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Why homomorphic encryption is built for the Post-Quantum era

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Why homomorphic encryption is built for the Post-Quantum era

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

Bitcoiners have long theorized the sort of black swan events that could cripple the cryptocurrency network, rendering it unusable. Scenarios postulated range from nuclear apocalypse to a catastrophic internet failure – either of which would of course affect humanity in much more tangible ways than merely their ability to transact onchain.

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One of the greatest threats envisaged, and which is now being routinely discussed, concerns the specter of quantum computing. Once sufficiently powerful quantum machines arrive, doomsdayers warn, cryptography could collapse overnight, affecting not just Bitcoin but most blockchains as well as traditional banking and web security.

The reason why this fear has gained mindshare, while other black swans – alien technology, say, or Satoshi’s 1M dormant bitcoins being reactivated – haven’t is because the quantum threat has a realistic chance of materializing. Indeed, many would say it’s inevitable and that it’s just a question of when it arrives.

Are we talking years or decades? If it’s the latter, there’s ample time for the world to migrate to quantum-proof systems. If it’s the former, then Houston we have a problem. Which is why it makes sense to head it off now so that when that day arrives, the world is ready and has implemented solutions to prevent digital assets and the distributed ledgers on which they run from being compromised.

As a result, researchers are increasingly paying attention to cryptographic systems that are quantum-resistant, ensuring they remain secure even in a world where quantum computers exist. Fully Homomorphic Encryption (FHE) falls firmly into this category, which is one of the primary reasons why it’s attracting growing interest across Web3 and traditional computing.

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To understand why, we need to unpack the quantum threat and examine how FHE’s underlying mathematics differ from the cryptography most blockchains rely on today.

The Quantum Computing Problem

Most people don’t understand quantum computing at a deep level, which is unsurprising given its complexity. But they do understand the significance of the threat it presents. As you’re likely aware, traditional computers process information as bits that exist in one of two states, 0 or 1. Quantum computers use quantum bits, or qubits, which can exist in multiple states simultaneously thanks to a property known as superposition.

Without going too far down the physics rabbit hole, the practical implication is that certain problems which would take classical computers thousands or millions of years to solve can theoretically be solved far faster on a quantum machine. This matters because many widely used encryption systems depend on mathematical problems that are easy to compute in one direction but extremely difficult to reverse.

Two of the most important examples are RSA encryption, which relies on the difficulty of factoring large prime numbers, and Elliptic Curve Cryptography (ECC), which relies on the difficulty of solving discrete logarithm problems. Both of these are vulnerable to a quantum algorithm known as Shor’s Algorithm, which can efficiently solve the mathematical problems that secure them, and ECC is particularly relevant to blockchain because it forms the backbone of most crypto wallet security.

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Why Blockchain Could Be Vulnerable

In most blockchain networks, control of funds ultimately comes down to possession of a private key. When you send a transaction, the network verifies that you own that key by checking a digital signature derived from elliptic curve cryptography. Under classical computing assumptions, deriving the private key from the public key is computationally infeasible.

But with sufficiently powerful quantum hardware running Shor’s Algorithm, that equation changes. A quantum attacker could theoretically derive the private key from the public key, allowing them to forge signatures and potentially drain wallets.

This doesn’t necessarily mean the threat is imminent. Current quantum computers remain far too small and error-prone to perform these attacks at scale. But cryptography operates on long time horizons and assets stored on a blockchain today need to remain secure decades into the future – which brings us back to FHE.

Why FHE is naturally Quantum-Resistant

Fully Homomorphic Encryption is built differently. That’s because most modern FHE implementations rely on lattice-based cryptography, which is based on the difficulty of solving problems involving high-dimensional geometric structures called lattices.

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In simple terms, the challenge involves solving large systems of equations that include small amounts of noise or randomness. For classical computers, solving these problems efficiently is extremely difficult and – critically – no known quantum algorithms can solve them dramatically faster.

This makes lattice-based systems among the leading candidates for post-quantum cryptography, and organizations such as the U.S. National Institute of Standards and Technology (NIST) have selected several lattice-based algorithms as future cryptographic standards.

Because most FHE schemes are built on these same mathematical foundations, they inherit the same resistance to quantum attacks. In other words, FHE wasn’t originally designed as a quantum defense mechanism but the mathematics it relies on happens to align with the direction post-quantum cryptography is moving.

What this means for Blockchain

Quantum resistance is particularly important for blockchain systems because they’re designed to be enduring infra. We don’t know what one bitcoin will be worth in 20 years, but we’d like to have the confidence that it will be worth something and thus worth holding as a long-term investment – as well as ultimately bequeathing to our descendants.

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Which is another reason why it’s important to be thinking about quantum computing now. It’s also worth noting, at this juncture, that blockchains can’t simply swap out cryptographic systems overnight. Their security assumptions are embedded into everything from consensus mechanisms to wallet architecture.

If a widely used cryptographic primitive becomes vulnerable, migrating an entire blockchain ecosystem would be – as Bane would put it – extremely painful. This is why the industry has begun circling FHE.

Because it allows computation on encrypted data and relies on quantum-resistant mathematics, FHE offers a pathway to privacy-preserving blockchain systems that are also post-quantum secure. This is particularly relevant for applications involving sensitive financial data.

The role of FHE in private DeFi

One of the most promising uses of FHE in blockchain today is encrypted decentralized finance. Public blockchains are of course transparent by design, and while this transparency is valuable for verification, it creates problems in financial markets where strategies and wallet balances become visible to everyone.

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Fully Homomorphic Encryption addresses this by allowing smart contracts to operate on encrypted balances. For example, a lending protocol can verify that a borrower has enough collateral to secure a loan without revealing the exact amount and liquidation thresholds can remain hidden, preventing traders from targeting vulnerable positions. Encrypted lending models built on FHE demonstrate how smart contracts can enforce financial rules while keeping sensitive information private.

In this context, FHE delivers two benefits simultaneously: privacy coupled with long-term cryptographic resilience.

A future-proof cryptographic model

The rise of quantum computing has forced cryptographers to rethink the assumptions underpinning modern security. It seems inevitable that technologies built around classical cryptographic primitives may eventually need to be replaced. It could happen slowly or it could occur overnight due to a sudden quantum computing breakthrough.

What matters is that when it does happen, we’re prepped and ready rather than scrambling around for a solution – by which point it may be too late. We don’t know how long the pre-quantum era will last. But we do know that every age eventually comes to pass and when the pre-quantum one does, the blockchains that are protected by Fully Homomorphic Encryption will be spared and their security guarantees unimpaired.

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In the here and now, FHE is useful for many things including delivering onchain privacy. But someway down the line, its primary value may be as the defense that ensures blockchain remains immune to the onslaught of the most powerful computers ever conceived.

Disclosure: This content is provided by a third party. Neither crypto.news nor the author of this article endorses any product mentioned on this page. Users should conduct their own research before taking any action related to the company.

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Bitcoin near $68K as fear spikes: Santiment sees buy signal

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Bitcoin price outlook: buy signals appear
Bitcoin Price
  • Bitcoin price hovers near $68,500 but saw intraday lows of $68,000.
  • Analysts say a textbook buy signal is flashing.
  • Bulls could target $75,000-$80,000 next.

Bitcoin continues to face headwinds, with ongoing tensions in the Iran conflict and the macro outlook key.

Despite the cryptocurrency dipping to near $68,000 amid stock market declines, analysts are pointing to a potential contrarian signal as they forecast a new leg up for BTC.

The bellwether digital asset traded around $68,500 in early trading on Friday, with slight gains coming amid relief for US stock futures.

An uptick in risk assets came after President Donald Trump extended a deadline for potential strikes on Iran’s energy infrastructure by ten days.

BTC now eyes a push back toward $69,000, signaling potential stabilization.

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Santiment says BTC is flashing a textbook buy signal

Bitcoin’s retest of $68,000 aligns with what on-chain analytics firm Santiment highlights as a surge in retail bearishness.

Yet it’s this outlook that analysts say could count as a classic contrarian indicator.

Social media chatter shows the crowd amplifying fear, uncertainty, and doubt (FUD) around Bitcoin and altcoins, with sentiment hitting lows not seen recently.

Why does this matter?

According to Santiment, cryptocurrency prices often defy public narratives.

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“Historically, prices move opposite to the crowd’s narrative,” the firm notes.

This means that the current spike in pessimism could read as a robust buy signal.

It’s a textbook contrarian outlook where bearish chatter highlights potential bottoms, while bullish retail discourse often marks tops.

Santiment says optimistic terms like bounce, recovery, accumulating, or buying typically signal a sell opportunity.

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Meanwhile, crowd chatter dominated by words such as dip, pullback, or bloodbath often signal buying opportunity.

Bitcoin price technical analysis

Over the past 24 hours, Bitcoin’s price action has mirrored broader market volatility.

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The asset plunged to intraday lows near $68,500, retracing to weekly support levels and transforming the $72,000–$75,000 band into a formidable supply zone.

Current price levels mark a 4% weekly decline, reflecting investor caution.

From a technical perspective, Bitcoin presents a bullish setup amid the pullback.

The weekly RSI has dipped into oversold territory, hinting at exhaustion selling. Support at $68,000 aligns with the 200-week EMA, a prior accumulation and resistance zone.

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The MACD indicator shows the histogram is flattening and there’s a hint of a bullish crossover.

On the upside, a retest of $70,000 brings $72,000 into view.

Short-term, the $75,000 supply zone could cap bulls’ move – unless they breach the level on increased volume amid de-escalation news. Broader forecasts point to $80,000 as a target for bulls.

On the downside, bears may fancy $65,000. However, they face a robust support base near the $60,000 mark.

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Why is the crypto market dropping today? (March 27)

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Why is the crypto market dropping today? (March 27)

The crypto market continued its downtrend on Friday as hopes of peace in the U.S. and Iran faded following a breakdown in diplomatic talks.

Summary

  • Crypto market extended losses as fading U.S.–Iran peace hopes pushed Bitcoin below key support and triggered nearly $300 million in liquidations.
  • Escalating Middle East tensions and surging oil prices fueled inflation fears, raising expectations of tighter Federal Reserve policy.
  • Investors rotated into safe-haven assets like gold while equities and crypto-related stocks declined amid a broader risk-off sentiment.

Bitcoin (BTC), the world’s largest crypto asset, lost the $70,000 psychological support, falling to $68,560 at press time, down 2.8% over the day. Ethereum (ETH) fell 3.9% to $2,050 while other major cryptocurrencies such as BNB (BNB), XRP (XRP), Solana (SOL), and Dogecoin (DOGE) posted losses between 2% and 4% respectively.

Some of the top laggards of the day were Siren (SIREN), Rain (RAIN), and Provenance Blockchain (HASH), which recorded double-digit losses of 42%, 13%, and 10%. The total crypto market cap fell 1.6% over the day to $2.43 trillion.

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As crypto prices fell, the market suffered nearly $300 million in liquidations over the past 24 hours, with $254 million coming from long liquidations, reflecting the dominance of sellers. The Crypto Fear and Greed Index reading fell to 28, reflecting fear amidst investors who seem to be taking a risk-off stance amid market uncertainty.

The crypto market continued to remain bearish amid reports that the United States could be considering deploying 10,000 additional troops in the Middle East to bolster defenses against Iran. This followed after Tehran rejected the latest ceasefire proposal to end hostilities, as it called it an infringement on their sovereignty.

The ongoing geopolitical friction between the two nations has led to a blockade at the Strait of Hormuz, a key maritime choke point, leading to significant oil supply chain disruptions. This has resulted in soaring crude oil prices, sparking concerns of runaway inflation across the globe.

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Notably, WTI crude oil prices soared by over 31.6% the past month to over $93, while Brent oil surged 38% to over $107. Iranian officials have even threatened to push prices as high as $200. 

Expectations of sky-high inflation as a result of the energy war could force the U.S. Federal Reserve to take on stricter monetary policies as they pivot back to data-dependent decision-making on interest rate cuts.

While the Fed decided to keep interest rates unchanged at 3.50% to 3.75% during the March meeting, growing concerns of higher inflation could shift the odds in favor of a rate hike, a U-turn from the narrative observed before the Middle East war erupted.

Despite these separate reports suggesting that US President Donald Trump is prepared to extend the current pause on military action by another 10 days amid shaky peace negotiations, the market remains on edge.

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Capital rotation to traditional safe-haven assets

Crypto prices dropped as investors seem to be rotating their capital into gold, which is touted as the ultimate safe-haven asset. After falling below key levels on Thursday, gold prices rebounded back above $4,400, up nearly 2% today. In comparison, silver outperformed with gains of 3% during the same period.

Several Asian tech stocks, such as Japan’s Nikkei, South Korea’s Kospi, and Hong Kong’s Hang Seng, also slumped as investor appetite for risk assets was severely dampened. Cryptocurrencies share a high correlation with these traditional equity indices.

Outside of the crypto market, several top tech companies such as Nvidia, Microsoft, and Amazon saw their valuations trimmed. Crypto-related stocks such as Coinbase (COIN), Circle (CRCL), and Strategy (MSTR) also faced selling pressure.

However, the deepest impact was felt by bitcoin miners such as Marathon Digital and Riot Platforms, which have seen their margins squeezed by rising energy costs and the broader market retreat.

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Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

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UK Sanctions Xinbi to Isolate It From the Legitimate Crypto Ecosystem

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UK Sanctions Xinbi to Isolate It From the Legitimate Crypto Ecosystem

The UK government is cracking down on a $20 billion Chinese-language crypto guarantee marketplace, with sweeping sanctions aimed at cutting the platform off from crypto access.

The UK’s Foreign, Commonwealth & Development Office said in a statement Thursday that Xinbi provides crypto-based services, scam-enabling tools and other illicit services to bad actors and plays a central role in scam centers operating across Southeast Asia.

“The UK’s sanctions will isolate the platform from the legitimate crypto ecosystem, significantly disrupting its operations by affecting its ability to send and receive cryptocurrency transactions,” the agency said.

While the sanctions mainly target the crypto ecosystem, the latest wording from the UK government highlights a separation between legitimate and illicit crypto ecosystems rather than lumping them together — a positive direction for the industry’s reputation.

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Under the sanctions, any UK assets connected to Xinbi will be frozen, and the platform will be barred from the country’s financial, trade and travel networks. UK-based businesses, including banks, crypto firms and individual citizens, are prohibited from providing goods, services, loans or investments to Xinbi.

Source: Foreign Commonwealth & Development Office

Key infrastructure targeted in crackdown

Chainalysis estimates Xinbi processed more than $19.9 billion between 2021 and 2025 and is deeply interconnected with a range of other illicit services.

The department’s recent sanctions include Thet Li, who allegedly managed the international financial network of Prince Group, a Cambodia-based company accused of orchestrating large-scale crypto fraud schemes.

Hu Xiaowei, who is allegedly involved in the Prince Group’s financial network and #8 Park, a scam compound linked to the group, was also sanctioned.

Blockchain analytics company Chainalysis said in a report Thursday that the sanctions target the scam ecosystem’s on- and off-ramps that enable large-scale fraud and are “exploiting the efficient, borderless nature of crypto rails.”

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“By blacklisting a well-known Chinese-language guarantee marketplace, the FCDO is addressing the commercial marketplaces that sustain scam operators with payment facilitation and marketing services,” it said.

Related: There’s more to crypto crime than meets the eye: What you need to know

Traditional financial systems, such as wire transfers, have long been exploited for money laundering and fraud, largely because of their scale and global reach.

The Financial Action Task Force estimates that 2% to 5% of global GDP is laundered through traditional financial systems, whereas Chainalysis estimates that less than 1% of crypto transactions are linked to illicit activity.

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The US has also intensified sanctions targeting illicit crypto operations. Earlier this month, the Treasury Department sanctioned six individuals and two entities for their alleged roles in an IT worker fraud scheme orchestrated by North Korea, a state actor that frequently targets the crypto industry.

Magazine: Big Questions: Can Bitcoin save you from the dreaded Cantillon Effect?