A proposal to freeze dormant bitcoin, currently valued at $76,405.02, could precipitate a sudden and drastic repricing, potentially marking one of the most tumultuous trading days in the cryptocurrency's history since its inception in 2009, according to advocates who spoke with CoinDesk. The debate surrounding the freezing of inactive tokens has been ongoing among bitcoin developers and industry participants, as they weigh the risks of potential theft via quantum computing against the potential consequences of such a move.
Samuel 'Chad' Patt, founder of Op Net, warned that freezing any coins, including 'lost' ones, would set a precedent that could undermine the market's confidence in the cryptocurrency, as it would imply 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, a self-described pragmatic maximalist, concurred with Patt's assessment but argued that a successful quantum attack would have far more severe repercussions.
'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 address the potential threat posed by quantum computing to the bitcoin network, particularly the estimated 5.6 million BTC held in wallets that have been dormant for over a decade. These tokens are considered the most vulnerable to quantum computing attacks, as they have not been upgraded and are therefore at risk of being stolen. A week ago, Jameson Lopp, a core Bitcoin developer and research analyst, expressed his preference for freezing the dormant bitcoin, valued at approximately $440 billion, rather than leaving it exposed to potential quantum hackers.
Lopp and a team of core bitcoin developers recently released Bitcoin Improvement Proposal 361 (BIP-361), which proposes phasing out bitcoin’s current cryptographic signatures and potentially freezing assets that fail to migrate. If implemented, Patt warned that '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.' The bitcoin maximalist argued that all fund managers who allocated funds based on the censorship-resistance thesis would be forced to unwind their investments, as the asset would no longer align with their risk profile.
Another bitcoin maximalist, Kent Halliburton, CEO and co-founder at SazMining, expressed his concerns about the proposal, stating that 'you don't defend Bitcoin by breaking its core promise of inviolable property rights.' He advocated for alternative solutions, such as better tooling and voluntary migration, rather than a protocol-level confiscation. Khushboo Khullar, venture partner at Lightning Ventures and a bitcoin maximalist, described the approach as 'deeply flawed,' as it would undermine the core principles of immutability, permissionlessness, and no central enforcement. However, not all maximalists agree, with some believing that Lopp's proposal is sensible and necessary to address the quantum computing threat. Ken Kruger, founder and CEO of Moon Technologies, acknowledged that building future-proof systems is challenging and that quantum computing may require tradeoffs that participants will not be happy with.
'So far there’s no solution that doesn’t include compromise: freeze funds or let them be stolen? If solved elegantly, this could be a critical moment Bitcoin proves its resilience as a global monetary system,' Kruger said. Fernandes understands the concerns about precedent but believes that the risk of inaction outweighs any concerns about philosophical purity.
He argued that bitcoin could evolve, as it has in the past with upgrades like SegWit and Taproot, to address the quantum risk. Ultimately, Fernandes believes that the majority of bitcoin holders are more interested in preserving capital than preserving a vague notion of what bitcoin is 'supposed to be.' Mati Greenspan, a market analyst and self-described maximalist, concurred, stating that 'doing nothing is better than doing something.' The Bitcoin community seems to feel strongly that freezing coins would be antithetical to bitcoin's quintessential value proposition.