The potential freeze of dormant bitcoin, valued at $78,348.72, could trigger an immediate and drastic repricing, marking one of the most tumultuous trading days in the cryptocurrency's history since its inception in 2009, according to advocates. For weeks, bitcoin developers and industry participants have been engaged in a heated debate regarding the potential risks of quantum computing and the need to protect dormant tokens from theft.
Samuel 'Chad' Patt, founder of Op Net, cautioned that freezing any coins, including 'lost' ones, would set a precedent that could undermine the market's confidence in the ownership of the approximately 19.8 million BTC in circulation. 'Institutional risk desks do not care about the reason, they care about the precedent,' Patt said. Market analyst Jason Fernandes, who describes himself as a pragmatic maximalist, concurred with Patt's assessment but emphasized that a successful quantum attack would have far more severe consequences.
'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 potential threat of quantum computing to the bitcoin network, particularly the estimated 5.6 million dormant BTC, has been ongoing for weeks.
These tokens, held in wallets that have been inactive for over a decade, are considered the most vulnerable to potential quantum computing attacks. A week ago, core Bitcoin developer Jameson Lopp expressed his preference for freezing the dormant bitcoin, valued at approximately $440 billion, rather than leaving it vulnerable to theft by future quantum hackers. Lopp and a team of developers released Bitcoin Improvement Proposal 361 (BIP-361), which proposes phasing out bitcoin’s current cryptographic signatures and potentially freezing assets that fail to migrate. Patt warned that 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.' 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.' Halliburton emphasized that the quantum computing threat is real but believes there are better ways to address the risks, such as improved tooling and voluntary migration.
Khushboo Khullar, venture partner at Lightning Ventures and a bitcoin maximalist, described the proposal to freeze dormant coins as 'deeply flawed,' as it would undermine Bitcoin’s core principles of immutability, permissionlessness, and no central enforcement. However, not all maximalists agree with Patt, Halliburton, or Khullar, with some, like Ken Kruger, founder and CEO of Moon Technologies, believing that Lopp’s proposal is sensible. '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,' Kruger said.
The debate highlights the challenges of balancing the need to protect the bitcoin network from potential threats with the need to preserve its core principles and value proposition. As Fernandes noted, 'I don't think there is time; I think quantum will be upon us way faster than anybody thinks.' Ultimately, the decision to freeze dormant bitcoin or not will have significant implications for the future of the cryptocurrency and its ability to evolve and adapt to emerging threats.