Intel’s 17-qubit quantum test chip.

Source: Intel

Stefan Thomas really could have used a quantum computer this year.

The German-born programmer and crypto trader forgot the password to unlock his digital wallet, which contains 7,002 bitcoin and is now worth $ 265 million. Quantum computers, which will be several million times faster than conventional computers, could easily have helped him break the code.

Although quantum computing is still in its infancy, governments and private companies like Microsoft and Google are working to make it a reality. Within a decade, quantum computers could be powerful enough to break the cryptographic security that protects cell phones, bank accounts, email addresses, and – yes – bitcoin wallets.

“If you had a quantum computer today and were a government sponsor – for example China – you could probably crack wallets on the blockchain in about eight years,” said Fred Thiel, CEO of cryptocurrency mining specialist Marathon Digital Holdings.

It is precisely for this reason that cryptographers around the world are striving to develop a quantum-resistant encryption protocol.

Quantum hoes

Right now, much of the world is running what is known as asymmetric cryptography, in which individuals use a private and public key pair to access things like email and crypto wallets.

“Every single financial institution, every registration on your phone – everything is based on asymmetric cryptography, which is prone to hackers with a quantum computer,” said Thiel. Thiel is a former director of Utimaco, one of the largest cryptography companies in Europe that has worked with Microsoft, Google, and others on post-quantum encryption.

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With the public-private key pair, users can use their private key to create a digital signature that can be verified by anyone with the appropriate public key.

In the case of cryptocurrencies such as Bitcoin, this digital signature is known as the Elliptic Curve Digital Signature Algorithm and ensures that Bitcoin can only be issued by the rightful owner.

In theory, someone using quantum computers could reverse engineer your private key, forge your digital signature, and then empty your Bitcoin wallet.

“If I were dealing with scare tactics … I would tell you that one of the first types of digital signatures to be broken by quantum computers was the elliptical curve we use today for Bitcoin wallets,” said Thorsten Groetker , former CTO of Utimaco and one of the top experts in the field of quantum computing.

“But that would happen if we didn’t do anything,” he said.

Strengthen bitcoin wallets

Crypto experts told CNBC that they are not too concerned about the quantum hacking of bitcoin wallets for a number of reasons.

Castle Island Ventures founding partner Nic Carter suggested that quantum fractions would happen gradually rather than suddenly.

“We would have many forewarnings when quantum computers reached the stage of maturity and sophistication where they began to threaten our basic cryptographic elements,” he said. “It wouldn’t be something that happened overnight.”

On top of that, the community knows it’s coming, and researchers are already in the process of building quantum-secure cryptography.

“The National Institute of Science and Technology (NIST) is working on a new standard for the encryption of the future that is quantum-secure,” said Thiel.

NIST is now conducting this selection process, selecting the best candidates and standardizing them.

“It’s a technical problem and there is a technical solution for it,” said Groetker. “There are new and more secure digital signature algorithms. … You will have years to move your money from one account to another.”

Groetker said he expected the first standard quantum secure crypto algorithm by 2024, which, as he put it, was still long before we saw a quantum computer capable of cracking Bitcoin’s cryptography.

As soon as a newly standardized post-quantum secure cryptography is established, said Groetker, the process of mass migration will begin. “Anyone who owns Bitcoin or Ethereum will transfer [their] Funds from the digital identity that is secured with the old type of key to a new wallet or account that is secured with a new type of key that will be secure, “he said.

However, this type of security upgrade requires proactive user action. In some scenarios where fiat money accounts are centralized through a bank, this process can be simpler than requiring a decentralized network of crypto holders to update their systems individually.

“Not everyone, no matter how long it takes, will move their money in time,” said Groetker. There will inevitably be users who have forgotten their password or perhaps passed away without sharing their key.

“There will be a number of wallets … which will become more and more insecure because they use weaker keys.”

However, there are ways to deal with these types of security update errors. For example, an organization could lock all accounts that still use the old type of cryptography and give owners a way to access them. The compromise here would be the loss of anonymity when users claim their credit back.