Explained quantum - blockchain, how far along are they

Quantum computing and blockchain systems are two emerging technologies in recent years that have the potential to revolutionize business models. Recent advances in quantum computing have had a significant impact on the computational efficiency of important algorithms, which poses serious security issues for cryptography-related technology systems, blockchain being one of them.

 

We will analyze in detail the blockchain-based financial systems in the emerging quantum era. The basics of the blockchain concept and its various real-world use cases will be discussed first, followed by specific financial use cases such as cryptocurrencies, smart contracts, digital payment and exchange systems, NFTs, and so on.

 

It is worth emphasizing that although there exist a number of reviews on blockchain and quantum technologies, most of them focus on only one aspect of the relationship between the two: i.e., they either focus on the quantum-resistance of the blockchain, or they focus only on the security aspects of the blockchain without taking into account quantum attacks, or they focus only on quantum computing and mining.

 

This paper, on the other hand, analyzes all aspects of blockchain and quantum technologies, privacy-preserving coins and their applications in finance. In this sense, we will give a broader and comprehensive view of the above concepts.

 

 

Blockchain is a digitally distributed and decentralized ledger system that is basically a database but not a single source of data; instead, the data is divided into multiple blocks that are called peers (nodes) in different computers.

 

The data structure is similar to a public record, where all completed transactions are recorded in a sequence of blocks. Over time, this sequence expands as new blocks are added. This distributed system is ruled by consensus algorithms. The development of blockchain systems began with the idea of building a secure peer-to-peer (P2P) digital payment system without the need for a trusted third party like a bank. By utilizing asymmetric cryptography and distributed consensus algorithms, user security and ledger consistency are ensured.

 

The main features of blockchain are:

 

- Decentralization: Blockchain's consensus algorithms enable the system to circumvent the need for a trusted third party and its associated cost and performance limitations.

 

- Immutability: Once transactions are added to the blockchain, it becomes very difficult, if not impossible, to delete or undo them.

 

- Anonymity: Users are provided with a unique address to access the blockchain, the Bitcoin address is generated as a 160-bit hash of the user's public key.

 

- Auditability: The use of the UTXO (Unconsumed Transaction Output) model in the blockchain ensures auditability by allowing all transactions to be verified and tracked directly.

 

Blockchain finds application in a variety of financial services such as digital assets, online payments and remittances as it allows payments to be completed without the involvement of banks or centralized authorities. Apart from finance, it can also be implemented in other areas such as smart contracts, security services, reputation systems, public services and the Internet of Things (IoT).

 

Listed below are some of the real-world scenarios where blockchain technology can be used:

 

- P2P global transactions: although there are some international payment processing services (e.g. PayPal), they tend to charge significant transaction fees. Blockchain offers secure, cheap and fast global money transfers without the need for a trusted third party.

 

- Supply chain management and quality assurance: Blockchain technology offers traceability and cost-effective benefits in supply chain management. Through blockchain, goods can be traced, along with their origin, quantity and other relevant details. This greater transparency streamlines various processes in the supply chain ecosystem such as payments, production process assurance and transfer of ownership. If any irregularities are detected in the supply chain, the blockchain system can help trace them back to their point of origin. This enables organizations to investigate the issue and take appropriate action.

 

- Accounting: Using blockchain technology to record transactions greatly reduces the risk of human error and safeguards the data from tampering. Notably, each time a record is passed from one blockchain node to another, it is validated, further ensuring accuracy. This not only ensures accuracy, but also creates a highly traceable record of financial transactions.

 

- Smart Contracts: Lengthy contractual transactions can hinder the growth of a business, especially for those that deal with large volumes of communication on a regular basis. Smart contracts automate the verification, signing and execution of agreements through the blockchain framework. This eliminates the need for a middleman, thus saving companies money and time.

 

- Voting: the use of blockchain for local elections can significantly reduce the risk of electoral fraud, which is a major issue despite the widespread use of electronic voting systems.

 

- Stock exchanges: Blockchain technology has been recognized as a potential solution for securities and commodities trading for some time, as blockchain systems are reliable and transparent. This has led stock exchanges to explore its potential as the next major advance. For example, the ASX (Australian Stock Exchange) has developed plans to transition to a blockchain-based system for its operations using technology developed by blockchain startup Digital Asset Holdings.

 

- Energy supply: Blockchain technology is currently delivering sustainable energy solutions, providing accurate usage tracking through a "grid of transactions" available to businesses and households in certain parts of the world.

 

- IoT devices: Blockchain technology has the potential to provide a secure mesh network for the Internet of Things (IoT), interconnecting without the risks associated with a centralized server model. This could create a platform for a public economy based on machine-to-machine interactions. Through blockchain, data generated by IoT sensors can be monetized, enabling owners of IoT devices to sell this data in digital currency.

 

- E-auctions: integrating blockchain technology into e-auctions can improve transparency, security and efficiency. By employing a decentralized platform, blockchain eliminates the need for a middleman and ensures that all transaction data is securely recorded. This enhances trust between buyers and sellers as all participants have real-time access to the entire bidding process, reducing the possibility of fraudulent activity. Moreover, implementation of smart contracts in blockchain-based e-auctions automates the bidding process and ensures that all parties adhere to predefined terms and conditions. As a result, blockchain technology has the potential to revolutionize the e-auction industry by providing a more secure and efficient platform for online auctions.

 

- NFT (Non-Fungible Token): NFTs are digital assets stored on a blockchain, usually an ethereum blockchain, which are independent and cannot be split. Unlike interchangeable tokens such as Bitcoin or Ether, which can be traded on a one-to-one basis, NFTs are single and unique. Buyers can use the blockchain to verify the ownership and legitimacy of digital assets.

 

In the future, possible barriers to blockchain adaptation include scalability, system integration, lack of standardization, complexity of blockchain applications, regulatory uncertainty, and risk. Examples include architectural and design risks as well as endpoints, storage, data security and confidentiality, smart contracts, compliance, vendor and contractual risks.

 

It should be noted that blockchain is actually computer software that allows transactions to take place between participants in a peer-to-peer network. Therefore, important issues regarding blockchain security are under discussion.

 

Right now, blockchain security is facing quantum threats.

 

 

Among cryptographic vulnerabilities, cryptographic primitives in blockchain structures are the most affected by the rising threat of quantum computing. The three basic cryptographic primitives used in blockchain systems are digital signature algorithms, hash functions, and random number generation:

 

- Digital Signature Algorithm Vulnerabilities. Digital signature algorithms based on public key cryptography are the main security pillar for blockchains to conduct transactions and record past activities. Each blockchain uses its own choice of digital signature algorithms and hash functions. The commonly used digital signature algorithms for blockchain are ECDSA (Elliptic Curve Digital Signature Algorithm) and EdDSA (Edwardian Curve Digital Signature Algorithm).

 

- Hash Function Vulnerability.SHA-256 is a secure hash algorithm commonly used in blockchain systems and is susceptible to length extension attacks. This attack is based on modifying the hash value of a signed message or transaction, i.e., the attacker adds certain data to the message without knowing the shared secret.

 

- Random Number Generation Vulnerability. Random number generation (RNG) plays a crucial role in blockchain technology and can be used for a variety of functions, including selecting verifiers or miners, verifying transactions, and creating new blocks. Miners use RNG to generate a random nonce (a number that is only used once), which is then combined with transaction data and hashed against the block header to validate the transaction. This process is repeated until the hash reaches a predetermined difficulty threshold, and the first miner to discover the exact hash is compensated with cryptocurrency.

 

Another common application is PoS-based blockchains. Proof of Stake (PoS) selects verifiers to create new blocks based on the amount of cryptocurrency they own, often using an RNG in the selection process in order to maintain fairness and avoid centralization. a random number generator RNG is also used in ECDSA (Elliptic Curve Digital Signature Algorithm) to create a secret nonce that is applied to the signature process. This nonce is a randomly generated value that is used in the signature algorithm to ensure that different messages do not generate the same signature.

 

The cryptographically secure random number generator that ECDSA and most other cryptographic protocols rely on is what makes them vulnerable. A poorly chosen random number generator can lead to the recovery of a private key from a given public key. The vulnerability of pseudo-random number generators can theoretically be overcome by using a quantum random number generator, which is a true random number generator that provides the required security against bias-related attacks.

 

It is widely recognized that quantum computers have the potential to solve difficult computational problems such as the integer factorization problem (IFP) and the discrete logarithm problem (DLP)-problems that underlie the security of most cryptographic protocols.

 

Shor's quantum factorization algorithm makes the most commonly used asymmetric cryptosystems, such as the RSA , Diffie-Hellman and Elliptic Curve Diffie- Hellman protocols, vulnerable to attacks by sufficiently powerful quantum computers; Grover's algorithm, by dramatically reducing the search space for collision attacks on private keys, preimages and hash functions, has improved brute force attacks. These algorithms are now being used to encrypt sensitive data such as government and military information, emails, and financial data such as blockchain transactions and wallets, so disrupting these algorithms would have serious consequences for digital security and privacy.

 

 

A step in the design of Grover's algorithmic quantum circuits

 

Most blockchain systems utilize ECDSA, EdDSA, or RSA digital signature algorithms based on the discrete logarithm problem, and are therefore vulnerable to quantum attacks in the near future. As a result, research and investment in quantum computing has increased in recent years across industries, prompting researchers to develop reliable quantum-resistant cryptographic protocols.

 

Quantum-resistant cryptography (PQC) involves the research and development of cryptographic algorithms that can withstand attacks from quantum computers. As quantum computers evolve, it poses a potential threat to many of the cryptographic algorithms currently in use. As a result, it is becoming increasingly important to focus on developing PQC algorithms that provide long-term security.

 

The National Institute of Standards and Technology (NIST) launched the Quantum Resistant Cryptography Standardization Process in 2016 to evaluate and standardize quantum-resistant cryptographic algorithms. The process takes the form of a multi-round competition in which competitors submit their anti-quantum encryption algorithms to be compared and evaluated from a number of perspectives, including security vulnerabilities and efficiency.

 

In July 2022, NIST announced the selection of 17 quantum-resistant cryptographic algorithms from the initial 69 submitted to the third round of the PQC standardization process, and on July 17, 2023, NIST published the list of submitters for the fourth round of PQC digital signature algorithms.

 

Several blockchain initiatives are currently focusing on creating solutions that can withstand quantum computing attacks to ensure the long-term security of their networks. To build a quantum-resistant cryptographic blockchain, a quantum-resistant digital signature algorithm and hash function are required.

 

 

Some blockchains with anti-quantum digital signature algorithms

 

In addition to the table above, there are a number of research papers that propose different anti-quantum blockchain constructs:

 

- In 2018, an anti-quantum blockchain based on BLISS signature generalization was proposed as a privacy-preserving, one-time linkable ring signature (L2RS) that provides environmentally friendly cryptographic transactions on the blockchain. They named this new privacy-preserving protocol for cryptocurrencies as Lattice RingCT v1.0.

 

- There is also a study that uses the anti-quantum SPHINCS+ signature algorithm in an efficient manner. The main challenge with lattice cryptosystems is that they use public keys and signatures that are usually very large, which limits the number of transactions that can be accommodated in each block of the blockchain. This can seriously affect the speed and performance of the blockchain. To solve this problem, the research team came up with a solution where they only store the hashes of the public keys and signatures on the blockchain, while storing the full content of these values on IPFS (which refers to the Interplanetary File System). In this way, the number of bytes needed for each exchange is greatly reduced. They developed a Bitcoin exchange scheme to evaluate the performance of this quantum-resistant blockchain system.

 

- There is another anti-quantum blockchain scheme in which FALCON is used because it is considered time efficient and has a smaller key size compared to other signature algorithms in the NIST PQC competition.

 

- In 2018, some scientists proposed a cryptocurrency based on an anti-quantum blockchain that could withstand quantum computing attacks. However, their proposition requires the use of a specialized blockchain, which does not harmonize with the currently used blockchains.

 

- Additionally, there are scientists who have proposed a grid-based proof-of-work (PoW) scheme that utilizes the difficulty of Hermite-SVP, a variant of SVP.

 

Over the past few years, there has been a growing interest in how to protect blockchains from potential attacks by quantum computers.

 

To this end, two main approaches have emerged in the research field, the first being quantum-resistant blockchains and the second being quantum-secure or quantum-secure blockchains. The former uses digital signature algorithms that are resistant to quantum computation, but are still predominantly theoretical and lack practical applications: it is important to realize that hash functions are already resistant to quantum computation as the bit size increases. However, unfortunately, implementing quantum-resistant signature algorithms and strong hash functions is not enough to avoid all quantum threats.

 

Various security risks exist at every layer of the blockchain. The concept of a quantum-safe blockchain refers to securing against quantum threats at each layer of the blockchain application. The network layer is responsible for providing interaction and communication between blockchain nodes. Their main role is to ensure the reliability of the network, which is why, in the future, this layer will need to implement a quantum network. Nodes also play a crucial role in the hardware layer as they are the physical devices that connect the network and enable blockchain consensus. In order to strengthen the security of the infrastructure, it is common practice to restrict or block access to the nodes. Therefore, to fully establish a quantum secure blockchain, the infrastructure must be enhanced.

 

 

Quantum blockchain can be defined as a distributed cryptographic database that uses the principles of quantum computing and quantum information theory to ensure decentralization. It refers to a specific type of blockchain technology designed to guard against the risks that quantum computers may pose. Quantum computers are capable of solving complex mathematical problems at a much faster rate than conventional computers, so the security of blockchain networks may be compromised. To counteract this, quantum blockchain employs sophisticated encryption methods, including quantum key distribution, quantum random number generation, quantum network channels and quantum information theory, to secure the network against malicious attacks. In addition, quantum blockchains can employ anti-quantum algorithms and protocols to enhance their security measures.

 

Similar to traditional blockchains, quantum blockchains have certain features, including decentralization; however, the main characteristics of quantum blockchains are security and efficiency.

 

Maintaining the security of quantum blockchains is crucial. Quantum Key Distribution (QKD) and Quantum Secure Direct Communication (QSDC) are two methods to ensure secure communication between nodes. These methods rely on quantum physics principles to authenticate the network and prevent unauthorized access; to address the weaknesses of digital signature algorithms, quantum blockchains can implement a quantum digital signature mechanism to make the blockchain quantum secure. This approach ensures that quantum computers cannot undermine the security of the quantum blockchain.

 

Another feature of blockchain technology utilizing quantum computing is the fast transaction processing speed. The adoption of simulated Hamiltonian optimizers has the potential to shorten transaction times and could significantly impact the widespread adoption of Bitcoin and other blockchain applications.

 

In addition, the integration of the Grover algorithm into the broader blockchain framework has the potential to improve the efficiency of the mining process. However, until quantum computers become commonplace, those with general-purpose quantum computers will have an unfair advantage in accessing mining rewards. By the time quantum technology becomes widely available, it may be so widely used that those without quantum computers will not be able to gain control of the network, while classical hardware will fall behind.

 

Implementing blockchain systems in quantum computers and quantum programming has several potential advantages:

 

- Enhanced computational power: Quantum computers have the potential to outperform ordinary computers in specific computational tasks. By utilizing quantum computing, blockchain systems can perform complex operations more efficiently, resulting in faster transaction verification, improved consensus mechanisms, and enhanced scalability.

 

- Quantum cryptography: quantum blockchain systems can utilize quantum mechanical principles to enhance cryptographic protocols. Quantum cryptography, including techniques such as quantum key distribution (QKD), enables secure exchange of cryptographic keys. This ensures the confidentiality and integrity of blockchain transactions, making them more resistant to attacks.

 

- Improved Consensus Mechanisms: quantum computing enables new types of consensus mechanisms tailored to quantum blockchain systems. These mechanisms utilize quantum properties such as entanglement and superposition to achieve faster and more secure consensus. Anti-quantum consensus algorithms can also be implemented to ensure long-term security against potential quantum attacks.

 

- Quantum data analytics: quantum computing has the potential to revolutionize data analysis and pattern recognition. Quantum blockchain systems can leverage quantum algorithms to process and analyze large data sets more efficiently, providing valuable insights and enhancing the decision-making process. This is particularly beneficial in blockchain applications involving complex data sets such as supply chain management or medical records.

 

- Quantum-specific applications: quantum blockchain systems enable the creation of quantum-specific applications and services. These applications leverage the unique capabilities of quantum computers, such as quantum machine learning, quantum simulation, or quantum optimization. By combining the advantages of blockchain technology and quantum computing, innovative solutions can be developed for areas such as finance, healthcare and logistics.

 

Implementing blockchain systems in quantum computers and quantum pre-programming can prepare organizations for the future era of quantum computing. As quantum computers become more powerful and ubiquitous, the classical cryptographic algorithms used in traditional blockchains could become vulnerable. Quantum blockchain systems can provide long-term security, ensuring that sensitive data and transactions are protected in the presence of quantum adversaries.

 

Notably, the practical realization of these advantages depends on advances in quantum computing hardware, quantum programming languages, and the development of powerful quantum algorithms designed specifically for blockchain applications.

 

 

Implementing blockchain using quantum programming faces many challenges because quantum computing and quantum programming are still in their early stages:

 

- Limited quantum computing resources: Quantum computers with sufficient quantum bits and low error rates are still under development. Building and maintaining such quantum computers is both complex and expensive, leading to a scarcity of quantum computing resources. This scarcity makes it difficult for quantum blockchain implementations to scale effectively.

 

- Programming Paradigm Shift: Quantum programming requires a unique mindset and approach compared to classical programming. quantum programming languages such as Q#, Qiskit or Cirq have unique syntax and concepts such as superposition, entanglement and quantum gates. Developers must have expertise in these quantum programming languages and master the fundamentals of quantum mechanics to effectively design and implement quantum blockchain systems.

 

- Designing Quantum Algorithms: Creating quantum algorithms specifically for blockchain applications is a major challenge. Existing classical blockchain algorithms and protocols cannot be directly ported to quantum computers due to fundamental differences in computing power and inherent limitations of quantum systems. Researchers need to explore new algorithms that utilize quantum properties to achieve quantum-enhanced blockchain functionality, including quantum consensus algorithms or quantum-resistant cryptography.

 

- Quantum error correction: quantum computers are vulnerable to errors caused by decoding and noise. The adoption of robust quantum error correction techniques is essential to minimize these errors and maintain reliable and stable computation. However, implementing such error correction mechanisms in quantum blockchain systems is challenging and requires significant computational re- sources and expertise.

 

- Integration with classical systems: quantum blockchains may need to interact with existing classical systems and infrastructures. Bridging the gap between classical and quantum systems introduces additional complexity. Ensuring compatibility, data exchange and secure communication between quantum blockchains and classical components is a major technical challenge.

 

- Lack of standardization: quantum programming is a rapidly evolving field that lacks standardization in programming languages, libraries and tools. This lack of standardization hinders the development of a cohesive and well-supported quantum blockchain ecosystem. Additionally, the lack of established best practices and guidelines makes it more challenging for developers to create reliable, interoperable quantum blockchain solutions.

 

Despite these obstacles, current R&D efforts are focused on addressing these challenges and advancing quantum programming for blockchain applications. As the field evolves, quantum computing resources, programming frameworks, and algorithms are expected to improve, thereby facilitating the implementation and integration of quantum blockchains across the system.

 

Reference Links:

[1] https://csrc.nist.gov/Projects/pqc-dig-sig/round-1-additional-signatures

[2]https://arxiv.org/pdf/2307.01155.pdf