Is the Quantum Threat to Bitcoin Real? with Alex Pruden

16:14Alex Thorn:of conditions you can't reset their context window by starting a new session exactly ai terms exactly

16:21Beimnet Abebe:so like in europe and in england uh in australia new zealand etc they're all uh expected to hike interest rates as a function of of where commodity prices have been and you know subsequently the

16:33Alex Thorn:inflation expectations are and where they're likely to realize you're saying they're they're short term they're not as they're never as long term as they should be they're too reactive to their the the current and the very recent yes um rather than trying to take a deep thoughtful

16:46Beimnet Abebe:method right and the classic example is is triche that that hiked uh you know in in 2008 um to a supply shock and when you know the world was about to employ right classic like policy error type of stuff. And so I think that's where we're headed because in my head, inflation is now driven by the commodities and the supply chain. And if you list through like all of the implications of the Strait of Hormuz, everything from helium prices, sulfuric acid, you know, polyethylene of fertilizer, all these things, these petrochemicals, like they've increased in price a ton. And you will see that feed into inflation eventually right food plastics all consumer goods let alone energy chips helium is and what i'm convinced of is even with an open strait of hormuz every molecule that is transfer transferring out of the strait of hormuz will have a material bid

17:45Alex Thorn:to it right i saw that the um some people have been talking about all these empty tankers around the world are like booking it across the world to go into the gulf of mexico gulf of america excuse me um to because to buy our supply and that a huge portion now of lng uh servicing europe partially because of hormuz but also because of the pipeline having blown up between russia and germany but also in general like one of the large u.s lng is one of the largest market shares in europe it's had in decades because so but there's a finite amount of ships there's some that are empty sure Maybe they can buy American petrochemicals, but the ones in the Gulf are full and waiting to get out.

18:27Alex Thorn:And it's not like, oh, yay, a bunch more supply. This is currently supply that's off the market. It's not new supply, and you're saying they're bid. So it's not like all of a sudden prices come down. That'll get gobbled up right away as soon as those things stream out of there. 100%. It eases the tension in the market a little bit, but it's not like a fresh wave of new supply. We're basically like— And you're still at deficit. Yeah, we're like a month and a half behind in oil supply. So it's like, let it out, great. It's no longer being blocked. You can maybe start the clock on slowly getting back to par.

19:02Alex Thorn:But it's not like there's more ships that are empty and they're waiting to be loaded with Saudi crude. There's no—the ships are full there. Correct. Yeah.

19:11Beimnet Abebe:So it's going to be a very tricky commodity story to navigate. Pardon the pun.

19:17Alex Thorn:And by the way, you've made this point many times to navigate. That's good. And so has the Fed. I think Jay Powell's made this point, too. And maybe just recently, maybe it wasn't Powell, but commodity based price inflation is not something the Fed can really materially affect with their blunt levers of monetary policy. Correct. So hiking, cutting, like probably doesn't make much of a difference.

19:39Beimnet Abebe:But at the same time, what I know for sure is that fixed income markets are not going to start aggressively pricing in cuts in this type of inflationary environment. And so what does that lead to? That leads to tight financial conditions, right, where all of the corporate debt that's got to get financed this year, all of the sovereign debt that has to get – and these sovereigns, they're going to have to issue more because their defense spending is increasing, right? And the outright level of rates that they have to pay to finance that defense spending is higher, right?

20:15Alex Thorn:And so less money for the economy, for growth, for new jobs, for whatever.

20:21Beimnet Abebe:All the above. Right. And there are also some places they're going to try to subsidize the commodity prices, etc.

20:26Alex Thorn:Brother, I don't know how many times we've sat here and I've marveled at the complexity of the situation. I long for the days. I wish it was just so. Remember like, you know, like, I don't know, 2016. You're just like, well, you know, software is eating the world. Yeah. Long everything. Yeah. You know, every dip gets bought. Not that easy right now. Not quite at all, is it?

20:45Beimnet Abebe:And so you've got this scenario where high yields globally are going to keep a lid on risk prices. And then you've got this structural trend of AI that should consume jobs and stuff. And you've got heightened risk of cybersecurity. And then, oh, wait. Like, yeah, you might get a permanent ceasefire deal. But in my lifetime, Middle East has always had fire-ups, et cetera. I don't know if this is truly the end of the geopolitical warfare that's going on right now.

21:23Alex Thorn:I mean, Tupac was calling for peace in the Middle East in 1998, you know. So I agree. Even if this resolves, it's a tenuous situation and is, I mean, has been my whole lifetime as well. So let's stop here. It was a great conversation today, Bim. Bim Netta-Bibi from Galaxy Trading. Thanks for having me. let's go now to our guest alex pruden co-founder and ceo of project 11. alex welcome to galaxy brains it's amazing to be here thanks for having me i'm excited to have you here um you quantum uh project 11 works on quantum computing specifically what mitigating the the threat of a cryptographically relevant quantum computer to public blockchains yeah so uh future proofing future building is kind of the tagline so so i guess you know psa quantum computers are coming and they're good for many things.

22:11But the thing that we know that they are good at is breaking all the underlying cryptographic assumptions that, you know, protocols like Bitcoin use. So there's a necessity to basically future proof digital assets like Bitcoin and others, which by the way, like most blockchains rely on elliptic curve cryptography. So you got to future proof them. But then I guess, you know, in the farther future, we see an opportunity to leverage quantum mechanics and these quantum computing platforms to basically provide, you know, new ways or give new ways to secure and and value in the future.

22:41Alex Thorn:Better blockchains. Is that what you're saying? Maybe better blockchains. Better wallets, better blockchains, better key generation, a lot of things. We're going to get into a bunch of topics related to this, but maybe just to set a high level, I don't think, Phineas, have we talked about, I don't think I've quite done an episode on quantum yet. Yeah, we've talked about it a little bit. So maybe just set the stage and explain the basics of why a quantum computer or a sufficiently good quantum computer could threaten the cryptography that, by the way, the whole world uses, but also basically all the blockchains or Bitcoin specifically.

23:16Yeah. So the super simple way to think about it is a quantum computer is a very special kind of computer that's not as good as a classical computer for many things, but it's far better than a classical computer for some things. And one of those things is basically the problem of factoring numbers or in the cryptographic context, what's called the discrete log problem. You can kind of think about it as when you multiply two numbers, it's kind of easy algorithmically to go that way. But dividing and trying to get the factors of the product is kind of harder. So cryptography leverages this asymmetry in some of the uncertain problem types to basically build cryptographic primitives like public key cryptography, where you can compute a public key quite easily from a private key.

24:00But it's really, really, really hard, at least for a classical computer, to go the other way down the one-way road. But it just so happens that we know of a quantum algorithm to go the wrong way down that one-way road.

24:11Alex Thorn:This was invented decades ago, one of them at least, the most prominent one by Peter Shore at MIT, right? Or I guess he's at MIT now, I believe. Yeah, yeah. This is Shore's algorithm. This was the mathematics behind how one of these then very theoretical, now much less theoretical computers could – is it like a brute force attack basically? Kind of, yeah. And so quantum was actually like the concept of quantum computer was invented by Richard Feynman. It's one of the greatest physicists of all time. But, you know, it was all in the context of modeling quantum physics, right? Because quantum physics is famously kind of hard to understand and model.

24:46And so he's like, well, we need to build a quantum computer to like model the physical universe. But people were like, ah, this seems abstract. Like, is this thing good for anything at all? And Peter Shore actually showed this. He created this algorithm that said, hey, there's a classical problem that quantum computers can solve. And then he also did one other thing that's important, which is he came up with a theory of error correction because quantum mechanics, very fragile, and quantum computers that are built on quantum mechanics, therefore, very fragile. So Peter Shor said not only do we have an algorithm that we can basically apply to a classical problem, but we also – it is theoretically possible to make these fragile states, you know, more – you know, less fragile, and therefore we can actually plausibly do this.

25:22Alex Thorn:uh and so but this no one has run shores algorithm on one of these machines yet right so there have been people have run variants of shores algorithm to do very small instances of say factoring integers etc um you know i say variants because you know quantum computers use you asked something earlier about brute force i mean quantum computers use you know quantum mechanics and properties like entanglement where you know you have two quantum bits and kind of share parts of the same state without being physically connected. And so these weird quantum mechanical properties that, frankly, physicists have scratched their heads about for decades are kind of the secret power behind these things.

26:01And a way to think about it for, you know, kind of a layman is like, they kind of try every possible path to the answer in parallel. I mean, some people like to make commentary about like, it's a multiverse. I don't know, whatever your interpretation is.

26:13Alex Thorn:I think the multiverse almost kind of helps it. It's helped me grok like the conceptual nature of it. I say brute force today because like if you want to derive, let's just say you got an encrypted zip file and it's only four characters, the password. I used to do this. I led forensics at Fidelity Investments and like sometimes there's evidence that a person had encrypted and, you know, I'm not going to devote like that much time or compute to it, but I'll run like a six or seven character brute force, which could take like four or five hours. If it's, you know, four numbers, We're going to break that in 30 seconds or less with a normal computer.

26:47Alex Thorn:If it's 25 characters that are alphanumeric with symbols, it's so long with a classical computer that it's impractical to do. Exactly. And that's your trying – but the brute force is you're mechanically trying every possibility. My understanding, again, very conceptually of the way the quantum would attack this is let's say it was a maze. and rather than like a mouse will try every single possibility until it eventually finds the cheese, the quantum computer kind of tries it all at once and tries sort of every possibility at once, but then once it finds the answer, just collapses down to the only one that worked, and it is almost like the others never were tried.

27:25Alex Thorn:So it is like a super brute force, but it's not like linearly going through. It's sort of all at once. Yeah, no, the way you describe it is perfect. I think it's obviously more complicated with the physics, But at a high-level conceptual, I think that's exactly right. I mean it's like you're trying the password example. You're breaking – you're trying every possibility in serial, right? It's like one after the other after the other versus this lets you kind of brute force it in parallel, and then you ultimately kind of converge on the right answer at the end. And that requires this concept of entanglement, right?

27:54This is why classical computers can't do it because you can't entangle two classical bits. Each classical bit is independent from one another. The one or a zero at all times. Yeah, yeah, exactly. So that's kind of the magic around it. And again, like I said, quantum computers can be used for other things besides cryptography, but this is the problem that a lot of people care about.

28:11Alex Thorn:Yeah, honestly, like quantum might be like one of the industries that's worse at telling the positive story or as bad as AI, which also is really not on balance very good at telling the positive that it will bring. Just some that I know about that just before we dive deeper into the potentially scary threat that a cryptographically relevant quantum computer poses could map like whole genomes like really quickly create new drugs that are customized for each individual. Like you think about like an astronomically multiple orders of magnitude more compute. Now like another one that people somebody mentioned that I thought was really interesting was like logistics modeling.

28:49Alex Thorn:So like FedEx has to move like a million trucks and boats and planes around while simultaneously – like in the most efficient way to deliver like 50 million packages with certain energy requirements. When you start to realize that like actually that problem is so unbelievably massive that they actually probably aren't doing that good a job. And they do a pretty good job because I get my packages, but they could maybe be so much more efficient. So complex systems analysis and design. Yeah. Because that's an optimization problem, right? This is known colloquially as the traveling salesman problem.

29:21And so some kind of what are called noisy intermediate scale quantum computers already are used for optimization problems like you just described.

29:28Alex Thorn:Yeah, and I've heard that some can do sort of even toy – still sort of toy level but physics problems like trying to model a black hole or something like that. Yeah, or material science like discovering new chemical compounds that can be used to make new materials. That's right. And that's – so yeah, there's a lot of potential amazing use cases. And I think it's like a good point to just remind everyone before we talk about all the doom stuff. Right. Like we as humanity should kind of want this to exist, but we got to prepare for it. Yeah. Similar in that sense, a little bit similar to AI. Absolutely.

29:57Alex Thorn:Enormous opportunity, you know, whether people are protesting data center build out and energy use or, you know, fears about job loss and stuff like that. You know, the, you know, the cobbler, the stable owner also feared cars. And, like, I personally, as an optimist, have to believe that these technological advancements are beneficial, have always been beneficial. But the quantum one is, like, you said magical. Like, I mean, again, maybe to, like, a senior Ph.D. in physics, it's actually mathematics to them. Yeah. To me, it is magical. I mean, to most physicists, like, physicists still have philosophical arguments about this.

30:32I mean, this thought experiment of Schrodinger's cat.

30:35Alex Thorn:Yes. Is the cat alive or dead in the box, right? And when you open the box, it's alive. Is it only alive because you measured it or was it always alive in the box? Like physicists can't even really agree on the answer to that question. So it is magical in that sense. Yeah. So, all right. Well, let's focus in on blockchains for a bit with quantum. So, you know, take Bitcoin as an example. Bitcoin uses ECDSA. It's an elliptic curve cryptography for address signing, signature schemes for transacting, right? So one of the things people always ask is like, are we talking about SHA-256? Are we talking about mining?

31:09Alex Thorn:Are people going to mine Bitcoin with a quantum computer? Are they going to have a very powerful ASIC? Maybe, but that's not really what we're talking about. The primary fear is elliptic curve cryptography. So it's the crypto that secures coins and transactions. Yeah, exactly. So the way I like to frame it is what makes digital assets like Bitcoin different from any other financial system. And I basically boil it down to two things. There's decentralization, which is kind of – and that's consensus, right? consensus is the mining and that makes sure there's no like one single entity that controls the network.

31:38Mining is driven all by SHA-256. And technically there is a quantum attack on SHA-256, but I want everyone who's watching or listening to this show to put that out of their minds.

31:46Alex Thorn:Yeah, because I was told by a quantum researcher that there is a technically, but it might take currently, it could take a quantum computer the size of the moon is what I was told. Yeah. And it's because the advantage of the quantum algorithm over the classical alternative is pretty small. So you would need a gigantic quantum computer in practice. So just forget about that. The issue though is that, so the other thing that makes blockchains unique is this concept of self-sovereignty, right? You only, only you can send your funds. Only I can send my funds. Like this is a bearer, these are bearer assets, right?

32:15With cryptographic certainty. With cryptographic certainty, that cryptographic certainty is guaranteed by these digital signatures. Like if I'm able to produce a digital signature for a given UTXO, that is how we all agree that I own these assets, right? And again, these digital signatures are based around this public key cryptography where you're supposed to, in the classical sense, only be able to only be able to go from private to public and not the other way. But if you have a quantum computer, you can go the other way and get the private key. And then potentially, you know, if your public key is exposed on chain, I can sign, even though I didn't originally, you know, it's not, wasn't my UTXO, I can sign for you.

32:49And then like from the network's perspective, the question of ownership goes out the window basically. Because if, you know, if a quantum computer with sufficient scale and speed existed, in some cryptographic sense, they own whatever percent of the public keys on the network.

33:02Alex Thorn:Yeah, and this is actually a problem, too, with plausible deniability, generally speaking. Somebody will say, oh, no, I was hacked. Yeah, exactly. My coins, I actually, I don't know, tax man, I don't have those coins. I didn't sell them. Actually, the fact that they left my wallet was a hack. Exactly. And you really can't prove that you weren't hacked. So what the network would know is that somebody signed with your private key. And similarly here, like, and I get maybe this is a good segue, although there's so many aspects to talk about, you know, if somebody did derive my private key from, say, an exposed public key that I had and move my coins, would that be clear to the, you know, blockchain viewing public, those that analyze the blockchain?

33:44Alex Thorn:Would we know that those coins were hacked? No, I mean, it would look like, well, I guess, again, to your point of deniability, it's the exact same point, right? It's like, do they know that? How do we know that you didn't just send them? How do we know you didn't just lose your key? Or how do we know that you weren't hacked? Or how do we know that it wasn't a quantum computer? And this is like, we're going to get into the kind of broader topic, but I think this is one of the areas that I think people underestimate about this threat is that there's a lot of uncertainty with how quickly quantum computers are going to advance, how specifically they'll be used, who will have them.

34:12And I think all that uncertainty, I think, kind of creates, or it basically implies that we don't know what might happen, but it makes sense to prepare for the worst case scenario.

34:22Alex Thorn:Yeah, I think that's one thing that I totally agree. In the case that this becomes possible, it's not like a giant alarm bell is going to spin around and we're all going to know. Or the very first time like some coin moves, we're going to be like, oh, no, quantum is here because it looks like any other signature. Yeah, and by the way, quantum computing developments are funded in large part by governments who have in mind espionage type use cases. So there's really no incentive for them to showcase the latest and greatest. And so we just may not actually see the state of the art. And that's just one more element of uncertainty.

34:53Alex Thorn:That's a fair point, too. There was the recent paper from Google and Stanford and Ethereum Foundation developers and researchers, right, referred to from a couple of weeks ago, generally referred to as the new Google paper, just because the Google guys like Craig Gidney were like first in the byline. But that one, they released – they proved their mathematics that they – so that and also this oratomic. paper for different reasons, both basically proved or posited, proved that the complexity of a quantum computer required to break such cryptography was less than previously expected. But the Google paper didn't, they didn't actually provide their data.

35:37Alex Thorn:They merely proved its accuracy with a zero-knowledge proof. Specifically, why? Exactly what I said. And they commented when presenting this proof. And by the way, what did they prove? They proved that they had compiled a circuit. And so you can think of a program, any program can be kind of represented as a circuit. And you can more or less think of it as the number of the steps to go along the way to compute the answer. And so what they proved was they had massively reduced, I think by four orders of magnitude from the prior state of the art, the number of steps that their circuit would have taken.

36:08And so, but they didn't want to release that. So they, and the comment around it was, if we release this compiled circuit, others with maybe less, you know, ethical boundaries or, you know, constraints might use this to do bad things. And therefore, we think it's responsible as scientists to publish this proof to show the world that we actually did this, but to not reveal what we actually did, which I think is really interesting. There's a parallel here to, you know, you go back to the 30s, when scientists were learned about the power of potentially splitting the atom. And at a certain point, there was a, you know, a degree of self, first off, the government, it got involved around like what people were allowed to say and not to say.

36:46But even among the scientists themselves, there started to become a degree of self-censorship.

36:49Alex Thorn:Yeah, it makes a lot of sense if, especially if we want to see, but these many sort of step function increases or decreases, however you want to describe it, improvements. To me, one of the things that that really raised in my mind as an alarm bell was as other researchers or those same researchers further make these improvement in capabilities for quantum, We may hear less about it. The more they – the closer they get, the less we may hear because there are significant national security implications and, I don't know, safety implications well beyond Bitcoin and crypto. Yeah, both from an offensive and a defensive side, right?

37:30Like maybe if you have this weapon as a country, you want to use it for a variety of things. And by the way, potentially there are countries in the world that have a vested interest in destabilizing a network like Bitcoin, you know, either because they have strong capital controls or because they're authoritarian regimes. and they want to take the U.S. down a peg. So I don't think, you know, again, this is like uncertainty around how this will play out. We just can't really rule out any possibility.

37:51Alex Thorn:Yeah, so we're going to get to a little bit more like the debate that's been going on in not just in crypto and blockchain land, but in Bitcoin specifically, but also in the investment community. But before, I want to ask you, so just again, back up here for a second. Public private key cryptography, asymmetric cryptography. the private key is a closely held secret from the private key you can develop uh you can derive or produce many public keys public keys are this is not you know don't get mad at me like someone like john carvalho always gets mad at me when i say things like this it's kind of like an email address you can give it out publicly like the mit is a famous public key key server yep you can upload a public key and say this is alex thorn's key you can give it away freely your bitcoin address, you can publish on your website and say, send me donations because of the difficulty in reverse engineering the private key from the public key.

38:42Yeah, exactly. And I think actually in the original Cypherpunks mailing list, you know, they were using PGP or GPG. I can't remember which, but it's the same idea. They were like, they gave away their public key, signed messages

38:51Alex Thorn:so people knew it was them. Yep. And you can prove with very low computation that I did accurately sign, but it would take enormous or incomprehensible computation. That's right. It's trivial to verify, but it's very difficult to sign unless you know the private key. So this concept in cryptography is called the trapdoor function. So you can go one way if and only if you have the secret, but you can't really go the other way. So, and that is what Bitcoin, Ethereum, Solana, many other systems, including, you know, basic, all the cryptography securing the vast majority of the internet. Although some services like Cloudflare and stuff have offered some post-quantum stuff.

39:25Alex Thorn:It all uses that basic concept. So again, if your public key is, I don't know, exposed in some way, viewable to an attacker, we'll just say generally, but in public, then if one of these quantum computers existed, it could be at risk. How many such Bitcoin – Bitcoins maybe, is that the right – I mean number of addresses. How many Bitcoins are sitting in such exposed public key addresses? Yeah, so we maintain a tracker called the Risk List at Project11.com, and this is constantly updated every day. So you can go see for yourself, and then also you can check your address to see if it's ever been exposed.

40:03But yeah, the answer is roughly 35 % of the overall supply, so call it 6 million total or so.

40:08Alex Thorn:Yeah. It's right. So it's a significant number. It's more than, you know, we estimate 10 % to 15 % of Bitcoin supply is lost, and that includes Satoshi's early coins where we're mining rewards that we're not. 1.1 million BTC. Yeah, exactly. On my own estimate. Yeah, so there's, you know, one million is Satoshis. They're secured under an older address type that is exposed as the public key natively. Right. But, you know, a lot of them are big exchanges. Right, and because it's like pay to public key, P2PK, which is like the original format, which is deprecated. If you create a new wallet today, you're not going to get one of those addresses.

40:42Alex Thorn:I don't think we need to get too much more into that nuance. But the other big category is even if you're in a better address format where the public key is not natively exposed in a Bitcoin block, Bitcoin signing schema process requires no matter what format the address is in when you're sitting on it and holding it, when you transact, you must show your public key. So any address that's been reused is also likely exposed or is exposed. That's right. And it's actually when you transact, you present the signature. But for you to verify the signature, you have to have the public key. So that's why in these transactions, I mean, it's literally the signature and the public key together in the mempool.

41:26And this was the other interesting thing about the Google paper was that they said, hey, based on this architecture that we have, potentially we can, if a quantum computer that could run the circuit that we proved was built, you could actually run this attack in a short enough time to be able to attack the mempool. Even before the transaction is confirmed. Was finalized, right? And there's a block time and then there's the heuristic that people use to consider finalized, right? Could even be – even if it was an hour or less.

41:51Alex Thorn:Well, let's talk about that in a second, the attacks. Yeah. So you said exchanges. That's likely because they reuse the addresses. Yeah, because if you think about – and it's really any business that has on-chain infrastructure. Just think about if you're – like exchange is a good example where it's like, hey, I give you a deposit address and you save the deposit address in your wallet. and then you send me a Bitcoin. And then you send me a Bitcoin again, right? And so for me to rotate every time would be a huge user experience. Even if you, the exchange, the receiving institution, offer that as a service, still it won't be used that all the time.

42:23Exactly, because if you send to the same address again, I have to either abandon those things and still credit you or I just have to tell you I'm sorry.

42:30Alex Thorn:Right. And so it's like for - But if you're already holding some of my coins in that address, then by definition, I can't send to them again anyway. And anyway, people do, right? But also, like, exchange hot wallets and cold wallets is complicated security infrastructure, and they don't want to rotate all the time. Exactly, because there's a huge security risk in accidentally rotating it if you have this complicated infrastructure or accidentally exposing something as you're rotating it. Yeah, so luckily, I mean, that's problematic. But I would say luckily for me, those coins aren't lost, though, and they're typically used by sophisticated businesses.

43:02Alex Thorn:So if and when a good solution comes, we could probably count on, like, the big centralized crypto exchanges and custodians to upgrade. Plausibly, yeah. I mean, I think it's – I think, you know, yes, but, you know, we just have to account for the fact that these are complicated systems with all of their own dependencies and timelines. We have to bake that in to whatever overall migration timeline. And then the other – OK. So let's just maybe real quick on a short and long-range attack. Maybe can you explain this? Yeah. Because people hear that term a lot. And you were referencing this a minute ago, talking about attacking the mempool.

43:34Yeah. So it's pretty easy. A short-range attack is basically an attack, like a quantum computer that can, you know, run Shor's algorithm and recover a private key from a public key in a short amount of time. Shor being defined as basically around a block time, roughly. And then, you know, again, so what this would look like is kind of like if people are familiar with this concept of MEV, a minor extractable value, is kind of a concept more from the Ethereum world. But the idea is basically like you can just sign, you can recover someone's private key, sign a transaction, you know, based on the public key that someone else was doing a transaction with over here.

44:07And then you pay a higher fee and then send the amount to yourself, right?

44:11Alex Thorn:So even if I'm storing it in the good address type. Even if you do everything right, potentially. I try to send my Bitcoins to a new address and they see that as a pending transaction and they break it before it even confirms. And then they can front run you, potentially. And, you know, as long as they pay a high enough fee or a higher fee than you, then a miner is incentivized to, you know, take that one. And by the way, again, going back to something you said earlier, how does the miner know it's not just you trying to try to replay the same transaction? Replace by fee, right? Exactly. That's an actual feature in Bitcoin.

44:35Alex Thorn:Exactly. Yeah. So, yeah, so that's a short-range attack. The long-range attacks are where, you know, basically the quantum computer can't, you know, recover the private key from a public key in a short, less than a block time. So it's more than a block time. So all of those Bitcoin that are constantly rotated into fresh UTXOs that aren't using addresses or using good public key hygiene are safe. But it's the big wallets like exchanges or the thing that a lot of people fixate on is Satoshi's coins. Are they ever coming back? Who knows? And so that's kind of like arguably the lowest hanging fruit, the easiest.

45:08Alex Thorn:And you could imagine like if you're a nation state, let's say hostile or not, setting Bitcoin aside as the example, the long range attack is going to happen. It would happen first. Now, let's say you have a giant pile of, again, maybe not on Bitcoin, just generally speaking, you have a giant pile of recovered but encrypted data. What do they say? Like harvest now, decrypt later, right? So in the past, like this is even in forensics. So like data destruction is very hard. It's basically impossible to prove. So usually what we did when we wanted to destroy data is you just encrypt it like to the maximum percent.

45:41Alex Thorn:Then you also smash the hard drive. And the idea was that the math would protect the data even in the case that the hardware was recovered. So probably spy agencies and stuff, when they vacuum up a bunch of data from an adversary, if it's fully encrypted and unbreakable, who knows? Maybe they just destroyed it. Probably in the last decades plus that they've realized maybe a quantum computer would exist, they've probably just been storing it rather than, sure, we can't get access, but what if one day we could? Exactly. And it's those types of things, including something like Satoshi's coins, that the long-range attack could – because, you know, fuck it.

46:16Alex Thorn:If it's really big, high-quality potential piece of data, let the quantum computer work on it for a year. Yeah, exactly. If it's that valuable. So you prioritize. Exactly. But I think there's an important nuance here because I think Harvest Not Decrypt Later, which you referenced a second ago, is kind of what the broader cybersecurity world talks about when they think about the risk of a quantum computer. And by the way, Google and Cloudflare and others on the internet have rolled out post-quantum cryptography specifically to address this risk. Yeah. But you said something important, which is just prioritizing based on the economic incentive.

46:44And the hard thing about an attacker, if you're doing the harvest, not decrypt later, is you have a pile of locked boxes.

46:50Alex Thorn:Yeah. You don't know what's in them. You don't know what's in them beforehand, so you're going to try one, and maybe it takes you five days to practice. But then, like, your probability of getting something may not be very high. And you're not going to have, like, 20 quantum computers. Probably not initially, right? Yeah. But on the other hand, you can just look at a block explorer, and you can basically know with certainty exactly what the payoff of that attack will be. And so I think for that reason, that's like another aspect of the exposure that blockchains uniquely face. Yeah, that's super interesting.

47:17Alex Thorn:That does make it – look, even if it's not economical, great. Then you don't waste your quantum computer on that block of 50 coins. So Satoshi's coins, one of the interesting things – tell me if this is a mitigation or at least a thing that makes it a little less scary. They're not all sitting in one address, right? Whereas on Ethereum, everyone's just like, for the most part, I mean, you can have multiple accounts, but like they reuse in giant address, one address. So, you know, for I would say the average, well, not even, I don't want to generalize because it's plenty different. But Satoshi's coins, I was just doing this on my own, in my own Bitcoin project, looking at the Potoshi pattern to the extent that they are his.

47:53Alex Thorn:But most people agree. He really didn't use them at all, almost at all, very, very minimally. So there are actually – he's just got a – I forget how many tens of thousands of unique Bitcoin addresses that all just hold the Coinbase reward from having mine to block. Definitely. But each one would be equally as hard to break as the others. That's right. So this is both, I think, positives and negatives. One is that it's not like you do your attack and get all 1.1 million Bitcoin. It's many attacks, concurrent or subsequent attacks. But on the other hand, you're also potentially less likely to notice, right?

48:30It's sort of like a drip if you attack Satoshi's coin.

48:34Alex Thorn:You don't even have to comment. Like, that's not that interesting. I'm just making this point. The only comment I'll make is I think people would notice. Even one. If even one moves. You're right. I actually just set up real-time alerting, again, on my own note. So you're right. People would notice. But that's why it actually makes attacking Satoshi's coins probably not the main. You probably find like the highest value, lowest famous address you can find theoretically, right? Yeah. If you're trying to economically optimize, probably you don't want to be so obvious that you give yourself away, but you want to get a good enough haul that it was worth it.

49:07Alex Thorn:Yeah. I think the one thing about Satoshi's coins that I think is interesting. I mean there are quantum computing companies that we've talked to that explicitly have made this part of the roadmap. Greg Maxwell actually wrote about this as well. And the reason is because the way that some of these folks think about this is they're like, well, you know, the Spanish were transporting gold back from the Caribbean in the 1400s and the ship sank. And you can go – it's legal for me to go recover this as digital salvage if I just put on a screwdriver-diving gear. And there's a notion that Satoshi's coins are digital salvage.

49:39You know, look, I think there's sort of this relies on some untested legal theories. Yeah. But it doesn't mean people may not try because there is a lot of upside, even if you have to go sequentially. Okay.

49:49Alex Thorn:So let's talk about – I think we're pretty well covered a lot of – is there anything else specifically sort of on the background of the problem that we should talk about? I would just say the one thing I think is really important for people to understand about quantum computers is quantum computers is an abstract concept just like a computer is an abstract concept. It can be realized in any number of ways. And so what Google is doing versus what Oratomic, another company that you mentioned, versus what IonQ is doing are all actually pretty distinct tech trees. And so even though people may read about or hear about limitations that Google is having or someone is like, it doesn't necessarily mean that progress in the field is blocked as a whole.

50:23I think that's really important because there's effectively a race going on. Yes. And that is kind of adding to the worry that potentially someone is going to figure out how to get there first. It's not like all bottlenecked on one path.

50:36Alex Thorn:And in fact, I even saw one of the interesting things I think worth noting that another quantum researcher pointed out to me. So Google is using a superconducting computer, whereas Automix is using a neutral atom computer. I'm not even going to begin to try to explain the difference. I know generally what a superconductor is. I have no godly idea what a neutral atom computer is. But it's a different hardware architecture, right, than what Google is doing. But just like a couple weeks before Google put out their paper, which is about software and mathematics, not about hardware, they actually spun up apparently another division in DeepMind that's actually doing the way Oratomic does.

51:15Alex Thorn:Yeah, neutral atom. Yeah, and some have pointed out that maybe that's actually a recognition or a fear or hedging. Yeah. Google might be saying, you know what? Maybe superconducting isn't going to be possible. Maybe we should do what Oratomic's doing. So it's still even on the hardware side of actually building the machine. Yeah. A lot of questions about what is the path. But your point seems to be like, listen, though, there's a bunch of paths that have been theorized and people are working on. That's right. And I think that just the only thing that anyone needs to know about this is the neutral atom, like kind of the Gen 2 that are not Google's approach.

51:44Like the upshot there is that they're much more stable and potentially easier to scale. But they're probably not going to be capable of the short-range attacks in the short term. Now, maybe over time, but that's kind of the upshot.

51:57Alex Thorn:It's a lot of nuance. Yeah. It's a deep topic. I want to get to some of the work that Project 11 has been doing. But first, let's address some of the debate that's been happening, particularly in Bitcoin land. I feel like other cryptocurrency ecosystems, some are saying, have been more proactive in addressing this potential threat. Whether that's actually initiating something or deploying some mitigation. But mostly, no one's really, not many, I mean, I can't tell you how many blockchains claim to be post-quantum. I can tell you none of the major ones that I know of claim that. But some of them, like Ethereum and Solana, have done some real work or released roadmaps or at least, you know, formulations of a plan.

52:43Alex Thorn:One of the criticisms that our mutual friend Nick Carter has made, and I think many have made fairly, perhaps fairly, I should say, is that I don't think Bitcoin developers or the Bitcoin community is taking it seriously enough. Do you think they're taking it seriously enough? And how would you think about that criticism? I think the way I would answer that is I think there are definitely individuals taking it seriously. And the Bitcoin core developer community is composed of a bunch of individuals without really an authority structure around it. And that was by design. I think that's kind of an inherent feature, a positive feature of this community.

53:22I think the challenge is individual efforts for a cryptographic migration like this may not be sufficient, which is why I think that's where the criticisms stem from, where if you have, let's say, the Ethereum Foundation basically all on the same page and being like, hey, we have a broad plan. It's 50 steps. You're going to do this. You're going to do this. You're going to do this. I mean, I think it at least acknowledges that the scale of the problem is quite big, and it's probably bigger than any one person or even one team. So, I do believe that for Bitcoin to solve this problem will require more than the efforts of an individual core dev.

54:00I mean, I think it will require significantly more because we talked a lot about quantum in the timeline. But I think the piece – and one of the motivations for starting Project 11 is when you think about the work that has to go into actually fixing these decentralized blockchain systems. Even after you decide to fix it. Once you decide to fix it, just the work to actually fix it is extremely intensive because of the distributed nature of the software and because so much relies on that strength of the cryptography.

54:26Alex Thorn:Yeah, and there's a lot of money at stake. There's a lot of money if it goes wrong. Yeah. And so I think we published a report, which I know you commented on, really just highlighting the work that is being done in the Bitcoin community. I feel like the difference is what you said. It's much more decentralized than other communities. Even Ethereum, which is, in my view, quite decentralized as a blockchain. It's got a foundation, though, that pays for development. Where's that? I mean, Bitcoin, to the extent development is funded, it's several nonprofits funding volunteers, basically. Yeah. And so it's harder.

55:00Yeah, and two things can be true. That model can be great and can be a strength of Bitcoin, but that model can also make it hard in the face of big challenges like this. But it doesn't mean that it's impossible to solve this problem if people come together. But I think that's just what they have to do.

55:13Alex Thorn:Yeah. So I agree. I think that to me, even if I want to, you know, I'm going to ask you the big question in a second about timelines. But even if it's extremely unlikely that that quantum computer ever gets built, because like, you know, at a high level, we talked about factoring earlier. Like, what is the highest number that has been factored by an existing quantum computer? It's quite low, right? I think technically people like to point to the number 21, although we recently ran, you know, a little competition where people factored a number significantly bigger than 21, but still far below a 256-bit number.

55:45256 bits is the number of atoms in the observable universe.

55:48Alex Thorn:Yes, and that's what you have to do to do Shor's over. So there's still a huge gap between there. I mean, again, there's been improvements, but it's very early. That's right. But my point is sort of, and I know you've said you agree with this even earlier in this conversation, but even if I'm skeptical that it even ever gets built, there's so much money at stake. I care so much about Bitcoin and the security of self-sovereign digital assets that surely if there's even like a 1 % chance, it's worth taking seriously. That's exactly how I feel about it. In my view, you don't need to be convinced that a quantum computer will ever happen.

56:20You just need to be convinced that there's enough of a chance that it might in a relevant timeline. And I think that bar is much, much lower. And there's a bunch of reasons why I think that, but we can talk about it.

56:30Alex Thorn:Well, I feel like the Bitcoin, there has been movement, I've observed, in the Bitcoin, not just developer community, but in the diaspora, I think. which is because I think if you really talk to someone who's serious and not trolling, I think whether or not they agree there may ever be a problem. There are plenty of smart people I know who just think it's physically impossible. I'm not qualified to know the physics of that, so I'm not focusing my work there. But most even of them will say, look, why I'm pushing back so hard is that we could screw up a hard fork, if it's a hard fork is required or a complex upgrade, or if we're going to rip out, you know, the signing algorithms we use now.

57:13Alex Thorn:And that has its own risks. And I think this is where it's sort of like, I want to work on it. I think we should take it seriously, but it doesn't feel like we need, I'm not saying, and you're not either saying roll something out tomorrow, right? There's still a lot of work that has to be done, figuring out what to do, right? Even if you agree something to do. Yeah. Yeah. But I think it's, it's interesting because I, I, you hear these comments often made together to kind of say, why not to do anything, but I think actually pull in opposite directions, right? One is quantum is impossible. Okay, maybe, but there's no proof.

57:42There's no physical or mathematical proof that that's true. By the way, there's no proof that a quantum computer is possible either. It's just unknown, right? So you've got to roll the dice that your bet is right. But then, though, if you also say, hey, well, we don't know it's possible, and we don't want to accidentally screw things up, we should wait to roll stuff out. But I think then you end up in a world where you risk it is possible, and then there is a quantum computer, And then what are you going to do at that point? Rush something out. And so it's like, honestly, it's better to start early when there is no urgency.

58:12That's a fair point. And make sure everything is tested.

58:14Alex Thorn:Because that's a guaranteed way to rush. It's very hard to do because of the uncertainty that you said. But basically, there should be some equal weighted amount of likelihood and work being done at all times. The problem is we won't ever know the exact likelihood. So I think that's why I focus on really just being supportive of the equivalent of getting off zero, right? The risk of doing nothing is pretty high. The risk of doing something and taking it slow, it's not that high. The cost is not that high. And when you're doing risk mitigation, you've got to think about the likelihood of the event and how serious it is, right?

58:47And think about it. I mean, it's the easiest way to think about it is seatbelts. Like, I don't intend to get in an accident every time I get in a car. It's not that likely. It's very unlikely, actually. But I still wear a seatbelt.

58:56Alex Thorn:Because if you do, it could be deadly. Yeah, you might die, right? But if you don't wear one, but if you do wear one, you might live. I will say that the institutional investment community is way ahead of the online crypto community in this. And it's really just in the last few months. I think we talked and I talked with you and Nick about this six months ago. And I went to that. We were at that Presidio. It was a great conference. I was there for exactly like 14 hours. Like just a quick trip out to San Francisco last July. I didn't hear a single peep about quantum from any of our clients or counterparties by then.

59:32Alex Thorn:And at this point, I wouldn't say it's a deafening roar, but it's a question every single person has. Like when that Google paper came out that was very widely publicized generally, which did deal specifically with cryptos, Bitcoin and Ethereum specifically. I mean, we had questions from everyone about it. So it's at the top of people's mind. I don't think people sold Bitcoin in October till now because of it. I do think some allocators are using it as a reason to sit on their hands until they feel more comfortable with where it is. I agree with that. In my personal view on Bitcoin's development priorities, I guess I challenge any Bitcoin core developer to point to a more existential technical issue.

1:00:12I mean, there's definitely things you could make Bitcoin better, but I guess this is kind of the elephant in the room. Well, yeah.

1:00:17Alex Thorn:We can improve scaling and do stuff like that, but that's new features or capabilities. And block utilization is barely 1%. That's what I mean, though. We can work on new tech or give some new op codes to give more features or not. Yeah. The only other one I would add, though, is that like Claude Mythos and like the threat of AI discovering unknown vulnerabilities, also very high, to be clear. Totally. And urgent today, although, I mean, there's not much to be done except can – I mean, Bitcoin is the most widely reviewed source code in the world probably, right? Yeah. Before we wrap, I know we have a hard stop in about one minute.

1:00:51Alex Thorn:Project 11, tell me what you guys are doing for this problem. I know you're raising a lot of awareness. I will point out, I know, I saw an interesting story about Project 11 working with Solana and helping Solana developers test out some PQ crypto. Sort of, what do you guys offer today and what's your vision? Yeah, amazing. So what do we do? Raise awareness and get yelled at a lot on X. That's thing one. Maybe that's what I do. But yeah, generally, look, I mean, our future-proofing blockchains has been what we've done. So we actually launched the first and only ever in-production post-quantum, you know, secure system for Bitcoin.

1:01:22It was a simple cross-signing service where you could generate new post-quantum keys and attest to owning your Bitcoin in a way that could never be forged, right? So it doesn't really protect your Bitcoin, but it's a proof of ownership that can't be hacked. So that was like, it was kind of a demo that we did last year called Yellow Pages. Since then, we worked with a bunch of different protocols as well as participated in a lot of conversations in the Bitcoin community about how should, you know, post-quantum cryptography be applied. So there's a bunch of trade-offs that kind of come with a lot of these new post-quantum schemes.

1:01:50And so what we aim to do is build reference implementations and work to test those implementations in reality. So the Solana partnership that you just referenced, we took one of the two NIST standard schemes. NIST is the National Institute of Standard Technology, one of their post-quantum recommended algorithms. We plugged it into Solana and we saw what would happen. Spoiler alert, I mean, things work differently and more slowly because these signatures are just bigger and slower in general. And this is going to be a problem that every blockchain has to face. And so these implications are really what Project 11 is all about.

1:02:19Let me make one last comment, just dovetailing off the mythos thing. Look, I think obviously quantum is a threat and it's going to cause a big dislocation in cryptography, but there's no guarantee that'll be the last dislocation. Mythos and AI, as it gets better and better, you might find yourselves in an arms race or we might find ourselves in an arm race where AI is always getting better and the cryptography is not catching up fast enough. And that requires basically this ability to embrace what's called crypto agility. And this, I think, for decentralized communities like Bitcoin, and maybe I'll end here, is like this muscle where we all have to come together and coordinate as not just a bunch of individuals but as a group may become relevant, again, sooner than we think.

1:02:58It may even not necessarily be a quantum computer that forces a change. And so I think it's a good thing to start talking about this now for a variety of reasons. There you go.

1:03:05Alex Thorn:Alex Pruden, co-founder, CEO of Project 11. Alex, thank you so much. And by the way, you'll see us on stage at the Bitcoin conference, I don't know, April something. in a couple of weeks talking about this topic. Thank you so much, Alex. It's amazing to be here. Thanks for having me. That's it for this week's episode of Galaxy Brains. Thank you to our guest, Alex Pruden, co-founder and CEO of Project 11 and our good friend, Bimnet Abibi from Galaxy Trading. Everyone have a safe and happy week and I will see you next week.

1:03:50Alex Thorn:Thank you for listening to Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorne, head of firmwide research at Galaxy. Follow me on X at Intangible Coins. Follow Galaxy Research on X at GLXY Research. Read our written reports at galaxy.com slash research. And don't forget, if you like Galaxy Brains, to like and subscribe on your favorite podcast platforms like YouTube, Spotify, Apple Podcasts, and more. We'll see you next time.