Bitcoin’s cryptographic security could face a major test in the future as quantum computing advances, and Coinbase is urging the cryptocurrency industry to begin preparing before the technology becomes capable of threatening the network.
In a publication dated October 13, 2026, authored by Shashank Agrawal, Coinbase outlined recommendations for strengthening Bitcoin against potential quantum-computing attacks. The proposals focus on upgrading transaction signature systems, protecting vulnerable holdings and ensuring that institutional custody services can transition to quantum-resistant technology without disrupting the wider network.
The issue carries particular significance for Coinbase, which reports holding approximately 5% of all Bitcoin in existence. With roughly 20 million BTC already mined, that share would represent around one million BTC held in custody. This figure refers to assets safeguarded by the exchange on behalf of customers and other entities, rather than Bitcoin owned outright by Coinbase.
Although quantum computers capable of breaking Bitcoin’s existing cryptographic signatures have not been publicly demonstrated at the scale required for practical attacks, the exchange argues that preparation cannot wait until such a threat becomes immediate.
Its recommendations are contributions to an ongoing technical discussion, not an approved Bitcoin protocol upgrade. Nevertheless, they highlight the challenges developers, investors and custodians may face in securing the world’s largest cryptocurrency against future advances in computing.
Why Coinbase Is Concerned About Quantum Computing and Bitcoin
Bitcoin relies on cryptographic systems to secure ownership and authorise transactions. Its current signature mechanisms, including the Elliptic Curve Digital Signature Algorithm (ECDSA) and Schnorr signatures, allow users to prove that they control the private keys associated with their funds.
A sufficiently powerful, fault-tolerant quantum computer could theoretically use Shor’s algorithm to derive a private key from a corresponding public key under the relevant cryptographic conditions.
Such a capability would threaten the security assumptions behind Bitcoin’s current signature systems. An attacker who successfully recovered a private key could potentially authorise unauthorised transactions involving the associated funds.
However, this remains a future possibility rather than a demonstrated capability of today’s quantum computers. Building a machine powerful and reliable enough to break Bitcoin’s cryptography at a practical scale would require significant technological advances.
Coinbase’s concern is that waiting until the threat becomes practical could leave insufficient time to coordinate and implement the necessary changes.
Bitcoin operates through a distributed network of developers, miners, node operators, wallet providers, exchanges and individual users. Any major cryptographic transition would require extensive technical development, testing and coordination across these participants.
For Coinbase, the challenge is therefore not simply choosing a stronger signature algorithm. It is finding a way to introduce quantum-resistant security while preserving Bitcoin’s functionality, decentralised governance and ability to process transactions efficiently.
Coinbase’s 5% Bitcoin Custody Share Raises the Stakes
Coinbase’s reported custody exposure helps explain why the exchange is taking the issue seriously.
Bitcoin has a maximum supply of 21 million BTC, with approximately 20 million already mined. If Coinbase safeguards around 5% of the existing supply, the amount under its custody would be approximately one million BTC.
This is a substantial concentration of assets within a single custody provider, although it does not mean Coinbase owns those coins or that all the holdings face identical risks.
Custody involves securing assets for customers and other account holders. The company must therefore consider how any future cryptographic migration would affect its own infrastructure, its customers’ holdings and its ability to support transactions across the Bitcoin network.
Institutional custody can be particularly complex because large providers often rely on sophisticated key-management systems, hardware security, access controls and multi-party signing arrangements.
Changing the underlying cryptographic algorithms could require updates to these systems, as well as coordination with wallet software and the broader Bitcoin ecosystem.
Coinbase’s recommendations reflect the need to prepare institutional infrastructure alongside the protocol itself. Even if a quantum-resistant signature scheme becomes available, its adoption would be difficult without compatible custody systems and reliable migration procedures.
Flexible Signature Systems Could Make Bitcoin More Quantum-Resistant
One of Coinbase’s central recommendations is to develop Bitcoin transaction structures that can support different signature algorithms without requiring repeated fundamental redesigns.
The company identified Pay-to-Merkle-Root (P2MR), proposed under Bitcoin Improvement Proposal 360, and a proposed approach referred to as P2TRv2 as potential avenues for further evaluation.
The objective is to create greater flexibility in how Bitcoin transactions are authorised, making it easier to introduce new cryptographic methods as security requirements evolve.
Under the current system, Bitcoin uses established signature schemes to verify that a transaction has been authorised by the relevant key holder. A future quantum-resistant system would need to provide comparable security while accounting for the different technical characteristics of post-quantum cryptography.
Coinbase also suggested evaluating hybrid spending mechanisms that could support both existing ECDSA or Schnorr signatures and post-quantum alternatives during a transition period.
A hybrid approach could give users, exchanges and institutional custodians time to migrate their holdings rather than requiring every participant to switch immediately.
However, such a design would require careful consideration of how signature requirements are enforced and how different spending paths affect security. Supporting multiple signature systems does not automatically eliminate vulnerabilities, and the details would need extensive review before implementation.
The broader objective is to make the transition more manageable while giving Bitcoin developers time to evaluate the security and performance of replacement cryptographic systems.
Which Post-Quantum Signature Algorithms Could Bitcoin Use?
Selecting a quantum-resistant signature algorithm is one of the most important decisions in preparing Bitcoin for a potential quantum threat.
Coinbase identified several candidates for evaluation, including ML-DSA, SLH-DSA, FN-DSA and SHRINCS.
These approaches have different characteristics, meaning that no single option can be selected solely on the basis of its resistance to quantum attacks.
The relevant considerations include signature size, verification speed, computational requirements and the amount of data required to process transactions.
Bitcoin has limited block space, so introducing significantly larger signatures could affect transaction capacity and fees. More demanding verification requirements could also increase the resources needed to operate a node.
Hardware-wallet compatibility is another important factor. Many users rely on dedicated devices to protect their private keys, and these products would need appropriate support for any new signature scheme.
Coinbase also highlighted the importance of compatibility with multi-party computation (MPC), a technique that allows multiple participants to contribute to cryptographic signing without relying on one party to control the entire signing process.
This capability is particularly relevant for institutional custodians, which may distribute control across multiple systems or authorised personnel to reduce the risks associated with a single compromised key.
The exchange also discussed SHRINCS, described in its recommendations as combining compact stateful signatures with a stateless fallback.
Stateful signature systems require careful tracking of signing states. If a state is reused incorrectly, the resulting security failure can potentially enable signature forgery. Any implementation would therefore need robust safeguards against operational mistakes.
Ultimately, the choice of a replacement algorithm would need to balance security, efficiency, implementation complexity and compatibility with Bitcoin’s existing infrastructure.
Dormant Bitcoin Holdings Could Present a Difficult Security Challenge
Not all Bitcoin holdings face the same potential quantum risk.
One concern involves older address types in which public keys have already been revealed on the blockchain. If a sufficiently powerful quantum computer could derive private keys from those public keys, funds associated with vulnerable cryptographic arrangements could become potential targets.
Coinbase’s quantum advisory council previously estimated that approximately 6.9 million BTC could face exposure through publicly revealed keys. That estimate included around 1.7 million BTC associated with older Pay-to-Public-Key outputs.
These figures represent estimated exposure under a potential quantum threat, not confirmed losses or Bitcoin that is currently accessible to attackers using existing technology.
The distinction is important because a quantum vulnerability would depend on the capabilities of the attacker, the cryptographic structure of the affected output and other technical factors.
Another challenge involves dormant Bitcoin whose owners have lost access to their private keys or are otherwise unable to move their holdings.
If the network eventually transitions to quantum-resistant signatures, developers may need to consider how legacy outputs should be handled and whether any restrictions are necessary to reduce the risk of theft.
Coinbase suggested evaluating options such as migration deadlines, recovery mechanisms and possible restrictions on legacy spending.
However, these proposals raise difficult questions about property rights and decentralisation. Restricting older coins could affect legitimate owners who have chosen not to move their funds, while recovery mechanisms would need to establish how ownership could be demonstrated securely.
No universal solution has been established. Any decision would involve significant technical, social and governance considerations across the Bitcoin community.
Coinbase Is Developing Quantum-Resistant Institutional Custody Technology
Alongside its recommendations for Bitcoin itself, Coinbase is working on preparing its own institutional custody infrastructure.
The exchange has begun developing PQ-CoreKMS, a quantum-resistant version of its institutional key-management infrastructure.
In July 2026, Coinbase announced plans for an initial post-quantum signing pipeline within approximately one year, followed by more advanced multi-party computation capabilities over the subsequent two to three years.
These initiatives are intended to help the company adapt its custody operations as post-quantum cryptographic technology develops.
The work also reflects an important distinction between upgrading an individual company’s systems and upgrading Bitcoin’s underlying protocol.
Coinbase can develop and test its own key-management and signing infrastructure, but changes to Bitcoin’s consensus rules require broader coordination among developers, node operators and other participants.
The exchange has also supported Bitcoin security research through developer collaboration and participation in the Bitcoin Security Consortium.
These efforts are part of a wider industry discussion about how to prepare existing blockchain networks for future advances in computing without introducing unnecessary disruption.
Does Bitcoin Face an Immediate Quantum Computing Threat?
Despite the growing attention, there is no publicly demonstrated quantum computer currently capable of breaking Bitcoin’s cryptographic signatures at the scale required for practical attacks.
Quantum computing remains an active research field, and the timeline for achieving the capabilities needed to threaten Bitcoin is uncertain.
That uncertainty makes it difficult to determine precisely when a cryptographic transition would become necessary. It does not, however, remove the need to evaluate potential vulnerabilities in advance.
Major protocol upgrades can take years to research, debate, implement and deploy. Exchanges and custodians must also update their infrastructure, while individual users may need to migrate funds to new address types.
A coordinated transition would therefore involve much more than releasing a new software version.
Coinbase’s position is that the cryptocurrency industry should begin examining these challenges before quantum technology reaches a level that could threaten existing security assumptions.
The recommendations do not establish that Bitcoin’s current cryptography is already broken, nor do they constitute an approved plan for replacing it. Instead, they outline possible approaches that developers and industry participants can evaluate.
Final Takeaway: Bitcoin’s Quantum Security Debate Is Entering a Critical Preparation Phase
Coinbase’s latest recommendations highlight the scale of the work that could be required to prepare Bitcoin for future quantum-computing threats.
The proposed approaches include more flexible transaction structures, hybrid signature mechanisms, evaluation of post-quantum algorithms and carefully planned migration strategies for vulnerable holdings.
The exchange’s reported custody of approximately 5% of Bitcoin’s existing supply also demonstrates why institutional readiness matters alongside network-wide protocol development.
Yet the hardest questions remain unresolved. Developers must assess the technical trade-offs of replacement signature schemes, institutions must ensure compatibility with custody systems, and the Bitcoin community must confront difficult questions about dormant funds and restrictions on legacy transactions.
For now, quantum computers capable of breaking Bitcoin’s cryptographic signatures at a practical scale have not been publicly demonstrated. Nevertheless, the time required to coordinate a network-wide transition makes early research and preparation valuable.
The next steps will depend on continued technical research, public discussion and agreement across the Bitcoin ecosystem. Coinbase’s proposals add to that discussion, but they should not be mistaken for a finalised protocol upgrade or evidence of an immediate quantum-driven security crisis.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment or cybersecurity advice. Quantum-computing capabilities and the development of post-quantum cryptography continue to evolve, and estimates of potentially vulnerable Bitcoin holdings depend on technical assumptions. Coinbase’s recommendations are proposals for further discussion, not approved changes to Bitcoin’s protocol. Readers should consult official technical documentation and qualified security professionals when assessing cryptocurrency custody and security risks.
