Coinbase is calling for Bitcoin to begin preparing for the potential arrival of quantum computers, proposing flexible transaction structures, backup quantum-resistant keys and a separate debate on how to deal with permanently inaccessible coins.

What if a quantum computer could break into a Bitcoin wallet and transfer its holdings to an attacker? While this scenario remains hypothetical, concerns are growing as researchers explore how quickly quantum technology could advance.

Coinbase (COIN), the Nasdaq-listed cryptocurrency exchange that holds around 5% of all Bitcoin on behalf of clients, including banks, asset managers and hedge funds, has published its recommendations for addressing this potential security challenge.

In a new blog post, the company outlined measures it believes Bitcoin should adopt to defend against future quantum attacks. Coinbase’s main argument is that developers must begin preparing now rather than waiting until the technology becomes capable of compromising existing security systems.

The exchange also recommends handling questions about lost Bitcoin separately from the technical process of upgrading the network.

How Bitcoin wallet security works

Bitcoin relies on public and private keys to control access to funds. The public key allows the network to verify transactions, while the private key enables its owner to authorize payments.

When a user sends Bitcoin, their wallet creates a digital signature using the private key. Network participants then verify the signature against the corresponding public key before approving the transaction.

Bitcoin currently uses two signature schemes, ECDSA and Schnorr. These remain secure against conventional computers because deriving a private key from a public key or its associated signature is computationally impractical.

The potential threat from quantum computing

A sufficiently powerful quantum computer could eventually break these cryptographic protections by deriving private keys from exposed public keys, potentially putting Bitcoin holdings at risk.

Researchers call a machine capable of breaking widely used cryptographic systems a cryptographically relevant quantum computer, or CRQC. Google researchers have suggested that such capabilities could potentially emerge by 2029, although the timeline is uncertain.

Post-quantum cryptography offers one possible defense. It involves cryptographic algorithms designed to withstand attacks from quantum computers.

However, Coinbase argues that protecting Bitcoin will require more than simply replacing its current signature technology. Any upgrade must accommodate existing and future holdings, fit within Bitcoin’s transaction-data limits and remain compatible with conventional computing systems.

The solution must also work for everyday users, exchanges and institutional custodians, while accounting for wallets that may never migrate to a new security standard.

Coinbase urges developers to begin preparations

Coinbase believes work should start immediately because Bitcoin’s decentralized governance makes major protocol upgrades and widespread adoption challenging.

Changes to Bitcoin’s consensus rules and the migration of wallets, exchanges and other infrastructure can take years. Waiting until a quantum threat becomes imminent could leave users with too little time to protect their funds.

The exchange has identified six priorities for developers evaluating potential solutions.

Six measures Coinbase wants Bitcoin developers to consider

1. Make transaction formats more flexible

Coinbase recommends separating Bitcoin’s transaction structure from the signature technology used to authorize spending. This would allow new quantum-resistant signatures to be introduced without rebuilding the entire network.

The approach could also make it easier to update or combine cryptographic methods as stronger alternatives become available. Coinbase identified P2MR (BIP-360) and P2TRv2 as proposals that could provide this flexibility.

2. Introduce quantum protection gradually

The exchange supports allowing active wallets to adopt quantum-resistant or hybrid signatures before Bitcoin finalizes its rules for legacy signature systems.

One possible arrangement is a “1-of-2” model, under which a transaction could be authorized using either a traditional ECDSA or Schnorr key or a post-quantum key.

This could enable users to strengthen their security earlier without forcing the entire ecosystem to upgrade simultaneously or suddenly disrupting access to funds.

3. Assess the risks of stateful signatures

Some post-quantum signature systems require wallets to track previously used one-time signing keys. This information, known as state, must be preserved accurately to prevent keys from being reused.

If a wallet restores an outdated backup or fails to save its latest records, it could reuse a key and potentially expose the system to forged signatures.

Although stateful methods can offer smaller signatures and faster performance, they introduce additional risks. Coinbase recommends evaluating stateless alternatives that do not require this record-keeping, giving users and developers more flexibility.

4. Focus on reliable security implementations

Coinbase wants developers to prioritize dependable software implementations when assessing post-quantum technologies.

Important considerations include consistent signature verification across platforms, protection against timing-based information leaks, straightforward configuration settings and safeguards against random-number generator failures during signing.

These precautions could help reduce vulnerabilities that lead to stolen funds, forged transactions or accidental losses.

5. Maintain compatibility with multi-party computation

Multi-party computation, or MPC, enables multiple participants to perform cryptographic operations without requiring one individual or device to control the entire private key.

Coinbase considers MPC compatibility particularly important for exchanges, custodians and institutional investors that manage substantial Bitcoin holdings and face ongoing cyber threats.

Post-quantum signature systems that support MPC could help these organizations strengthen security while reducing reliance on a single point of failure.

6. Prepare for wallets that migrate late

Some holders may continue using legacy Bitcoin addresses even after quantum-resistant protections become available. If Bitcoin eventually restricts or ends spending through older ECDSA and Schnorr signatures, these users could face difficulties accessing their holdings.

Coinbase recommends exploring whether funds held in older wallet formats could eventually be transferred to quantum-resistant outputs. However, the company acknowledged that the appropriate approach and its potential trade-offs remain unresolved.

It also believes the discussion should continue separately from the technical work required to introduce post-quantum signatures, preventing disagreements over older holdings from delaying broader security improvements.

Lost Bitcoin raises a separate challenge

Long-dormant wallets and inaccessible Bitcoin present additional concerns. Some coins belong to people who have lost their private keys, while certain older address formats have exposed public keys that could become vulnerable to quantum attacks.

Coinbase warned that an attacker might exploit these weaknesses and steal funds before the wider public learns that a sufficiently powerful quantum computer has been developed.

The exchange did not endorse a particular policy for handling lost or abandoned coins. Instead, it called for a separate discussion so that disagreements over these holdings do not obstruct work on quantum-resistant security.

Coinbase also emphasized that any proposed recovery mechanism must itself withstand quantum attacks. Otherwise, a process designed to protect vulnerable funds could create another opportunity for theft.

The company’s position is that Bitcoin should begin developing its quantum defenses well ahead of any technological breakthrough, while decisions about permanently inaccessible coins should be considered independently of the core security upgrade.

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