Bitcoin is a safe asset only until decrypted: Chris Wood

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Jefferies’ global head of equity strategy, Chris Wood, flagged concerns about the existential risk of Bitcoin, highlighting that the arrival of quantum computing could undermine its security. In his newsletter Greed and Fear, Wood said he removed allocation to Bitcoin in his model portfolio, replacing that with gold and gold-mining stocks.

According to him, the potential emergence of Cryptographically Relevant Quantum Computers (CRQCs) could weaken the assumption that Bitcoin is secure, as it would increase the risk of the digital asset being compromised.

“There is an ongoing discussion about whether to ‘burn’ the quantum-vulnerable coins or to do nothing and risk having those vulnerable coins being ‘stolen’ by entities with so-called CRQCs,” said Wood in the note.

He said that while deriving a “public key from a private key” is simple, the reverse operation would take supercomputers “trillions of years”.

“But this asymmetry collapses with the arrival of CRQCs, reducing the time to derive a private key from a public key to mere hours or days,” said Wood.

The public key is used to receive Bitcoin from others in the network, while the private key is needed to move it. The security of Bitcoin depends on the private key remaining secret.

“Clearly, any threat to the quantitative tightening dynamic (pre-programmed reduction in new coin supply) enshrined in bitcoin, with the last bitcoin due to be created or ‘mined’ in 2140, is potentially existential as it undermines the concept of bitcoin as a store of value and therefore as a digital alternative to gold,” said Wood.

He said the bitcoin community is debating about the risk of CRQCs becoming a reality.

“Those arguing for pre-emptive action that burning the vulnerable coins will preserve Bitcoin’s integrity as a system designed to protect property rights,” he said. “It is also the case that it can be legitimately argued that so-called forks in Bitcoin have happened where rules have been changed following a debate within the community.”

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