The proposed freeze of dormant bitcoin, valued at $79,242.42, could precipitate an immediate and significant repricing, marking one of the most tumultuous trading days in the cryptocurrency's history since its inception in 2009, according to advocates. The debate surrounding the freeze of dormant tokens to safeguard against potential theft via quantum computing has been ongoing among bitcoin developers and crypto industry participants. Samuel 'Chad' Patt, founder of Op Net, warned that freezing any coins, including 'lost' ones, would set a precedent, implying that all 19.8 million BTC in circulation are conditionally owned.
'Institutional risk desks do not care about the reason, they care about the precedent,' Patt said. Market analyst Jason Fernandes concurred with Patt's repricing thesis but believed a successful quantum attack would trigger a more severe repricing.
'Institutions won’t just price precedent, they’ll price whether the system can survive a break in its core assumptions,' Fernandes added. The discussion follows weeks of deliberation over how to respond to the potential threat quantum computing poses to the bitcoin network, particularly the estimated 5.6 million BTC held in wallets that have been dormant for over a decade. Core Bitcoin developer Jameson Lopp suggested that freezing the dormant bitcoin, worth roughly $440 billion, would be preferable to leaving it vulnerable to future quantum hackers.
Lopp and other developers released Bitcoin Improvement Proposal 361 (BIP-361), which contemplates phasing out bitcoin’s current cryptographic signatures and potentially freezing assets that fail to migrate. Patt cautioned that if the proposal proceeds, 'bitcoin’s repricing would be instant, not gradual, and would be the worst single day in bitcoin's history, but not because of a hack, but because the network will have proven its core value proposition is negotiable.' Bitcoin maximalist Kent Halliburton argued that the intentions behind BIP-361 are good but that 'you don't defend Bitcoin by breaking its core promise of inviolable property rights.' Halliburton and others believe that the quantum computing threat is real but that there are better ways to address the risks, such as improved tooling and voluntary migration.
Khushboo Khullar, a venture partner at Lightning Ventures and a bitcoin maximalist, said that freezing dormant coins is a deeply flawed approach that undermines Bitcoin’s core principles of immutability, permissionlessness, and no central enforcement. However, not all maximalists agree, with some believing Lopp’s proposal is sensible. Ken Kruger, founder and CEO of Moon Technologies, said, 'It’s extremely challenging to build systems that are truly future-proof, and while Bitcoin has come quite close, quantum may pose a threat that requires tradeoffs participants won’t be happy with.' Fernandes understands the concerns about precedent but believes that the risk of inaction far outweighs any concern about philosophical purity. Ultimately, Fernandes thinks that the majority of bitcoin holders are more interested in preserving capital than preserving a vague notion about what bitcoin is 'supposed to be.' Mati Greenspan, a self-described maximalist and market analyst, concluded that 'the Bitcoin community seems to feel strongly that freezing coins would be antithetical to bitcoin's quintessential value proposition.'