stones and cryptocurrencies. Everything is there for anyone to scrutinise, and so anyone can check if a payment comes from the rightful owner. There’s no need for trust between two people in a transaction, because the system removes the possibility of fraud.

That’s it, that’s the core of cryptocurrency explained in 60 seconds.  Of course there’s a great deal more to it.  If you’d like to follow the technology as it develops, drop by my google+ page or linkedin page and say hi.

Now, if you’ve got another 60 seconds, here are the answers to some burning questions you may have.