Coinbase, which holds 5% of all bitcoin, wants quantum-resistance work to begin now

Coinbase says bitcoin should start preparing for quantum computers now, with flexible addresses, a backup post-quantum key, and a separate discussion on lost coins.

What if someone built a quantum computer fast enough to crack your bitcoin wallet and steal your coins?

It's on everyone's mind, as some predictions suggest that such a quantum machine, although it doesn't exist today, could arrive within a few years.

Nasdaq-listed crypto exchange Coinbase Coin $181.88 · Market Closed, which holds about 5 percent of all bitcoins in existence today for its clients, including banks, asset managers and hedge funds, shared its thoughts on the question in a new blog post, and what it believes bitcoin needs to remain safe from the threat going forward.

The first point is to start preparing now, don't wait for the risk to arrive and deal with the issue of missing coins separately.

To follow the exchange's proposals, it helps to know how Bitcoin locks work and how a quantum computer can break them.

Think of a Bitcoin wallet as a mailbox with a narrow horizontal slot at the top and a key that only the owner has. The visible slot, through which anyone can insert the letters, is the public key of the wallet. In contrast, the private key is the physical key that unlocks the box. Tightly held by the owner, this private key is invisible to the outside world and keeps the bitcoins in the wallet safe.

When a user sends bitcoins, their wallet uses the private key to create a digital signature, a tamper-proof seal. The network checks it against the user's public key. If it matches, the transaction is confirmed.

The Bitcoin blockchain uses two methods, ECDSA and Schnorr, to create and verify these digital signatures. These are currently very secure because current computers are not powerful enough to crack the math behind these techniques and reverse engineer the user's private key via a digital signature or public key.

According to Google researchers, a sufficiently powerful quantum computer, one that could exist by 2029, could do just that: reverse engineer a private key from a public key and empty the holders' Bitcoin wallets.

Researchers call a machine with this capability a cryptographically coupled quantum computer, or CRQC.

The proposed solution is Post-Quantum Cryptography or PQ. In plain English, new signature methods that resist quantum attacks.

According to Coinbase, simply choosing a new security method is not enough. They believe that a full upgrade to protect Bitcoin against quantum computers should secure both old and new capital, fit well within Bitcoin's limited data space, and allow ordinary computers to continue the network. It should also work for giant crypto platforms and everyday users, while providing a clear blueprint for legacy coins that may never move.

Such efforts must begin immediately, largely because Bitcoin's decentralized design, often hailed as an advantage over centralized institutions, also makes it difficult to implement change.

As the exchange says, "Bitcoin consensus changes and ecosystem migration can take years." That's why work should begin "well in advance of any CRQC announcement."

Bitcoin developers are considering proposals to build quantum defenses.

Separating the "container" from the signature: Simply put, Bitcoin must be designed in such a way that its transaction format can support new types of post-quantum signatures without having to rebuild the entire system. This makes it easier to add, replace, or combine quantum-resistant signatures over time. Two proposals, P2MR (BIP-360) and P2TRv2, appear to offer this type of flexibility, Coinbase said.

Phased Protection: Coinbase supports an approach that allows active wallets to use quantum-resistant or hybrid signatures before Bitcoin finalizes its rules for older signature types. One possible transition is a "1 of 2" setup: the same bitcoin can be spent using a traditional ECDSA or Schnorr key or a post-quantum key. This allows users to protect their capital sooner, without forcing everyone to switch at once or risk a sudden loss of access.

Use of state: Some post-quantum signature schemes require the wallet to keep track of information called "state" after each signature. These schemes use many one-time signing keys, and the wallet must remember which ones have already been used so that it never reuses one. If a wallet is restored from an old backup or does not save that record, it may accidentally reuse a key. This can allow an attacker to forge a valid signature. Government signatures can be smaller and faster, but they are easier to misuse. If Bitcoin supports them, Coinbase thinks it should also support stateless options that don't require this registry. This gives users and wallet developers a safer choice and reduces the risk of lost funds or fraudulent transactions.

Robust implementation: Coinbase hopes that the evaluation process will give high weight to software that works reliably across all platforms, validates signatures consistently everywhere, prevents disclosure of confidential information through timing, uses clear settings, and remains secure even if the random number generator used during signing fails. This makes quantum-resistant Bitcoin wallets more reliable and reduces the risk of bugs, hacks or loss of funds.

Compatibility with MPC: For Coinbase and many of its customers, post-quantum schemes should work well with multiparty computing, or MPC. When done correctly, MPC can help protect private keys from theft, adding an important layer of security for large organizations that face constant attacks on their systems. This makes it easier for exchanges, custodians and large businesses to secure Bitcoin without relying on a single person or device to hold the key.

A path for late-migrating wallets: If Bitcoin eventually caps or ends ECDSA and Schnorr fees, some people may still hold funds in older wallet formats. Coinbase thinks it would be useful to investigate whether – and how – these users can later transfer their funds to secure quantum outputs. The right of access and its exchanges are still open questions. This will help prevent some users from getting locked out of their bitcoins if they don't upgrade in time. The discussion can happen alongside the technical work, and separately, to add support for post-quantum signatures, so there's no need to stop that work.

Finally, not everyone will upgrade to Post Quantum over time, especially wallets that have been inactive for a long time. Some of them belong to people who have lost their keys. Some bitcoins are also located in a variety of old addresses that have exposed public keys.

Coinbase worries that someone could quietly build a quantum machine and start draining coins from these wallets "before people know."

The exchange did not take a side on what to do with the coins, but said that the discussion should be done separately, so it is not protected for others. The organization emphasized that any rescue must be quantum-secure, otherwise thieves could exploit the rescue method itself.

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