The Crypto Wallet FEAR Factor 😰 ; Navigating Bitcoin Wallet Security Claims in a post Quantum World.

richard brooks
Aug 28
5 min read

The digital asset space is a hotbed of innovation, but it's also rife with sensationalism. A quick search reveals a staggering number of online claims about the vulnerability of Bitcoin wallets.

Just in the US, the Federal Trade Commission reported that from 2021 to 2023, there were over 20,000 reports of cryptocurrency scams filed by consumers, with losses exceeding $2.5 billion.

However, some of the doom articles appear to be driven more by the desire for web clicks than by a deep understanding of cryptography or the issues at play.

Here is my version.

The Problem: A Flood of Fear and Financial Fallout

While Bitcoin's underlying cryptography (Elliptical Curve Cryptography - or ECC) remains uncompromised, the human and technical layers built on top of it are often vulnerable. Because of HUMAN and SOLUTION vulnerabilities cryptocurrency scams and hacks have resulted in billions of dollars in losses annually. These threats are not from breaking Bitcoin's core cryptography but from social engineering, phishing, and attacks on third-party services that host on line crypto wallets.

The scale of the issue is significant. Recent data from Chainalysis and TRM Labs reveals that hacks and exploits alone stole over $2.2 billion in 2024, bringing the three-year total to more than $7.7 billion. As a reference point a US$1.3billion dollar unpaid debt obligation made Barings Bank ‘bankrupt’ in 1995 due to unsettled futures on the Japanese and Singapore markets.

These losses are real, and substantial, and potentially financially dangerous too, as US Bonds are increasingly being used as collateral against Bitcoin and other Crypto and Stable Coin positions. Its basically a carry trade from a lower risk and volatility asset (bonds) into a higher risk crypto asset class. Note that Tether was the 7th largest buyer of US Treasury Bonds in 2024!

My take away - Crypto hacks can trigger the liquidation of large US Bond holdings.

What is the Crypto - in Crypto+currency.

The real, long-term threat to Bitcoin's security isn't from today's attackers as described above, but from the advent of large-scale, fault-tolerant quantum computers.

Bitcoin, like much of our modern digital infrastructure, relies on the public / private key sharing method called Elliptic Curve Cryptography (ECC). This algorithm is secure against classical computers because of the immense time it would take to reverse-engineer a private key from a public key. Think millions of years, then add at least 9 more 0s. Just the energy required to run such a process on a decent sized application server, would consume all of the electricity ever generated.

However, a quantum computer adapted for Shor's Algorithm could solve this problem in a few days, or faster, potentially rendering current digital signatures and keys obsolete.

So a quantum computer with enough computational power (estimated to be 2500 Logical Qbits) would decrypt the ECC key pairs and would remove the crypto from crypto+currency, just leaving currency!

And if currency was left lying around in online wallets and exposed during internet communications, it will be stolen. Or maybe just become valueless, as its prime function as a store of value disappears.

To highlight this risk Arcam Intelligence published via X in August 2025 that US$14 billion of BTC has been stolen from the Chinese Lubain Pool. Not a Human or System based hack, but a simple wallet decryption due low (32bit) randomness of the keys. A 32-bit key has 2^32 or 4,294,967,296 possible combinations. This number is large, but well within the capabilities of modern computing, given that a modern laptop with a fast processor can perform billions of operations per second.

Here is the article via X.

Bad news for people with cryptocurrency assets. Well actually bad news for everyone because a literal avalanche of US Bonds would then need to be redeemed to compensate investors. The carry trade would break down and the price of the secure asset, the US Bond, will also move into a higher risk and more volatile period, taking not just crypto with it, but hundreds of other bond / equity hedge strategies.

My point - This is almost the same borrow low risk, spend higher risk / return that caused the 2008 financial crash if combined with a Black Swan event as described above.

The Sky is Falling - the Sky is Falling !

Not yet Chicken Little, but it may do.

The response to weaker cryptography is of course stronger cryptography.

To address this, the cryptographic community is working on Post-Quantum Cryptography (PQC), a family of algorithms designed to be secure against both classical and quantum attacks. These solutions, would require a hard fork of the Bitcoin protocol. While this transition would be a major undertaking, it's a necessary step to ensure the long-term integrity of the network. NIST the US organisation that works this stuff out states that ECC needs to be sunset on systems by 2035 to be wholly safe.

Well thats OK then isnt it?

No because the current state of Quantum Computing indicates that by using a modular template of just 12 Logical Qbits, operational today via IBM, Quintessence Labs and IonQ, built in an array format, reaches the required 2,500 LQBs by 2029 by just stacking these 12 LQB modules together and connecting them to a common bus.

A bit more here on a previous blog entry.

The Click-Through Conundrum

Many of the sensational headlines about "Bitcoin wallet hacks" are not about a fundamental cryptographic flaw but rather about the common scams that plague the digital world. "Pig butchering" schemes, fake exchanges, and phishing attacks are all forms of social engineering, not technical exploits of the Bitcoin protocol itself.

But hidden away in this noise is a real threat to both encryption and the resulting liquidation of US Government Bond assets held as collateral against these crypto assets and stable coins.

This is significant and real and somewhere over the time horizon at around 2029 / 2030.

Also, and probably more significantly, is the risk multiplier given to a major US Bond liquidation event that could also be triggered by decryption of ECC.

Conclusion

We don't have all of the answers here at Blue Mesh - but with our technology partner Quantropi we have ready to deploy quantum safe solutions, such as Quantum Safe MQTT for IoT communications and the hardest to break encryption Quantum Random Number Generation based key material to harden classical ECC RSA and AES methods, or the newer NIST PQC encryption models.

My opinion - its time to take this threat seriously and harden all encryption layers with quantum derived key material (QRNG) and to upgrade to Quantum Key Distribution methods for networking.