Coinbase Report Has Five Scenarios for Beating Bitcoin Quantum Threat

Crypto exchange Coinbase’s Quantum Advisory Council has released a report calling for the Bitcoin community to start work now on quantum-proofing the world’s largest cryptocurrency.

It found that approximately seven million bitcoins are at risk of quantum theft, which could happen when quantum computers become powerful enough to break Bitcoin’s encryption. How far off that is remains a matter of debate, with some experts saying it’s at least a decade off. Others disagree. Google has set a 2029 deadline for quantum-proofing all of its encryption, citing the accelerating speed of advancements in the field.

While those seven million bitcoins include some 1.7 million produced in the early days of the cryptocurrency, including Satoshi Nakamoto’s approximately 1.1 million coins, as many as five million are in wallets owned by modern cryptocurrency exchanges. The report did not specify if Coinbase’s tokens were among those at risk.

While the older tokens used old-style P2PK addresses that left public keys exposed — quantum computers could deduce the private keys used to move bitcoins from their public keys — some five million are at risk because their public keys have already been revealed. Many of those are in exchange wallets, the report said.

The council is made up of five professors from universities, including Stanford, UT Austin, and the University of Washington, and an Ethereum Foundation member.

The report outlines five possible solutions, beginning with the two most extreme: Burning “abandoned” coins (the 1.7 million of them) that have not been moved for many years, under the assumption that the keys are lost anyway, and doing nothing beyond enabling the migration to post-quantum keys.

The argument for burning the abandoned coins is that if they are stolen and dumped onto the market, that will drive down the price of bitcoin — something the report calls “a threat to the economic viability of Bitcoin.” The argument against burning is that there’s nothing to say that the so-called abandoned coins really have lost keys. Owners could be choosing not to move them.

Another problem with burning abandoned bitcoins is that it could set a precedent enabling governments to demand that specific bitcoins be burned or seized, the report said.

The three intermediate proposals are: limit the amount of P2PK bitcoins that could be spent to one per block, making sure they could not be dumped all at once, crashing the market; require users to prove ownership with zero-knowledge proofs derived from recovery seed phrases; and letting owners commit to a future quantum-safe transfer by a set deadline without publicly moving funds onchain. These proposals are compatible with each other so it’s not a matter of choosing one, the report said.

The recommendations are twofold. First, start the technical planning and migration now. Second, be clear about what is happening and when people will need to move their bitcoins, assuming they do.

“A clear statement by a large portion of the community that this issue is being taken seriously and will be addressed is important to allay users’ fears,” it said.