Chinese researchers have reportedly claimed to have successfully breached the encryption algorithms used in banking and crypto using a quantum computer.

Shanghai University researchers led by Wang Chao claimed they used a quantum computer produced by Canada’s D-Wave Systems to breach the algorithms through quantum annealing, which involves searching for the lowest energy state, the South China Morning Post (SCMP) reported on Oct. 11.

The researchers targeted the Present, Gift-64, and Rectangle algorithms — the foundation for the Substitution-Permutation Network (SPN) structure, which backs the advanced encryption standards (AES) widely used to encrypt cryptocurrency wallets. 

AES-256, in particular, is considered one of the most secure encryption standards available, but researchers say quantum computers may soon be a threat, and the breakthrough could pose a severe threat to longstanding password-protection mechanisms.

Wang’s paper described the quantum annealing technique they used as similar to an artificial intelligence algorithm capable of optimizing solutions on a global scale.

Traditional algorithms explore every path, but quantum tunneling involves particles passing through barriers rather than over them, allowing the quantum computer to find the lowest point more efficiently by bypassing obstacles that standard methods usually struggle to replicate.

“This is the first time that a real quantum computer has posed a real and substantial threat to multiple full-scale SPN structured algorithms in use today,” Wang’s team said.

Quantum computing has been a long-feared inflection point for the crypto industry . Computers capable of breaking encryption could expose user funds to thieves in large volumes and at rapid rates.

Scientists breach cryptographic algorithms with quantum computer: SCMP image 0

There’s no single point of failure for blockchains, to attack it, you need to command 51% of the processing power on the network. Source: Medium 

Despite the advancement, researchers said limitations would still hamper a full-on quantum hack, at least for now, because of environmental factors, hardware limitations and the challenge of devising a single attack algorithm capable of breaching multiple systems.

At the same time, researchers said the quantum computer attack did not reveal the specific passcodes used in the algorithms tested; however, they made larger gains than previously achieved.

They noted that further developments could yield more robust quantum attacks in the future and reveal potential new vulnerabilities in existing cryptographic systems.

The findings were recorded in a peer-reviewed paper published on Sept. 30 in the academic journal, the China Computer Federation (CCF) Chinese Journal of Computers.

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Ethereum co-founder Vitalik Buterin has already proposed a way to mitigate the risk of quantum computing in the future, explaining in a March X post that a simple hard fork could subvert the issue.

Buterin says the blockchain would have to hard fork and users would have to download new wallet software , but few would lose their funds.

He also thinks the infrastructure needed to implement the hard fork on the Ethereum blockchain could, in theory, “start to be built tomorrow.”

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