In the first installment of this series, we introduced the concept of “quantum computing” and how, while still experimental, its implications for blockchain security include the potential exposure of public keys, the theft of funds—and thus the transformation of cryptocurrencies as we know them. That article focused on the SHA-256 algorithm’s contribution to Bitcoin security primarily via its consensus mechanism, but SHA-256 is only one side of the coin so to speak. In this second part, we will examine the Elliptic Curve Digital Signature Algorithm (ECDSA). A signature algorithm deeply embedded within the Bitcoin protocol, ECDSA adds a layer of authentication by linking a public key with its corresponding private…
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Thawing Out Cold Storage
Putting some BTC to work in DeFi while keeping the rest offline
With a market capitalization of $660 billion as of this writing, bitcoin is not only the first and oldest cryptocurrency, it’s the largest store of value – fully 53% of the total value of all cryptos tracked by CoinMarketCap. And bitcoin true believers are notorious for holding onto their BTC for the long term. In April the percentage of BTC that had not moved in 2 years hit an all-time high of 53%, and almost 29% of all bitcoin in circulation hadn’t moved in 5 years ($150 billion of market cap at the time). In fact, it’s a notable event when a very old BTC address sends funds for the…
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Staking and Liquid Staking: a Primer
Part 1 of Staking: benefits and challenges for the crypto ecosystem
Staking – the practice of providing one’s tokens to help operate and secure a network, usually in exchange for rewards – is rapidly becoming a substantial ecosystem of its own as the number and market capitalization of cryptocurrencies using a “proof of stake” (PoS) consensus mechanism to verify transactions continues to grow (in contrast to electricity-intensive “proof of work” chains like Bitcoin). Staked / Kraken’s State of Staking Q2 report cataloged a number of impressive growth stats. While proof of stake’s share of the total crypto market cap increased only 2% quarter over quarter to 23%: The value of staked assets rose 61% to $68 billion Market cap of the…
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Could Quantum Computing Mean the Death of Crypto?
Interest is growing in cryptography resilient to quantum attacks
Contained in the bizarre world of quantum mechanics—where physical matter has properties of both particles and waves, and subatomic particles exist in multiple states at one time until observed—may lie the key to unparalleled computational speed. While still highly experimental, governments have been investing in research into “quantum computing” for years, and a recent article in Wired notes that last year venture capitalists “plowed a record $1.8 billion into companies working on quantum computing hardware or software worldwide…nearly five times the amount invested in 2019.” Whereas the basic unit of information in traditional digital electronics is the bit (a logical state with two possible values, typically expressed as 0 and…
