Author: André Beganski

Translation: Deep Tide TechFlow

Deep Tide Introduction: The threat of quantum computers to Bitcoin's security is no longer purely theoretical. Coinbase is designing post-quantum protection schemes for the $250 billion in managed assets, and the path it chooses may determine whether institutional funds will remain on-chain in the future. This article breaks down how the custody giant balances between “key splitting” and “hardware vaults,” making it a must-read for practitioners concerned about asset security.

If a cryptographically significant quantum computer ultimately becomes a real threat to Bitcoin's security, Coinbase aims to be ready with protective measures, regardless of the direction Bitcoin and other digital assets take in the future. This is the viewpoint of Yehuda Lindell.

In a recent program on MARA Foundation TV, the cryptography chief of the cryptocurrency exchange told host Isabel Foxen Duke that the post-quantum measures the company is designing aim to support any potential form of technological transformation. Currently, there is no clear answer to which post-quantum signature scheme Bitcoin will ultimately adopt.

“It is unlikely that a single signature scheme will emerge that everyone will use,” Lindell stated when discussing the standards that different networks will eventually adopt, “this means we have to be prepared to deal with different outcomes across different blockchains.”

As a service provider representing BlackRock and other institutions holding approximately $250 billion in assets, Coinbase has been refining relevant processes for years. It is now preparing for a world where a critical component becomes more difficult, and in the Bitcoin scenario, potentially completely unfeasible: multi-party computation, or MPC.

MPC functionally resembles Bitcoin's multi-signature setup, allowing different participants to each hold a “share” of a private key, enabling multiple signers to execute transactions while avoiding the complete private key being exposed on any single device.

Bitcoin's native scripting language allows users to create multi-signature setups directly on the chain by executing certain quorum rules, while MPC runs off-chain using specific cryptographic functions. Because signing a transaction requires meeting a certain threshold of key shares, the complete key is never assembled in one location, effectively eliminating single points of failure.

However, as Bitcoin prepares for the post-quantum era, more and more experts are concerned that not all post-quantum signature schemes may be “compatible with MPC.” Specifically, hash-based signatures may lack the underlying arithmetic structure that traditional cryptographic key splitting relies on. The absence of this mathematical structure is why hash signatures are thought to be capable of resisting quantum threats, but it also complicates the infrastructure built around MPC.

“Whether it is compatible with MPC makes a huge difference,” Lindell explained. Until recently, people believed that hash-based signatures could not execute MPC, but top cryptographers like Dan Boneh are actively researching potential solutions, with a recently published paper titled “PRAWNS” detailing this. However, since this research is still in a highly experimental stage, it remains unclear whether a viable MPC-like solution for hash signatures can be developed.

Wallet developers, including Ledger's Chief Technology Officer Charles Guillemet, have also expressed concerns over issues related to hash signatures.

Hardware Backup Solutions

If Bitcoin ultimately adopts a post-quantum scheme that is incompatible with MPC, Coinbase is researching a solution centered around a backup architecture that is built around programmable hardware security modules (HSMs). HSMs are essentially digital vaults used to store cryptographic keys in private data centers.

In this arrangement, private keys will be encrypted using post-quantum cryptography and will only be assembled in a physically secure environment inside the HSM.

Although placing the complete key in the same location, even if only for a brief moment, is theoretically less secure than traditional MPC, HSMs still provide strong protection under these constraints. Lindell pointed out that strict physical side-channel protections and stringent code upload controls are why he feels reassured by this setup.

Lindell stated that considering the uncertainty of Bitcoin's potential post-quantum upgrades, Coinbase is designing its custody architecture to be neutral and flexible enough to adapt to any signature scheme that Bitcoin may adopt in the coming years.

Although the timeline for Coinbase to complete its post-quantum security measures remains uncertain, Lindell added that once completed, “I can say, ‘I can support any solution.’ We don’t have to worry about a blockchain deciding to use something we can’t support.”

André Beganski is a Senior Content Manager at MARA Foundation, responsible for producing content covering themes such as the intersection of quantum computing and cryptography. He has previously worked at Decrypt.