BitMEX pitches ‘canary fund’ alternative to Bitcoin quantum coin freeze

BitMEX Research has proposed an alternative to freezing quantum-vulnerable dormant Bitcoins, advocating a wait-and-see approach and a “canary fund” with a quantum bounty instead. 

BitMEX Research proposed a soft fork on Thursday that would only activate a full freeze of vulnerable coins if it is “proven that a quantum computer capable of stealing Bitcoins actually exists.”

The system uses a “canary approach,” creating a special Bitcoin address using a “Nothing-Up-My-Sleeve Number” (NUMS). This is a cryptographic proof in which the private key is unknown, but it is a valid address that could theoretically be spent by a powerful enough quantum computer.

Users can donate BTC to this address as a bounty, incentivizing any quantum-capable actor to “ring the alarm” by spending from it. Only if someone spends from this canary address does the freeze automatically activate, as it proves the quantum threat is real. 

The solution provides an alternative mechanism to the BIP-361 proposal on Tuesday that suggested freezing dormant, quantum-vulnerable Bitcoin to prevent it from being stolen by bad actors in the future. 

BIP-361 drew significant community pushback, with some comments calling it “authoritarian” and “confiscatory.”

Canary watch state prevents automatic freeze

BitMEX’s proposed “canary watch state” would still allow old coins to be spent, provided malicious actors using quantum computers do not attempt to steal from the “canary fund.” 

Investors participating in the canary fund can use multisignatures and withdraw their BTC at any time, it explained. 

There is also a safety window where quantum-vulnerable transactions could still be allowed after the five-year mark proposed in BIP-361, but with outputs locked for a period. 

“While this approach adds complexity and risk, given how controversial any coin freeze is, mitigating the impact of the freeze using this type of system may be worth consideration.”

BIP-361 is a rough idea for a contingency plan

Meanwhile, BIP-361 co-author Jameson Lopp has said his Bitcoin improvement proposal was more of a “rough idea for a contingency plan” than something ready to be proposed for activation. 

“I know folks don’t like it. I don’t like it myself. I wrote it because I like the alternative even less,” he wrote on X on Wednesday. 

He told Cointelegraph that it was a “rough sketch” to approach the issue of a “looming circulating supply shock” if quantum computing advances to the point that a post-quantum signature scheme achieves consensus for being added to Bitcoin.

Proposed three-phase solution in BIP-361. Source: GitHub