Understanding the Quantum Computing Impact on Cryptocurrencies

Quantum computing is generating significant buzz these days, largely due to Google’s assertion that a powerful enough machine could potentially combine traditional blockchain technology with less computational power than initially thought.

For those holding XRP, experts suggest that its structure is somewhat more resilient compared to Bitcoin. XRP is a digital token operating on the XRP Ledger (XRPL), which is an open-source, decentralized blockchain system. Ripple, a fintech company, is one of the co-founders of this infrastructure.

Addressing the Threat

All major blockchains share fundamental cryptographic properties, including private keys. A private key functions as a confidential password that remains undisclosed, enabling users to sign and execute transactions on a distributed ledger.

A public key is mathematically derived from the private key and is what generates the wallet address shared with others for receiving funds.

The prevailing concern surrounding quantum computing is that a sufficiently advanced machine utilizing the Scholl algorithm could, in theory, reverse-engineer a private key from its corresponding public key, putting users’ funds at risk.

When executing a transaction, the network sees the public key, while only the wallet address appears when receiving funds. This means that any account activity may render a user vulnerable to quantum threats—irrespective of the actual balances or the duration an address has been active.

XRP’s Quantum Exposure

Recently, XRP Ledger validator Vet carried out a quantum vulnerability assessment and revealed that around 300,000 XRP accounts holding 2.4 billion XRP have never engaged in transactions. They’ve remained in a funding-only state, meaning their public keys have not been exposed.

Consequently, these accounts are inherently quantum secure.

However, there are dormant whale accounts that have transacted in the past and disclosed their public keys, but this was at least five years ago. These accounts are essentially exposed but inactive. Should quantum computers become a reality tomorrow, these accounts could face serious risks.

Vet identified two such accounts on the XRP Ledger, together holding about 21 million XRP. While this may seem significant, it’s only 0.03% of the total circulating supply.

This vulnerability hinges on the assumption that these accounts are inactive and have not employed “key rotation,” a feature of XRPL that allows users to exchange signing keys without moving funds. It’s akin to changing the lock on your house without relocating—your assets remain secure, and anyone with old keys would be locked out.

The XRP Ledger’s architecture facilitates key rotation, allowing users to update their signing keys without switching accounts. Yet, this isn’t a foolproof solution, and ultimately, quantum-resistant algorithms are required. The veterinarian noted this on X.

This feature is available to all users, but problems may arise for long-dormant accounts that, for instance, have lost their keys or are unmonitored, making them susceptible to threats.

Mayuka Vadali, a staff software engineer at Ripple, pointed to the “escrow function” as another layer of protection against quantum risks.

According to Vadali, funds locked in an escrow with a time lock are secure based on logic rather than encryption; these time locks prevent withdrawals until a pre-set duration passes.

He emphasized, “Time locks are not hash-based; they can’t be penetrated until the designated period is over.” Adding humorously, “Yes, that’s true. You can’t stop a black hole, but attackers usually lack the resources to justify that approach.”

However, while escrow locks specifically safeguard your assets, accounts with locked funds may still face quantum threats like any other XRPL account, which could allow an attacker to override escrow conditions or simply wait for the time lock to expire.

Contrasting with Bitcoin

The quantum risk to Bitcoin seems to be more significant than that to XRP for a couple of reasons.

First is the scale: Many early Bitcoins were mined using a format called P2PK, where the public key was directly exposed in the transaction output, needing no separate spending transactions. This includes Satoshi Nakamoto’s one million BTC, which remain untouched. Google estimates that around 6.9 million BTC, nearly 35% of Bitcoin’s circulating supply, are at risk, in contrast to XRP’s 0.03%.

This massive exposure creates an inviting target for potential quantum attackers.

Even those Bitcoin holders who understand the risks and wish to protect their assets face unique structural issues that XRP holders do not encounter. The Bitcoin blockchain lacks key rotation, which means that the only recourse is to move funds to a new address where the public key hasn’t been revealed yet. This new address would be quantum secure.

However, transferring funds from one address to another means the transaction is placed in the memory pool for about 10 minutes during which the old address’s public key is still visible. A sufficiently advanced quantum machine could exploit this vulnerability in that timeframe. While this risk remains primarily theoretical, it illustrates the inherent structural weaknesses Bitcoin holders may face.

That said, it’s worth mentioning that Bitcoin developers have already initiated several proposals aimed at enhancing quantum resistance.