Tag: protection

  • Bitcoin faces quantum risk: why SegWit wallets may offer limited protection

    Bitcoin faces quantum risk: why SegWit wallets may offer limited protection

    Bitcoin faces quantum risk: Why SegWit wallets may offer limited protection

    • SegWit wallets delay public key exposure until the point of transaction.
    • Holding Bitcoin in SegWit addresses offers temporary protection if left untouched.
    • Critics believe practical quantum computing remains decades away.

    Quantum computing’s long-theorised threat to Bitcoin is resurfacing in the crypto conversation.

    The idea that a powerful enough quantum machine could break cryptographic security and expose Bitcoin keys has moved from theoretical chatter to practical concern.

    Bitcoin analyst Willy Woo recently suggested a short-term safeguard: store Bitcoin in SegWit addresses for the next seven years.

    While the tactic has sparked debate, the broader community remains divided over whether quantum computers are a real, imminent threat or just the latest tech-driven scare.

    SegWit offers delayed public key exposure

    Segregated Witness (SegWit), introduced on 23 August 2017, is a protocol upgrade that changes how data is stored in Bitcoin transactions. Woo suggests that SegWit’s delayed public key exposure could act as a deterrent against quantum attacks.

    Unlike Taproot, which exposes the public key immediately within the address, SegWit only reveals it during transaction execution.

    This delay makes it harder for a quantum computer to reverse-engineer the private key from the public one before the transaction is completed.

    Under current conditions, exposing a public key does not present much of a problem. However, if and when quantum computing advances to the point of real-time decryption capabilities, the exposure window of Taproot wallets could be a key vulnerability.

    In contrast, SegWit’s hashing conceals the public key behind a layer of encryption until absolutely necessary. This may keep Bitcoin more secure during this anticipated transition period.

    Hodling in SegWit comes with major constraints

    While the SegWit method may offer protection, it carries a critical limitation. According to Woo, users must not move their Bitcoin from the SegWit address.

    Any outgoing transaction would expose the public key, potentially inviting a quantum attack if executed during the transaction.

    As such, this method is not viable for active traders or anyone needing liquidity in the short term. It is a static defence mechanism, not a dynamic solution.

    This approach effectively puts Bitcoin in a vault. It is safe but inaccessible. It is also only as secure as the continued absence of real-time quantum decryption.

    If a breakthrough comes earlier than anticipated, even SegWit-held coins could be compromised during withdrawal. Woo acknowledges that this is only an intermediary measure.

    It is meant to bridge the gap until a quantum-resistant Bitcoin protocol becomes available.

    Experts disagree over SegWit’s efficacy

    Not everyone agrees that SegWit provides any meaningful protection. Charles Edwards, founder of digital asset fund Capriole, has dismissed the idea as ineffective.

    He argues that SegWit is not a quantum-safe model and relying on it could delay necessary network upgrades.

    According to Edwards, the belief that Bitcoin has a seven-year buffer period could create complacency, weakening pressure to accelerate work on quantum-resistant algorithms.

    This disagreement underscores a broader lack of consensus in the crypto space on how seriously the community should take quantum risk.

    Although protocol upgrades are under development, there is concern among developers that current initiatives are progressing too slowly.

    Some argue that existing security layers were not built with quantum capabilities in mind, making them structurally vulnerable regardless of transaction format.

    Sceptics say quantum fears are overblown

    Despite the alarm, some in the community believe the risk is being overstated. Critics point to quantum computing’s persistent technical limitations.

    In a post in February, Bitcoin advocate Adrian Morris claimed quantum tech is “barely viable”, citing issues with thermodynamics, memory, and persistent calculations.

    Others argue that traditional financial systems and major banks would be far more attractive targets for early quantum attacks than a decentralised network like Bitcoin.

    Woo notes that Bitcoin held by custodians, such as ETFs or treasury firms, may be better shielded in the interim. This is only true if those institutions take proactive steps to secure their holdings.

    Until a comprehensive upgrade is implemented, the quantum debate will continue to shape discourse around Bitcoin’s long-term security.

    Source link

  • Calamos Investments to introduce a Bitcoin ETF with 100% downside protection

    Calamos Investments to introduce a Bitcoin ETF with 100% downside protection

    Calamos Investments to introduce a Bitcoin ETF with 100% downside protection
    • Calamos is launching a Bitcoin ETF with 100% downside protection named CBOJ in January.
    • The ETF combines Treasury bonds and Bitcoin options to mitigate investment risks.
    • CBOJ offers annual protection resets and caps potential gains for risk management.

    Calamos Investments is set to launch a groundbreaking Bitcoin exchange-traded fund (ETF) offering 100% downside protection.

    Scheduled to debut on the Chicago Board Options Exchange (CBOE) on January 22, the new ETF, named CBOJ, is designed to address Bitcoin’s volatility while providing growth opportunities, according to a company announcement.

    Calamos’ Structured Protection ETF series

    CBOJ builds upon the success of Calamos’ Structured Protection ETF series, introduced in 2024. This series provided similar downside protection mechanisms for stock indices like the S&P 500 and Nasdaq-100.

    By extending these principles to Bitcoin, Calamos seeks to meet the demands of advisors, institutions, and investors looking for a way to capture Bitcoin’s growth potential while mitigating its historically high volatility.

    Bitcoin has historically been a highly volatile asset, often deterring risk-averse investors. The CBOJ ETF aims to overcome this challenge by ensuring that investors do not lose money, even if Bitcoin’s value declines.

    This innovative fund achieves downside protection by integrating US Treasury bonds with options tied to the CBOE Bitcoin US ETF Index. The combination provides a regulated and transparent avenue for gaining Bitcoin exposure while minimizing associated risks.

    CBOJ ETF’s annual protection reset

    One of the unique features of the CBOJ ETF is its annual reset of downside protection. Each year, investors benefit from a new cap on potential gains while maintaining full protection against losses for the next 12 months.

    This structure ensures ongoing risk mitigation and aligns with the dynamic nature of the Bitcoin market.

    “Many investors have been hesitant to invest in Bitcoin due to its epic volatility,” said Matt Kaufman, Head of ETFs at Calamos. “Calamos seeks to meet advisor, institutional, and investor demands for solutions that capture Bitcoin’s growth potential while mitigating the historically high volatility and drawdowns of the asset.”

    ETFs are investment funds that trade like stocks on exchanges, allowing investors to pool their money into a fund holding various assets. With CBOJ, investors gain exposure to Bitcoin without the need to own the cryptocurrency directly. This protective structure makes the ETF especially appealing to cautious investors looking to navigate the crypto market’s notorious price swings.

    As derivatives-based Bitcoin ETFs gain traction, industry reports suggest that more firms may follow Calamos’ lead in introducing similar solutions for risk-averse investors.

    Source link