Coinbase is calling on Bitcoin developers to begin preparing for the potential threat of quantum computers, recommending flexible transaction formats, backup quantum-resistant keys and a separate debate over how to handle lost or abandoned coins.
What if a quantum computer became powerful enough to break Bitcoin wallet security and steal the funds stored inside?
Although such a machine does not exist today, projections suggest that quantum technology capable of threatening current cryptographic systems could emerge within the next few years. The possibility has prompted growing discussion about how Bitcoin should prepare.
Coinbase (COIN), the Nasdaq-listed cryptocurrency exchange that holds roughly 5% of the Bitcoin supply on behalf of clients, including banks, asset managers and hedge funds, has outlined its recommendations in a new blog post. The company explained how Bitcoin could strengthen its security against a potential quantum computing breakthrough.
The exchange’s main message is that preparations should begin immediately rather than waiting until the threat becomes imminent. It also recommends separating technical security upgrades from the debate over Bitcoin that may be permanently inaccessible.
Understanding these proposals requires examining how Bitcoin currently protects transactions and where quantum computing could introduce vulnerabilities.
How Bitcoin protects its funds
A Bitcoin wallet works much like a locked mailbox. Anyone can use its public-facing address to send funds, but only the holder of the corresponding private key can authorize spending.
When a Bitcoin transaction is initiated, the wallet uses its private key to produce a digital signature. The network checks that signature against the relevant public key to confirm that the transaction is valid and authorized.
Bitcoin relies on two principal signature schemes: ECDSA and Schnorr. Both remain secure against conventional computers because current technology cannot efficiently derive a private key from the mathematical information exposed by a public key or digital signature.
How quantum computing could threaten Bitcoin
A sufficiently powerful quantum computer could potentially exploit these cryptographic systems to recover private keys from public keys, putting vulnerable Bitcoin holdings at risk of theft.
Researchers use the term cryptographically relevant quantum computer, or CRQC, to describe a quantum machine capable of breaking widely used cryptographic protections. Google researchers have indicated that such capabilities could potentially emerge by 2029, although the timeline remains uncertain.
One proposed defense is post-quantum cryptography, which uses cryptographic techniques designed to resist attacks from quantum computers.
Coinbase argues that Bitcoin needs more than a simple replacement for its existing signature system. Any upgrade must protect both existing and future funds, fit within the blockchain’s limited transaction-data capacity and remain compatible with conventional computing infrastructure.
It must also serve individual Bitcoin holders and large financial institutions while addressing the challenges posed by legacy wallets that may never be upgraded.
Coinbase wants Bitcoin to act before the threat arrives
Coinbase believes development should start now because Bitcoin’s decentralized governance makes major protocol changes and ecosystem-wide migrations difficult to coordinate.
The exchange pointed out that achieving agreement on Bitcoin upgrades and implementing them across the ecosystem can take years. Waiting until a quantum threat becomes an immediate concern could leave insufficient time to protect vulnerable holdings.
Bitcoin developers are already examining potential solutions. Coinbase has outlined several priorities it believes should guide the transition.
Six recommendations from Coinbase
1. Make transaction formats adaptable
Coinbase recommends separating Bitcoin’s transaction structure from the specific signature technology used to authorize spending. This would allow developers to introduce new quantum-resistant signatures without redesigning the entire network.
Such flexibility could make it easier to update or combine cryptographic methods as stronger solutions become available. Coinbase identified P2MR (BIP-360) and P2TRv2 as proposals that could support this approach.
2. Introduce quantum protection gradually
The exchange supports allowing active wallets to adopt quantum-resistant or hybrid signatures before Bitcoin finalizes rules for older signature systems.
One potential solution is a “1-of-2” arrangement in which a transaction can be authorized using either a traditional ECDSA or Schnorr key or a post-quantum key.
This would give users an opportunity to improve security early without forcing every holder to migrate at the same time or abruptly risk losing access to funds.
3. Assess the risks of stateful signatures
Some post-quantum signature schemes require wallets to maintain records of previously used signing keys. These records, known as state, help prevent one-time keys from being reused.
If a wallet restores an outdated backup or fails to save its latest records, it could mistakenly reuse a key, potentially allowing an attacker to forge a valid signature.
Although stateful schemes can offer smaller signatures and faster performance, they require careful management. Coinbase recommends supporting stateless alternatives as well, giving users and wallet developers options that do not depend on maintaining this information.
4. Emphasize dependable software implementations
Coinbase wants the evaluation of quantum-resistant cryptography to prioritize implementation quality alongside mathematical security.
Important safeguards include consistent signature verification across platforms, protection against timing-based information leaks, clear configuration settings and resilience when random-number generators fail during signing.
These measures could help prevent software vulnerabilities, unauthorized transactions and accidental loss of funds.
5. Support multi-party computation
Multi-party computation, or MPC, allows multiple participants to take part in cryptographic operations without requiring a single individual or device to control the entire private key.
Coinbase considers MPC compatibility particularly important for exchanges, custodians and institutional clients that face persistent security threats.
Post-quantum schemes that work effectively with MPC could help these organizations protect Bitcoin holdings while reducing reliance on a single point of control.
6. Plan for wallets that upgrade too late
Some Bitcoin holders may continue using older wallet formats even after quantum-resistant protections become available. If Bitcoin eventually restricts spending through ECDSA or Schnorr signatures, these users could face difficulties accessing their funds.
Coinbase recommends examining whether such holdings could be transferred into quantum-resistant outputs at a later stage. However, the exchange acknowledged that the appropriate method and its potential trade-offs remain unresolved.
It believes this discussion should proceed independently of the work needed to introduce post-quantum signatures, ensuring that disagreements over legacy holdings do not delay broader security improvements.
Lost Bitcoin presents a separate challenge
Another concern involves dormant wallets, inaccessible funds and older Bitcoin address formats that have exposed public keys on the blockchain.
Some coins may belong to holders who have lost their private keys, while others may remain untouched for years. If a sufficiently capable quantum computer emerges, these holdings could become targets for attackers attempting to steal funds before the threat is widely recognized.
Coinbase has not endorsed a particular policy for dealing with these coins. Instead, it recommends keeping the debate over lost or abandoned Bitcoin separate from the technical process of upgrading the network.
The exchange also warned that any proposed recovery mechanism must be quantum-resistant itself. Otherwise, an attempt to safeguard vulnerable holdings could create another avenue for theft.
Coinbase’s position is that Bitcoin should begin developing quantum-resistant security now, while leaving the politically and technically sensitive question of lost coins to a separate discussion.
