Coinbase has urged Bitcoin developers to prepare for quantum computing threats, warning that upgrading the network's security could take years. In an October 13 technical paper, the company proposed stronger digital signatures, flexible wallets and a phased migration process. The recommendations aim to protect Bitcoin holdings before quantum computers become powerful enough to threaten existing cryptographic systems.
Coinbase, which says it holds about 5% of existing Bitcoin in custody, called for early coordination among developers and wallet providers. It also warned that technical disagreements over older coins should not delay security improvements.
Bitcoin currently uses ECDSA and Schnorr signatures to authorize transactions. A sufficiently powerful quantum computer could derive private keys from exposed public keys and potentially access vulnerable funds.
Still, Coinbase did not claim that current quantum computers can break Bitcoin's security.
Coinbase Backs BIP-360 for Bitcoin Quantum Security
Coinbase identified BIP-360 as one potential foundation for Bitcoin's transition toward quantum-resistant cryptography.
The proposal introduces Pay-to-Merkle-Root, or P2MR, a transaction format based on Bitcoin's existing Taproot design. It removes the key-path spending feature, which can expose public keys to future quantum attacks.
However, BIP-360 does not introduce quantum-resistant signatures on its own. Instead, it creates a proposed structure that developers could combine with new cryptographic protections.
Coinbase also identified P2TRv2 as another design worth examining. Both approaches could help Bitcoin support new signature systems without repeatedly changing its transaction structure.
Meanwhile, the company recommended evaluating ML-DSA, SLH-DSA and FN-DSA alongside the proposed SHRINCS design. Developers must compare signature sizes, processing speeds, transaction fees and hardware compatibility before selecting suitable algorithms.
Larger signatures could increase demand for block space and make Bitcoin transactions more expensive during migration. Earlier testing by BTQ Technologies demonstrated experimental BIP-360 transactions on a Bitcoin quantum testnet. Nevertheless, Bitcoin's main network has not activated the proposal.
Bitcoin Wallet Migration Raises New Security Questions
Beyond signature upgrades, Coinbase proposed a gradual transition that would allow users to strengthen wallet security before developers restrict older signing methods.
One approach involves hybrid wallets supporting existing Bitcoin signatures alongside separate post-quantum keys. Under this proposed 1-of-2 arrangement, users could authorize transactions through either signing method during the transition.
Coinbase also recommended examining post-quantum-only outputs for users seeking stronger protection earlier. Yet institutional custody presents additional challenges. Large custodians often distribute signing operations across multiple systems and locations.
Therefore, Coinbase called for compatibility with multiparty computation, which allows several parties to participate in securing transactions. The company also warned about stateful signatures, which require careful tracking of information between signing operations.
Errors involving reused or lost signing records could weaken security. Coinbase consequently recommended retaining stateless signing options.
Read More: Coinbase Adds IPO Share Access for US Users as COIN Stock Rises
Lost Bitcoin Complicates Quantum Migration Plans
Coinbase identified dormant wallets, exposed public keys and permanently inaccessible holdings as unresolved concerns. Some older coins may still have legitimate owners, while others could remain inaccessible because their private keys are lost.
Separately, BIP-361 proposes gradually restricting legacy signatures after Bitcoin introduces post-quantum transaction outputs. However, the proposal remains a draft, and Bitcoin developers have not approved its activation.
Coinbase recommended handling disputes over older holdings separately from technical security upgrades. The company also called for further testing of transaction fees, hardware wallets, network performance and verification costs.
Its October 13 paper established no migration deadline or final signature standard. Further work will involve researchers, developers and open-source contributors.
Conclusion
Coinbase's October 13 proposals outline a possible path toward Bitcoin quantum security through BIP-360, stronger signatures and phased wallet migration. However, technical costs, institutional custody requirements and dormant holdings remain unresolved. The company advocates early preparation while developers continue evaluating security designs and migration policies.