Coinbase is urging the Bitcoin community to begin developing defenses against quantum computing immediately. Its recommendations include adaptable transaction formats, backup quantum-resistant keys and a separate discussion about how to handle Bitcoin that may be permanently lost.
What would happen if a quantum computer became powerful enough to compromise a Bitcoin wallet and steal its holdings?
Although no such machine exists today, some projections suggest that quantum computers capable of threatening current cryptographic systems could emerge within the next few years. This possibility has raised questions about whether Bitcoin’s existing security measures will remain effective in the future.
Coinbase (COIN), the Nasdaq-listed cryptocurrency exchange that holds approximately 5% of Bitcoin’s total supply for clients such as banks, asset managers and hedge funds, has shared its recommendations in a new blog post. The company outlined several steps it believes are necessary to protect Bitcoin against a potential quantum computing threat.
Its central argument is that preparation must begin well before the technology becomes a practical danger. Coinbase also wants discussions about inaccessible Bitcoin holdings to remain separate from the technical work required to upgrade the network.
Understanding Bitcoin’s existing security
A Bitcoin wallet can be compared to a locked container that anyone can send funds to but only its owner can unlock. The public key allows the network to verify transactions, while the private key gives its holder the authority to spend the Bitcoin.
Whenever a user initiates a transaction, their wallet generates a digital signature using the private key. Bitcoin nodes verify that signature against the corresponding public key before accepting the transaction.
Bitcoin currently uses two primary digital signature schemes, ECDSA and Schnorr. These systems are considered secure against conventional computers because existing technology cannot efficiently calculate a private key from the information provided by a public key or signature.
Quantum computers could change the security landscape
A sufficiently advanced quantum computer could potentially reverse-engineer private keys from exposed public keys, allowing attackers to access Bitcoin stored in vulnerable wallets.
Researchers describe a quantum machine capable of breaking widely used cryptographic systems as a cryptographically relevant quantum computer, or CRQC. Google researchers have suggested that such capabilities could potentially become available by 2029, although the timing remains uncertain.
One possible defense is post-quantum cryptography, which uses algorithms designed to resist attacks from quantum computers.
Coinbase argues that Bitcoin needs a comprehensive transition rather than simply adopting a different signature algorithm. The new system must protect existing and future holdings, work within Bitcoin’s limited transaction-data capacity and remain compatible with conventional computers.
It must also accommodate both individual users and large financial institutions while considering older wallets whose owners may never migrate to a new security standard.
Why Coinbase wants action now
Coinbase believes the development process should begin immediately because Bitcoin’s decentralized structure makes major protocol changes and widespread adoption difficult to coordinate.
Reaching agreement on consensus changes and implementing them across the ecosystem can take years. Delaying preparations until a quantum breakthrough is announced could leave Bitcoin users with insufficient time to secure their holdings.
Developers are already exploring potential defenses, and Coinbase has highlighted six areas that it believes deserve particular attention.
Six priorities for Bitcoin’s quantum upgrade
1. Build flexibility into transaction formats
Coinbase recommends designing Bitcoin so its transaction structure can accommodate new post-quantum signature methods without requiring a complete network redesign.
This would make it easier to introduce, replace or combine cryptographic systems as technology evolves. The exchange pointed to P2MR (BIP-360) and P2TRv2 as proposals that could provide this flexibility.
2. Allow users to upgrade in stages
Rather than requiring everyone to switch at once, Coinbase supports an approach that lets active wallets begin using quantum-resistant or hybrid signatures before all rules governing older signatures are finalized.
One potential model is a “1-of-2” arrangement, allowing Bitcoin to be spent using either a conventional ECDSA or Schnorr key or a post-quantum key.
Such a transition could provide earlier protection while reducing the risk of disrupting access to funds for users who have not yet upgraded.
3. Evaluate stateful and stateless signatures
Certain post-quantum signature systems require wallets to track which one-time signing keys have already been used. This information, called state, must be maintained accurately to prevent key reuse.
If a wallet restores an outdated backup or fails to preserve its records, a previously used key could be reused, potentially allowing an attacker to forge a transaction signature.
Stateful schemes may offer advantages in signature size and speed, but they introduce additional operational risks. Coinbase therefore recommends considering stateless alternatives that do not require this ongoing record-keeping.
4. Prioritize secure software implementation
Coinbase believes the assessment of post-quantum technologies should focus on how reliably they operate in real-world conditions.
The exchange highlighted consistent signature verification across platforms, safeguards against timing-based information leaks, clear configuration options and protection against failures in random-number generation.
These measures could reduce the chances of implementation errors, wallet compromises and lost funds.
5. Ensure compatibility with multi-party computation
Multi-party computation, or MPC, enables several participants to contribute to cryptographic operations without requiring one individual or device to control the complete private key.
Coinbase considers this capability important for exchanges, custodians and other institutional Bitcoin holders that must defend against persistent cyberattacks.
Post-quantum systems that integrate effectively with MPC could help these organizations improve key security and reduce dependence on a single point of control.
6. Develop options for late-upgrading wallets
Some Bitcoin holders may still use older address formats after quantum-resistant protections are introduced. If Bitcoin eventually limits or discontinues spending through ECDSA and Schnorr signatures, these users could struggle to access their remaining funds.
Coinbase recommends investigating whether Bitcoin held in legacy wallets could eventually be transferred to quantum-resistant outputs. The appropriate method and its potential consequences, however, remain open questions.
The exchange believes these discussions should take place alongside, but independently of, the work to implement post-quantum signatures so that technical progress is not held back by unresolved questions about older holdings.
Lost and dormant Bitcoin remains an open issue
Bitcoin that has remained untouched for years presents another challenge. Some holdings belong to users who have lost their private keys, while certain older address formats have exposed public keys that could become vulnerable to future quantum attacks.
Coinbase warned that an attacker could potentially exploit these weaknesses before the public becomes aware that a quantum computer capable of breaking existing protections has been developed.
The exchange did not recommend a specific policy for dealing with lost or abandoned coins. Instead, it argued that the question should be addressed separately from the technical upgrade, allowing developers to continue strengthening Bitcoin’s security without waiting for agreement on the fate of inaccessible holdings.
Coinbase also stressed that any proposed recovery process must be resistant to quantum attacks. Otherwise, the mechanism intended to protect vulnerable Bitcoin could itself become a target for theft.
The exchange’s broader message is that Bitcoin’s quantum defenses need to be developed well in advance of a potential breakthrough, while the debate over permanently inaccessible coins should proceed on a separate track.
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