A proposal to freeze approximately 5.6 million dormant bitcoin, valued at around $440 billion, has sparked intense debate within the cryptocurrency community. Proponents of the plan argue that it is necessary to protect these coins from potential theft via quantum computing, which could compromise the security of the bitcoin network.
However, critics contend that such a move would undermine the fundamental principles of bitcoin, including its decentralized nature and the concept of unconditional ownership. According to Samuel 'Chad' Patt, founder of Op Net, freezing any coins, even those deemed 'lost,' would set a precedent that could have far-reaching consequences for the market. 'Institutional risk desks do not care about the reason, they care about the precedent,' he said.
Market analyst Jason Fernandes, a self-described pragmatic maximalist, agrees that freezing dormant coins could trigger a significant repricing event, but believes that a successful quantum attack would have an even more severe impact on the market. 'Institutions won’t just price precedent, they’ll price whether the system can survive a break in its core assumptions,' Fernandes added. The debate surrounding the proposed freeze has been ongoing for weeks, with some experts arguing that it is a necessary measure to protect the bitcoin network from the potential risks posed by quantum computing.
Others, however, believe that such a move would be a betrayal of the principles that underpin the cryptocurrency. Mati Greenspan, a market analyst and self-described maximalist, said that if quantum computers were to crack early Bitcoin wallets, it would not trigger a rollback or freeze, but rather the largest bug bounty in human history.
The discussion has led to the release of Bitcoin Improvement Proposal 361 (BIP-361), which contemplates phasing out bitcoin’s current cryptographic signatures and potentially freezing assets that fail to migrate. According to Patt, if this proposal were to proceed, '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 said that all fund managers who allocated assets based on the censorship-resistance thesis would be forced to unwind their positions, not by choice, but by mandate, because the asset would no longer fit the risk profile it was purchased under.
Another bitcoin maximalist, Kent Halliburton, CEO and co-founder at SazMining, said that while the intentions behind BIP-361 are good, 'you don't defend Bitcoin by breaking its core promise of inviolable property rights.' He believes that the quantum computing threat is real, but that there are better ways to deal with the risks it poses, such as better tooling and voluntary migration, rather than a protocol-level confiscation. Khushboo Khullar, venture partner at Lightning Ventures and a bitcoin maximalist, said that freezing dormant coins is a deeply flawed approach, despite appearing to be a pragmatic solution against quantum threats. 'It directly undermines Bitcoin’s core principles of immutability, permissionlessness, and no central enforcement,' she said.
However, not all maximalists agree with Patt, Halliburton, or Khullar, and instead believe that Lopp’s proposal is sensible. Ken Kruger, founder and CEO of Moon Technologies, said that '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 precedent or philosophical purity. 'Quantum risk is an existential threat to the system, not a philosophical debate,' he said. Ultimately, Fernandes believes that very few people within the community care in the long run, and that the majority of bitcoin holders are more interested in preserving capital rather than preserving some vague notion about what bitcoin is 'supposed to be.' Greenspan echoes the sentiments of many maximalists, saying that 'doing nothing is better than doing something.' He concluded that 'the Bitcoin community seems to feel strongly that freezing coins would be antithetical to bitcoin's quintessential value proposition.'