Freezes dormant bitcoin would trigger an immediate repricing and mark one of the world’s oldest cryptocurrencies’ worst trading days since its launch in 2009, proponents told CoinDesk.
Bitcoin developers and crypto industry participants have debated for weeks whether to freeze dormant tokens to protect them from the risk of theft by quantum computers when those machines start going online.
“Freezing coins, even ‘lost’ ones, tells the market that all (roughly) 19.8 million BTC currently in circulation are contingently owned,” said Samuel “Chad” Patt, who is also the founder of Op Net. “Institutional risk desks don’t care about the cause, they care about the precedent.”
Read more: A simple explanation of what quantum computing actually is and why it’s scary for bitcoin
Although Jason Fernandes, a market analyst who describes himself as a pragmatic maximalist, said he agrees with Patt’s repricing thesis, he said he believes a successful quantum attack would trigger a far more severe repricing.
“Institutions will not only price precedent, they will price whether the system can survive a breach in its core assumptions,” added Fernandes, also a co-founder at AdLunam.
Mati Greenspan, also a self-described maximalist and market analyst, said that if “quantum computers ever crack early Bitcoin wallets, it won’t trigger a rollback or a freeze; it will trigger the biggest bug bounty in human history.”
The debate follows weeks of discussion about how to respond to the potential threat quantum computing poses to the bitcoin network, particularly the estimated 5.6 million BTC. These tokens are stored in wallets that have been dormant for more than a decade, at addresses that have not been upgraded and are therefore the most vulnerable in the event that quantum computing attacks become a reality.
A week ago, Jameson Lopp, a core Bitcoin developer and research analyst, told CoinDesk that he would prefer to see the dormant bitcoin, worth about $440 billion, frozen by the network than left at risk of being stolen by future quantum hackers. He said that he already sees these bitcoin as lost.
Lopp and a team of other core bitcoin developers released Bitcoin Improvement Proposal 361 (BIP-361) earlier this month. The proposal considers phasing out bitcoin’s current cryptographic signatures, potentially freezing assets that cannot migrate.
‘Instant’ repricing
If that were to continue, Patt said, “bitcoin’s repricing will be immediate, 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 that its core value proposition is negotiable.”
The Bitcoin maximalist said that all fund managers “allocating on the censorship resistance thesis would be forced to relax. Not by choice, but by mandate, because the asset no longer fits the risk profile under which it was purchased.”
Read more: To freeze or not to freeze: Satoshi and the $440 billion in bitcoin threatened by quantum computing
Another bitcoin maximalist, Kent Halliburton, CEO and co-founder at SazMining, said he believes the intentions behind BIP-361 are good.
“However, you don’t defend Bitcoin by breaking its core promise of inviolable property rights,” he said. “We run data centers on four continents and our customers own every machine. That model only works because Bitcoin guarantees unconditional ownership.”
Halliburton said he believes, as many others do, 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, “but not a protocol-level confiscation dressed up as a contingency plan.”
Deeply flawed
Khushboo Khullar, venture partner at Lightning Ventures and also a bitcoin maximalist, said that freezing dormant coins is a deeply flawed approach, despite appearing to be a pragmatic approach against quantum threats.
“It directly undermines Bitcoin’s core principles of immutability, permissionlessness and no central enforcement. Such a move would require a contentious hard fork that violates the network’s decentralized ethos where no one can unilaterally seize or freeze anyone’s coins,” she said.
However, not all maximalists agree with Patt, Halliburton or Khullar, and instead believe that Lopp’s proposal is sensible.
“It’s extremely challenging to build systems that are truly future-proof, and while Bitcoin has come pretty close, quantum can pose a threat that requires trade-offs participants won’t be happy with.” said Ken Kruger, founder and CEO of Moon Technologies.
“So far, there is no solution that does not include compromise: freeze funds or let them be stolen? If resolved elegantly, this could be a critical moment Bitcoin proves its resilience as a global monetary system,” he said.
Bitcoin can still evolve
Fernandes said he understands Patt’s and other maximalists’ points about precedent, adding that it’s a real concern among the bitcoin community when discussing the network’s anti-censorship ethos. In fact, he added, “I don’t think there is time; I think quantum will be upon us much sooner than anyone thinks.”
“But framing this as a matter of purity misses the larger issue: quantum risk is an existential threat to the system, not a philosophical debate,” Fernandes said. He believes bitcoin can evolve as it has in the past with SegWit and Taproot, upgrades designed to improve network efficiency, privacy and scalability.
“The protocol is not ‘finished,’ it’s just conservative in how it’s changing,” he said. “But the risks of inaction far outweigh any concerns about precedent or philosophical purity.”
Ultimately, Fernandes believes that very few people in society care about the long run, and that the majority of bitcoin holders, whether they are maximalists or not, are “more interested in preserving capital rather than preserving a vague notion of what bitcoin ‘should be’.”
Greenspan echoes what many of the maximalists ultimately prefer. “As with many cases in life, and especially with bitcoin, doing nothing is better than doing something.”
He concluded: “The bitcoin community seems to feel strongly that freezing coins would be antithetical to bitcoin’s essential value proposition.”
Read more: How a quantum computer can be used to actually steal your bitcoin in ‘9 minutes’
