The Quantum Countdown: Crypto Firms Scramble to Shield Wallets as Bitcoin and Ethereum Lag Behind

Cryptocurrency firms are taking steps to protect their wallet and custody services from the looming threat of quantum computing, working to enhance user-facing systems more quickly than blockchains can update their underlying protocols.

This move stems from an increasing belief that network-wide upgrades to blockchains such as Bitcoin and Ethereum may take years to complete, leaving wallets vulnerable in the interim. Moreover, the projected timeline for the so-called “Q-Day” threat to cryptocurrency may be arriving sooner than anticipated, with one recent prediction suggesting it could happen as early as 2030.

One firm working to integrate post-quantum security into crypto wallets is Silence Laboratories, which announced it has incorporated support for distributed—or multi-party computation (MPC)—signatures utilizing ML-DSA, a cryptographic algorithm chosen by the National Institute of Standards and Technology (NIST).

Jay Prakash, CEO and co-founder of Silence Laboratories, explained that the company’s efforts follow recent progress in post-quantum cryptography, including NIST’s endorsement of three algorithms: SPHINCS+, Falcon, and CRYSTALS-Dilithium.

Prakash noted that the company dedicated the last six months to assessing those algorithms for distributed signing systems employed by custodians and institutional wallets.

“Not all of SPHINCS+, Falcon, and CRYSTALS-Dilithium will satisfy the requirements of multi-party computation (MPC) compatibility—whether they enable efficient distributed transaction signing—and potential fragmentation must also be considered, since each chain is selecting a different scheme based on its own optimization priorities, signature size, or computational efficiency,” Prakash said.

The key, he added, is divided into shares across separate nodes, and a signature is created collaboratively without the key ever being reassembled. This helps defend against the danger posed by quantum computers, which are projected to be capable of cracking current encryption within a few years. And businesses recognize the urgency, Prakash added.

“Institutions are now accustomed to distributed signing,” he said. “Whether it’s a partner like BitGo or a bank developing a digital asset division, they all understand that keys cannot remain in a single location.”

MPC systems distribute private keys across multiple devices—a common configuration for custodians and institutional wallets. Silence Laboratories stated that its method is built to function within that existing framework, enabling firms to upgrade without altering how their systems work.

“Any bank or custodian with existing MPC infrastructure can now transition to a post-quantum MPC-based wallet, without modifying their infrastructure,” Prakash said. “It’s a code upgrade. After that, they have a post-quantum-secure signing layer.”

The upgrade occurs at the wallet level, meaning users would not need to do anything.

“With a post-quantum wallet SDK, institutions receive a straightforward upgrade path on the infrastructure they already operate,” Prakash said. “No major architectural migration—they’re already using MPC. The developer could swap out the algorithm in the library, and the end user—whether they’re on a wallet like MetaMask, or anything else—would have the same experience, now post-quantum-secure.”

The division mirrors a broader split in how the industry is tackling quantum risk. Some developers are concentrating on wallet-level enhancements, while others contend that only protocol-level modifications to the crypto networks themselves can fully safeguard users.

Other companies are pursuing different strategies for the issue. Developers behind a wallet from Postquant Labs are creating a system that layers quantum-resistant signatures onto Bitcoin through a separate smart contract layer, bypassing changes to the base protocol.

Comparable concepts have been put forward, including work from StarkWare researcher Avihu Mordechai Levy, which substitutes Bitcoin’s elliptic-curve cryptography with hash-based signatures that function within the network’s existing rules. The design is characterized as a “last-resort” measure rather than a scalable solution, and could be extremely expensive.

However, the challenge lies in timing, and while quantum computers capable of breaking current encryption do not yet exist, recent progress has experts zeroing in on the schedule. That uncertainty is prompting companies to act early, but wallet-level solutions have their limitations.

“If wallets are upgraded to post-quantum and chains are not upgrading,” Prakash added, “it won’t work.”