Citi Report Highlights Quantum Computing Risks to Bitcoin

Citi said Friday that accelerating advances in quantum computing are compressing the timeline for risks to crypto and broader internet infrastructure. The bank sees Bitcoin as particularly exposed because of its conservative governance model and slower ability to implement protocol upgrades.

In a Friday report, the bank said advances in quantum computing are challenging the cryptographic systems underpinning cryptocurrencies, financial networks and online communications. "While large-scale quantum attacks remain a medium-term concern, the pace of progress has shortened the horizon and warrants closer attention from investors," wrote analyst Alex Saunders.

Quantum computing is a long-term threat to crypto because a sufficiently powerful quantum computer could break the cryptographic systems that protect wallets, exchanges, and blockchains, especially public-key cryptography like ECDSA used by Bitcoin and Ethereum.

Saunders pointed to vulnerabilities tied to public keys exposed on-chain, dormant wallets and early pay-to-public-key (P2PK) addresses, including wallets believed to belong to Bitcoin creator Satoshi Nakamoto. 9 million bitcoin at quantum risk due to already-exposed public keys. This is about one-third of circulating supply, or roughly $450 billion worth depending on the BTC price.

Proof-of-stake networks such as Ethereum may be better positioned to respond because they can upgrade protocols more frequently, the analyst said. The report said future quantum computers could eventually derive private keys quickly enough to interfere with Bitcoin transactions before confirmation.

Despite the risks, the bank remains constructive on crypto’s long-term ability to adapt through post-quantum cryptography and protocol redesigns and proposed Bitcoin upgrades, including BIP-360 and BIP-361, are developments to watch.