Coinbase, Custodian of 5% of Existing Bitcoin, Outlines…

Coinbase has published a set of recommendations for preparing Bitcoin for future quantum-computing threats, arguing that coordinated protocol upgrades, institutional custody compatibility and protections for vulnerable coins should be addressed before the risk becomes practical. The paper, authored by Shashank Agrawal, notes that the exchange holds roughly 5% of all bitcoin in existence — about one million BTC, given that some 20 million of the 21 million maximum supply have been mined. That figure reflects assets held on behalf of clients rather than coins owned by Coinbase itself.

The core concern is that sufficiently powerful quantum computers could eventually break the elliptic-curve digital signatures that authorize Bitcoin transactions. Coinbase stressed that its proposals are contributions to an ongoing technical debate, not finalized recommendations or approved changes to the network's protocol.

Flexible signatures and a phased migration

A central proposal is to introduce Bitcoin output structures that can accommodate different quantum-resistant signature algorithms without repeated fundamental redesigns. Coinbase pointed to Pay-to-Merkle-Root, put forward under Bitcoin Improvement Proposal 360, and P2TRv2 as possible approaches. It also suggested evaluating hybrid spending mechanisms that would let transactions be authorized with either existing ECDSA/Schnorr signatures or post-quantum alternatives during a transition period, giving users and institutional custodians time to prepare before any decision to restrict legacy signatures.

The company said selecting replacement algorithms requires weighing their impact on Bitcoin's limited block space, transaction fees, verification performance and hardware-wallet compatibility. Candidates it identified include ML-DSA, SLH-DSA, FN-DSA and SHRINCS, the last combining compact stateful signatures with a stateless fallback. Coinbase cautioned that stateful systems carry operational risk because reusing signing states by accident can enable forgery, and it highlighted compatibility with multi-party computation, which lets institutions split cryptographic key control instead of relying on a single signer.

Dormant coins and custody questions

Another challenge involves older addresses whose public keys are already exposed, along with funds whose owners have lost their keys. Coinbase's quantum advisory council has previously estimated that about 6.9 million BTC could be exposed through revealed public keys, including roughly 1.7 million BTC in older Pay-to-Public-Key outputs. The exchange suggested weighing recovery mechanisms, migration deadlines and possible restrictions on legacy spending, while acknowledging that such steps raise difficult questions about ownership rights.

Coinbase said it has begun building PQ-CoreKMS, a quantum-resistant version of its institutional key-management infrastructure. In July it outlined plans for an initial post-quantum signing pipeline within about a year, followed by more advanced multi-party computation capabilities in the following two to three years. The company has also backed Bitcoin security research through developer collaboration and its participation in the Bitcoin Security Consortium. No quantum computer has publicly demonstrated the ability to break Bitcoin's signatures at the scale needed for a practical attack, but Coinbase argues preparation should start early given the time required to reach consensus, upgrade wallets and migrate holdings.