Coinbase is calling on Bitcoin developers to begin preparing for the transition to quantum-resistant security, highlighting the need to protect assets held by institutions and individual investors. The exchange safeguards approximately 5% of all Bitcoin on behalf of clients, including banks, asset managers, and hedge funds. Although quantum computing has not yet been shown to compromise Bitcoin’s security, Coinbase believes preparations should begin before the potential threat becomes urgent.

Bitcoin uses digital signatures to verify that transactions are authorized by the owners of the funds being spent. The network currently relies on the Elliptic Curve Digital Signature Algorithm (ECDSA) and Schnorr signatures, both of which remain secure against the computing capabilities available today.

The emergence of a sufficiently powerful quantum computer could change that situation. Such a machine might be able to derive private keys from exposed public keys, potentially allowing attackers to spend Bitcoin without authorization.

A quantum computer capable of breaking widely used cryptographic protections is known as a cryptographically relevant quantum computer (CRQC). The report references projections from Google researchers suggesting that this capability could potentially emerge by 2029.

However, preparing Bitcoin for this possibility presents a significant coordination challenge. The network’s decentralized governance requires broad agreement for major protocol changes, while wallet developers, exchanges, custodians, and other service providers must also implement and test new security standards.

Coinbase argues that work should start well before a CRQC becomes available. Although Bitcoin’s signatures are not currently known to be vulnerable to practical quantum attacks, migrating the network to new cryptographic methods could take years. Early preparation would give developers time to evaluate alternatives and upgrade supporting infrastructure.

Coinbase Proposes Flexible Designs for Bitcoin’s Quantum Transition

Coinbase wants Bitcoin’s transaction outputs, which define the conditions for spending funds, to support post-quantum cryptography in a way that accommodates future technological changes without requiring repeated redesigns of the transaction system.

Flexible transaction structures could make it easier to introduce new signature methods, replace existing ones, or combine different approaches as quantum research progresses. Coinbase identifies P2MR, associated with BIP-360, and P2TRv2 as potential designs for further assessment.

The exchange also supports a gradual migration instead of an immediate network-wide switch. One possible hybrid model would allow Bitcoin to be spent using either conventional ECDSA or Schnorr signatures or a post-quantum key.

This approach could help users adopt stronger protection before the network completes its broader transition. However, Coinbase has not finalized a preferred design or established when existing signature methods should be phased out.

Stateful signature schemes introduce additional risks because wallets must maintain accurate records of previously used signing keys. If those records are lost or incorrectly managed, key reuse could create opportunities for forged signatures.

Coinbase therefore recommends investigating stateless alternatives alongside stateful approaches. Supporting both types of design could give wallet developers greater flexibility and reduce dependence on error-free record management.

Implementation Quality and Institutional Compatibility Matter

Adopting quantum-resistant cryptography will require careful software engineering in addition to stronger algorithms. Coinbase recommends consistent signature verification across platforms, protection against timing-based information leaks, clear configuration options, and safeguards against failures in the random-number generators used during signing.

These measures are intended to prevent new security weaknesses from emerging during the upgrade process. Even a cryptographic scheme designed to withstand quantum attacks could introduce vulnerabilities if implemented incorrectly.

The exchange also emphasizes compatibility with multiparty computation (MPC), a technology that distributes key operations among several participants rather than relying on one individual or device.

This capability is important for exchanges, custodians, and financial institutions that manage large Bitcoin holdings. A quantum-resistant scheme that works well for individual wallets but is difficult to integrate into institutional systems could slow adoption across the wider ecosystem.

Legacy Bitcoin Holdings Raise Difficult Questions

Phasing out older ECDSA and Schnorr spending methods could create complications for Bitcoin held in legacy address formats. Some older addresses have exposed public keys, while certain dormant wallets may belong to people who have lost access to their funds.

Coinbase warns that an attacker with access to a CRQC could potentially target vulnerable holdings before the technology becomes publicly known to be capable of breaking existing cryptographic protections.

The exchange has not recommended a specific policy for handling dormant, quantum-exposed, or potentially lost Bitcoin. Instead, it argues that the treatment of these holdings should be considered separately so that disagreements over legacy funds do not delay security upgrades for users who can move their assets to safer formats.

Any proposed recovery mechanism or special treatment for vulnerable Bitcoin would also need to address quantum-related security risks.

For now, Coinbase is emphasizing the need to assess adaptable transaction formats, improve software implementation, and ensure that future signature schemes work for both individual users and institutional operators.

The policy debate surrounding older Bitcoin holdings remains unresolved. Starting technical preparations early could give the network more time to develop solutions, coordinate upgrades, and strengthen its defenses before quantum computing becomes a demonstrated threat to Bitcoin’s existing signature system.