El Salvador has begun moving its Bitcoin reserves from a single Bitcoin address to several new, unused addresses. This was announced by the national Bitcoin authority, Oficina Nacional del Bitcoin (ONBTC), on social media at the end of last week. The move is “part of a strategic initiative to improve the security and long-term custody of the national strategic Bitcoin reserve”, according to a detailed announcement on the X platform. According to the ONBTC, the measure is in preparation for possible risks arising from advances in quantum computing.
Quantum computers are theoretically capable of breaking cryptography with public-private keys. When a Bitcoin transaction is signed and transmitted, the public key becomes visible in the blockchain, potentially exposing the address to quantum attacks that could discover private keys and divert funds before the transaction is confirmed, El Salvador’s Bitcoin authority warns.
Redistribution to multiple addresses
The reserve will now be redistributed to several addresses. Each address will contain up to 500 bitcoins. At the time of the announcement, 500 bitcoins corresponded to a value of around 54 million US dollars. According to the ONBTC, the value limit in each address is intended to reduce vulnerability to quantum attacks. “By dividing the funds into smaller amounts, the impact of a possible quantum attack is minimized,” it says.
For reasons of transparency, a single address had previously been used over and over again, but this meant that public keys were constantly exposed and a quantum attacker theoretically had unlimited time to discover private keys. With a public dashboard that can monitor multiple addresses and is managed by the Bitcoin Authority, the aim is to maintain transparency without address reuse while increasing security. “This approach combines robust risk mitigation through address diversification and limited exposure per address with a commitment to transparency through the public cataloging of all reserve addresses. This strategy strengthens the integrity and future-proofing of El Salvador’s National Strategic Bitcoin Reserve against evolving technological threats.”
Risks not only from quantum computers
In September 2021 , El Salvador became the first country in the world to declare Bitcoin legal tender. The government promised better access to payment systems for the poor, easier money transfers from Salvadorans abroad and more foreign investment. However, none of this has materialized. Only a tiny percentage of the population used the cryptocurrency as a means of payment. Critics, on the other hand, warned of risks to monetary stability, a lack of transparency and possible money laundering from the outset due to the high volatility of Bitcoin.
Not least for these reasons, the International Monetary Fund (IMF) called on El Salvador to abandon Bitcoin as a means of payment at the end of January 2022. Meanwhile, the fall in the value of Bitcoin exacerbated the financial crisis in El Salvador. At the beginning of this year, El Salvador’s parliament finally revoked the recognition of Bitcoin as a legal tender under pressure from the IMF. Nevertheless, the country continues to hold large reserves of Bitcoin. According to the news agency Reuters, these currently amount to around 682 million US dollars. Their safekeeping is now to be made more secure considering future dangers.
(akn)