Written by: Nic Carter
Compiled by: AididiaoJP, Foresight News
A few months ago, I was considered public enemy number one for pointing out that elliptic curve cryptography might not survive the next decade and that Bitcoin's cryptography needed to be adjusted. Now, most Bitcoin supporters have been convinced and are instead debating how and when we should upgrade to withstand quantum computers. Ironically, Bitcoin developers have finally begun releasing details of their quantum-resistant plan to refute my claims of inaction.
Regarding quantum transition resistance, the problem is that, as a Bitcoin supporter, one cannot claim the protocol as cutting-edge technology if Bitcoin, a currency system entirely built on cryptography, lags behind Google (migration completed by 2029), Cloudflare (2029), Ethereum (2029), and the US government (2030-2035) in its upgrade progress. Leaving aside the blatant madness of betting the entire fate of a multi-trillion-dollar currency network on the wishful thinking that technology won't advance rapidly, the mere fact that Bitcoin is the last to act in updating its algorithm is embarrassing enough. Some Bitcoin supporters associate quantum computing with Vitalik and questionable public stocks, reflexively denying the risks the technology poses. But we have no reason to hold the entire network hostage because of the past traumas of a few old-school Bitcoin supporters. Bitcoin will naturally filter out a group of oddballs and madmen: some of them will be happy to deny the empirical realities of quantum mechanics to prove their point, but we can simply ignore them.
So sooner or later we'll add quantum-resistant signatures to Bitcoin, and I can give you a rough idea of what it will look like. After a soft fork, there will be a transition period during which you can choose to use regular elliptic curve cryptography signatures or entirely new quantum-resistant signatures (and possibly more than one). At any time before Quantum Day, network participants can migrate based on their own risk assessment. Ultimately, and ideally, before Quantum Day, elliptic curve cryptography-based signatures will be completely disabled. Hopefully, this process will proceed smoothly without any major surprises, and all active participants will have the opportunity to rotate their wallets before Quantum Day.
Then, the real trouble begins. As a cryptographically significant quantum computer draws ever closer (early commercial applications will emerge before breaking 256-bit elliptic curve cryptography, but development could be extremely rapid), a massive debate will erupt within the Bitcoin community over the 1.7 million unmigrated coins used to pay public key outputs. These are the coins of Satoshi Nakamoto and other early miners. This debate will be exceptionally intense because both sides hold deeply ingrained and entirely reasonable viewpoints.
The battle lines have been drawn.
Disagreements have begun to emerge:
The Freeze Camp (Financial Investors, Institutions, Trustees): For them, freezing is the obvious option. These coins are presumed lost, their owners have nearly 20 years to act, their failure to migrate them to a quantum-resistant address was negligence, and they have been adequately notified. For institutions, there is no other choice. Either delist and completely relinquish all revenue related to Bitcoin asset management products, or ensure Bitcoin adopts the freeze fork. A world where over 1.7 million Bitcoins fall into the hands of potential hostile actors is unacceptable to these individuals, as they are trustees of their clients' funds. As these coins are recovered through quantum means, Bitcoin will suffer devastating volatility, not only from unexpected inflation but also from the unknown motives of the new owners. For this reason, I expect most custodians, exchanges, and asset management companies to pre-commit to only recognizing freeze forks, which will greatly annoy the other camp.
The "No Freeze" Camp (hardcore Bitcoin extremists, some developers, ideological supremacists): For many in this group, this is beyond debate: Satoshi Nakamoto set the currency parameter at 21 million, and no living person has the right to arbitrarily change it to over 19 million. Bitcoin will not undergo selective "abnormal state changes" like Ethereum did after the 2016 Decentralized Autonomous Organization (DAO) hack. Even after losing 850,000 Bitcoins in the Mt. Gox attack, the protocol did not take any measures to recover the funds; this is not in our DNA. Moreover, Satoshi Nakamoto and other early miners received their tokens fairly; those tokens were their due reward as early administrators of the protocol. Furthermore, if we allow institutions to substantially coerce the Bitcoin community into making a major currency change, we are betraying the network's original decentralized premise. If we grant them such power, who knows what they will push for next—a change to Proof-of-Work? Client identification requirements at the protocol level? Logically, attackers would not dump all their tokens on the market. Even if they are "malicious" to some extent, economic rationality suggests they will simply hold the tokens, not sell them off instantly. This camp believes that temporary volatility is preferable to compromising the ideals of the network. The "no-freeze" camp is characterizing the freeze as an "attack on Bitcoin," ignoring the fact that those who advocate for the freeze are also equal and effective participants in the network.
Currently, these two groups are not clearly distinct. Staunch Bitcoin advocates who may fall into the "no-freeze" camp are also investors, but their time horizon and risk exposure differ from institutions holding Bitcoin on behalf of clients. Some developers also largely belong to the freeze camp. Pieter Uilé, perhaps the most influential Bitcoin Core developer today, once stated:
"These coins must certainly be confiscated. If (this is a huge hypothetical) the existence of cryptographically unbreakable quantum computers becomes a credible threat, the Bitcoin ecosystem will have no choice but to remove the payment capabilities of quantum-vulnerable signature schemes (including elliptic curve digital signature algorithms and Bitcoin Improvement Proposal 340) through soft forks. Another option is that millions of Bitcoins are at risk of being stolen; in this scenario, I cannot imagine the currency retaining any value. And this would affect everyone, even those who have carefully transferred their tokens to quantum-resistant protection schemes."
You can find more summarized developer perspectives here.
Generally speaking, the two camps can be divided into two groups: hardcore, ideologically driven Bitcoin extremists (who do not freeze), and institutions and large investors (who freeze). In other words, it's a battle between the "economic nodes" (large asset management companies, institutions, and investors) and the "social layer" (Bitcoin supporters who are more concerned with principles than expediency). During the block size war, it was widely believed that the "social layer" prevailed over the demands of the economic nodes.
Fight a war
In outlining this debate, two main directions are generally anticipated (as well as a hidden third path). In my view, the most likely outcome is a victory for the economic node: the most important institutions in the Bitcoin space will jointly sign a letter declaring that they will only recognize the Bitcoin that implemented the "freeze" fork as the "real" Bitcoin, with any other forks being byproducts. An alternative for these institutions would be to delist Bitcoin and completely terminate their Bitcoin-related businesses, a move some might indeed do due to a lack of motivation. I suspect that to avoid fragmentation (what happens when a Bitcoin ETF suddenly splits into two?), most large ETF issuers will strive to avoid a value-destroying split and decide early on to support only one side of the fork. The other side's tokens will be sold off, with the proceeds going to the company entity, not the customers. Exchanges might be more accommodating, choosing to support both forks simultaneously and "let the winner take the lead," giving the choice to customers. But overall, I believe institutions will firmly stand on the side supporting only the freeze fork, as they simply cannot afford the liability risk of customers' assets being wiped out overnight by a malicious actor.
Another possibility is that Bitcoin's "immune system" is activated, leading to a similar outcome to the block size war: corporate backing down and yielding to the community's will. I think this is highly unlikely—although many Bitcoin proponents would expect it—because 2026 is not 2017. Between 2015 and 2017, active institutions were limited to crypto-native companies—companies like the CME Group were just beginning to support Bitcoin and were not yet a significant factor, let alone asset management firms or exchange-traded funds (ETFs). Therefore, crypto-native companies like Treasury eventually realized there was no need to fight to the death over 2x or larger block sizes, allowing "purists" to win through user-activated soft forks and the activation of Segregated Witness. Another reason the 2x scaling proposal failed was the lack of sufficient developer talent to push for larger block sizes. But this is not the case with the freeze fork. You will find many developers willing to dedicate themselves to the freeze fork side.
As I've stated, times have changed. A significant proportion of Bitcoin is now held by corporate entities like MicroStrategy, or by custodians, exchanges, and asset management companies. Economic influence is now much greater and more concentrated in the hands of a dozen or so major companies, each with voting rights. Furthermore, the economic reasons for a freeze are far more glaring than the reasons for increasing block size; the latter is a peripheral economic issue, more of an engineering problem. Moreover, influential developers and community members with significant social prestige, such as Jameson Lope and Piet Uilé, have publicly expressed their support for a freeze, further dividing the "ideological hardliners."
So my baseline scenario is that investors and institutions will win, and they will do so cleanly and efficiently by simply committing to a pre-emptive freeze on the fork. Many Bitcoin proponents will complain, but they will eventually acknowledge the economic validity of this argument. They want to make money too. Most people are unwilling to risk their life savings and fortunes for the sake of ideological purity.
The Hidden Third Way
But there is another path. Bitcoin doesn't necessarily have to make a brutal choice between economic destruction and abandoning its founding principles. A possible "compromise" might be achieved that both rescues these tokens from their quantum dilemma and (roughly) maintains the purity of Bitcoin's monetary policy and ideology. I'm referring to the legal recovery or "rescue" of these vulnerable tokens.
To ensure this outcome, one condition is necessary: one or more American companies must win the quantum race (which seems highly likely to me).
The process would be as follows. An American company, whether Google, IBM, or another leader in the quantum field (most of whom are American), acquires a cryptography-related quantum computer and contracts with the US government to legally recover the 1.7 million tokens paid to the public key. They do not gain ownership of these tokens; instead, a court-appointed neutral receiver or court-authorized trustee is responsible for protecting the assets and returning them to their rightful owners, or holding them in trust while awaiting a judicial ruling. In other words, a rescue company recovers property from a ship in distress and receives a court-ordered rescue payment, but does not gain ownership of the recovered assets.
Some might argue that Satoshi Nakamoto's Bitcoin would be more akin to "discovery law," or more colloquially, "whoever finds it owns it." If property is deemed abandoned, the finder who gains possession acquires full ownership. I believe this is far less likely, as US courts tend to require the original owner to definitively relinquish control, something that is highly improbable in Nakamoto's case.
While the concept of "rescuer's claim" is not a practically applicable legal principle (since Satoshi Nakamoto's Bitcoin is not a literal shipwreck on the high seas), it serves as the best analogy and a plausible example for courts seeking inspiration. In this scenario, Google or another entity that first built a cryptographically-related quantum computer would be granted a temporary, exclusive license to reclaim the 1.7 million Bitcoins deemed "at risk" (as other adversaries might soon follow suit with their own cryptographically-related quantum computers). Other companies would either be included in a consortium or legally prohibited from attempting to reclaim them. These tokens would be transferred to a court-controlled address and placed in a receivership or trust structure. Claimants (Satoshi Nakamoto or others) could then prove ownership by providing conventional evidence (proving they indeed mined these coins between 2009 and 2010). This is difficult, but not impossible if sufficient electronic records are maintained. The rescuer would receive a compensation commensurate with the difficulty and cost of recovery. This compensation could be substantial.
If no one claims them (and I believe the likelihood of Satoshi Nakamoto or anyone else claiming them is extremely small, if any, very small), the fate of these tokens is somewhat ambiguous. Theoretically, the property would be nationalized, liquidated, and its proceeds used, but with a permanent liability—that is, if Satoshi Nakamoto returns and demands the return of his funds. The sheer size of the liability and the unclear ownership of the tokens suggest that this matter needs to be handled through some kind of ad hoc federal process; no state would be willing to assume such a massive debt. Therefore, I believe the most likely outcome is that these tokens will ultimately end up in the Bitcoin Reserve managed by the Treasury Department—Satoshi Nakamoto has the right to claim them, but they will effectively become the property of the US government.
Admittedly, this isn't the most cypherpunk-esque outcome, but most Bitcoin supporters have long accepted the US government's involvement in Bitcoin, with many even advocating for a strategic Bitcoin reserve. Therefore, Bitcoin supporters aren't overly sensitive to government intervention in the protocol when it serves their interests. In this scenario, the US government proactively addresses Bitcoin's biggest threat and ensures these tokens aren't dumped on the market, thus doing us all a huge favor—and in a way that doesn't require any changes to the protocol layer.
This idea may seem far-fetched, but I believe it is indeed possible.
So, what kind of outcome would I personally like to see?
My preferences, listed in order, are as follows:
- These tokens were legally rescued, held in trust pending Satoshi Nakamoto's claim, and ultimately returned to the state for inclusion in the strategic Bitcoin reserve.
- The freeze was implemented.
- Without a freeze, Bitcoin is doomed.
I believe Option 1 is superior to Option 2 because if Bitcoin were to freeze these tokens, a core aspect of Bitcoin would truly die. It would survive, but be forever altered—arguably no longer the network Satoshi Nakamoto established years ago.
