Fidelity Warns Bitcoin Private Keys Face Quantum Computing Risk

TLDR

• Fidelity Digital Assets published research on Sept. 1 examining Bitcoin’s exposure to future quantum computers.
• Quantum machines could theoretically derive private keys from public keys using Shor’s algorithm.
• A proposed system called SHRINCS uses hash-based signatures instead of elliptic-curve cryptography.
• Larger quantum-resistant signatures would slow transaction throughput and raise costs.
• Fidelity and eight other firms funded a $15 million Bitcoin security initiative in July.

Fidelity Digital Assets released a report on Sept. 1 looking at how future quantum computers might affect Bitcoin. The report focuses on private keys, which give owners control over their coins.

Quantum computers capable of breaking current cryptography do not exist yet. But researchers say the technology could eventually catch up.

Fidelity’s team pointed to transaction throughput as a major concern for any fix. They noted the impact might be smaller right now since Bitcoin’s mempool is nearly empty.

Private keys let Bitcoin owners approve transactions without needing a bank or other middleman. A wallet uses the private key to create a signature that proves ownership.

That signature does not reveal the actual private key. This setup is the backbone of how people hold and move Bitcoin today.

How Bitcoin Signatures Work Today

Most Bitcoin transactions rely on either the Elliptic Curve Digital Signature Algorithm or Schnorr signatures. Schnorr signatures became usable after the Taproot upgrade activated in 2021.

Taproot’s rules came from a proposal first assigned in January 2020. Both signature types depend on a math problem that is hard for regular computers to solve.

A powerful enough quantum computer running Shor’s algorithm could solve that problem. This would let it work backward from a public key to find the private key.

Some studies have lowered estimates of what a quantum attack would require. That has pushed more attention toward Bitcoin’s long-term security planning.

A Possible Quantum-Resistant Fix

Researchers are looking at signature systems built on hash functions instead of elliptic curves. One proposal, called SHRINCS, combines a small stateful signature with a larger backup option.

The current draft sets a 48-byte public key. Its stateful signatures range from 548 to 4,619 bytes, while the stateless backup runs 5,777 bytes.

The stateful method requires devices to track which one-time keys have already been used. Losing that tracking data could block safe use of that path.

The stateless fallback avoids that problem by drawing on NIST’s SLH-DSA standard, published in August 2024. It keeps access working but takes up far more space on the blockchain.

Fidelity’s researchers said SHRINCS is one option among several being studied. They added that Bitcoin’s technical limits may still shape whatever gets built.

Bigger signatures mean more data per transaction. That could raise fees and slow down how many transfers get confirmed when the network gets busy.

Putting a system like SHRINCS into use would need new consensus rules. This would likely happen through a backward-compatible soft fork.

Wallet makers, miners, exchanges, and node operators would all need to support the change for it to work. That kind of coordination takes time across the industry.

In July, Fidelity joined eight other financial and crypto firms to fund a $15 million Bitcoin security initiative. The program includes research into quantum-resistant solutions for the network.

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