Coinbase Warns Bitcoin Faces Quantum Threat, Flags Satoshi-Era Coins As A Separate Challenge

Coinbase called for a separate plan for immovable coins, including lost wallets and Satoshi-era holdings, with options ranging from freezes to spending limits.

• Coinbase urged Bitcoin developers to begin preparing for quantum computing threats, warning that the upgrade process could take years.
• The exchange is preparing its systems, engaging developers and supporting phased upgrades that introduce quantum-resistant signatures.
• COIN shares fell 0.21% in pre-market trading Wednesday, while Stocktwits retail sentiment remained bearish amid low chatter.

Bitcoin’s (BTC) future security could be threatened by quantum computers capable of breaking the cryptography securing its wallets, Coinbase Global (COIN) warned, telling developers to begin preparing for an upgrade that may take years. The exchange also raised another challenge: how to protect dormant, lost or inaccessible Bitcoin holdings, including coins attributed to the network's pseudonymous creator, Satoshi Nakamoto, that may not be moved to upgraded wallets.

In a blog post on Tuesday, Coinbase said Bitcoin should begin preparing "well ahead" of any announcement of a cryptographically relevant quantum computer. The exchange said the move would be "a challenging, complex, and multi-year process."

A quantum computer could break the cryptography that keeps Bitcoin safe in wallets.

Why Coinbase Is Calling For Quantum Readiness

Coinbase said it held about “5% of all Bitcoin in existence” as a custodian for banks, asset managers, hedge funds, and other institutions. Coinbase added that it was preparing its own systems, holding discussions with Bitcoin developers, and participating in the Bitcoin Security Consortium. The exchange clarified that the post was meant as input to an open discussion, "not a set of instructions or a final Coinbase position."

Why Bitcoin Needs An Upgrade

Bitcoin wallets are protected by digital signatures that a powerful enough quantum computer could, in theory, break. Once a wallet's public key is visible on the blockchain, such a machine could work out the private key and take the funds. A Google (GOOG) study in March suggested this may take far fewer qubits than once thought. About 30% of Bitcoin's supply already sat in addresses with visible public keys, according to Glassnode data.

Coinbase said it would back a phased fix, in which the same funds could be spent with either a current key or a quantum-resistant one. It pointed to BIP-360, a proposed upgrade that already had a test network running earlier in the year, and a design called P2TRv2 as flexible options. It also said any new scheme should work with multi-party computation, which splits key control across several parties, a setup large institutions rely on.

Why Satoshi-Era Bitcoin Presents A Problem

An upgrade only protected coins whose owners moved them. Coinbase said the harder question was what to do with coins that "cannot or will not move," and called it "a separate governance and engineering problem."

That group included coins in early address types, coins in reused addresses, coins with lost keys and Satoshi-era holdings. Satoshi Nakamoto is the pseudonymous creator of Bitcoin, whose identity has never been confirmed. 

Satoshi was estimated to have mined around 1.1 million BTC in Bitcoin’s first year, and those coins have never moved. At Bitcoin’s current price of about $83,190, that stash would be worth roughly $91.5 billion. 

Many of these coins sit in early address types that leave their public keys visible, making them prime targets if quantum machines mature. With no one known to be able to move them, an upgrade alone cannot protect them.

COIN, BTC: Retail Sentiment 

COIN stock was down by 0.21% during pre-market trading on Wednesday, amid broader market weakness. On Stocktwits, retail sentiment around COIN was in the ‘bearish’ zone, while chatter stayed at ‘low’ levels over the past day.

Bitcoin’s price was trading at $83,346, down 0.4% in the last 24 hours. On Stocktwits, retail sentiment around BTC remained in the ‘bearish’ zone, accompanied by ‘low’ chatter levels over the past day. 

For updates and corrections, email newsroom[at]stocktwits[dot]com.<