Imposing a freeze on inactive bitcoin holdings, currently valued at $75,320.90, would lead to an instantaneous and potentially catastrophic repricing of the cryptocurrency, according to advocates who spoke with CoinDesk. This move is being considered as a safeguard against the looming threat of quantum computing, which could potentially compromise the security of dormant tokens.
Bitcoin developers and industry stakeholders have been engaged in heated debates over the past few weeks, weighing the pros and cons of freezing approximately 5.6 million inactive BTC to shield them from the risks associated with quantum computing. Samuel 'Chad' Patt, founder of Op Net, cautioned that freezing any coins, including those deemed lost, could have far-reaching implications for the market, as it would imply that all 19.8 million BTC in circulation are conditionally owned.
'Institutional risk desks are not concerned with the reasoning behind such a move, but rather the precedent it sets,' Patt explained. Market analyst Jason Fernandes, who identifies as a pragmatic maximalist, concurred with Patt's assessment, stating that a successful quantum attack would have a significantly more severe impact on the market. Fernandes emphasized that institutions would not only consider the precedent set by freezing coins but also the potential vulnerability of the system to a breach of its core assumptions.
Mati Greenspan, a self-described maximalist and market analyst, suggested 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 ongoing debate stems from concerns over the potential threat posed by quantum computing to the bitcoin network, particularly the estimated 5.6 million BTC held in wallets that have remained dormant for over a decade.
These tokens are stored in addresses that have not been upgraded, rendering them highly susceptible to quantum computing attacks. 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 theft by future quantum hackers.
Lopp and a team of core bitcoin developers recently introduced Bitcoin Improvement Proposal 361 (BIP-361), which proposes 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, not due to a hack, but because the network will have proven its core value proposition is negotiable.' Patt added 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, as the asset would no longer align with the risk profile it was purchased under. Another bitcoin maximalist, Kent Halliburton, CEO and co-founder of SazMining, acknowledged the good intentions behind BIP-361 but emphasized that defending Bitcoin should not involve compromising its core promise of inviolable property rights.
Halliburton advocated for alternative solutions, such as better tooling and voluntary migration, rather than a protocol-level confiscation disguised as a contingency plan. Khushboo Khullar, venture partner at Lightning Ventures and a bitcoin maximalist, deemed the approach of freezing dormant coins as deeply flawed, as it undermines Bitcoin's core principles of immutability, permissionlessness, and no central enforcement. However, not all maximalists share the same views, with some believing that Lopp's proposal is sensible. Ken Kruger, founder and CEO of Moon Technologies, noted that building systems that are truly future-proof is extremely challenging, and while Bitcoin has come close, quantum computing may pose a threat that requires tradeoffs that participants may not be happy with.
Fernandes acknowledged the concerns regarding precedent and censorship-resistance ethos but emphasized that the quantum risk is an existential threat to the system, rather than a philosophical debate. He suggested 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.' Greenspan concurred, stating that 'doing nothing is often better than doing something,' and that the Bitcoin community seems to strongly feel that freezing coins would be antithetical to bitcoin's quintessential value proposition.