1.1M Dormant BTC in Play: CZ Freeze Proposal Rattles Liquidity and Positioning Desks

A proposal to freeze the estimated 1.1 million bitcoin believed to belong to Bitcoin creator Satoshi Nakamoto has ignited a sharp debate among leading industry figures, according to CoinDesk. Binance founder Changpeng Zhao, known as CZ, argues the dormant coins should be locked before quantum computers become powerful enough to steal them, but several prominent developers and investors reject the idea as a dangerous precedent.

Satoshi’s holdings, untouched since Bitcoin’s earliest days, are worth roughly $68 billion at bitcoin’s current price of about $62,000, per CoinDesk. At the time of writing, BTC traded near $62,930.45.

CZ’s freeze proposal

CZ floated the idea last month during a podcast appearance with Galaxy Digital’s Alex Thorn, CoinDesk reported. His suggestion was to give Satoshi a window of six to 12 months to move the coins. If the address remained untouched after that period, the Bitcoin community could then vote on whether to freeze it.

“If we don’t do anything with it, then we’re basically giving it to somebody who’s going to hack it,” CZ said, according to CoinDesk.

The concern centers on two scenarios: a hacker who eventually cracks Bitcoin’s cryptography could dump the coins on the market and crash the price, or the network could be forced to override individual property rights in a system explicitly built to be permissionless.

“A slippery slope”

Michael Terpin, founder and CEO of Transform Ventures and author of Bitcoin Supercycle, told CoinDesk that freezing Satoshi’s coins would cross a line the network has never crossed before.

“While I appreciate the proactivity in CZ’s proposal, it begins a slippery slope of creating permission in a permissionless system relative to personal property,” Terpin said. “If indeed [Satoshi] is dead, as many Bitcoiners believe, then only a quantum hack unlocks the coins. While it would hurt the price substantially if the coins were dumped, it would be a one-time episode and post-quantum bitcoin would recover.”

Terpin also doubted the community could reach agreement quickly, noting that it took years to implement the SegWit upgrade. “Considering it took years just to implement SegWit, I doubt a quick consensus could be formed here,” he told CoinDesk.

Developers push a broader fix

Jameson Lopp, co-founder and chief security officer at Casa, told CoinDesk that CZ’s comments distract from the more urgent issue: preparing Bitcoin’s cryptography for a post-quantum world. “I don’t really consider it a proposal so much as him musing upon the threat,” Lopp said. “I think this is not a binary debate of ‘to freeze or not to freeze.'”

Lopp authored Bitcoin Improvement Proposal 361 (BIP-361), which outlines a phased migration toward quantum-resistant cryptography. “The goal is to create incentives and deadlines so users, exchanges, custodians, wallets and institutions actually migrate in a timely fashion,” he said, according to CoinDesk. Lopp has previously argued, in April, that freezing Satoshi’s hoard along with millions of other dormant bitcoins would be preferable to letting hackers steal them.

Matt Hougan, chief investment officer at Bitwise, rejected both extremes — letting the coins be stolen or freezing them outright — and instead pointed to a proposal from Castle Island Ventures partner Nic Carter. That plan would place Satoshi’s bitcoin into a legal trust until ownership could be verified through historical electronic records.

“I actually like Nic Carter’s proposal,” Hougan said via email, per CoinDesk. “It avoids the philosophical challenges of both CZ’s suggestion and the ‘let whatever happens’ perspective.” Hougan added that markets already treat Satoshi’s holdings as effectively unavailable. “I don’t think there is any way that developments around Satoshi’s coins are positive for the ecosystem,” he said. “The market already accounts for them as frozen forever.”

CoinDesk noted the debate remains largely theoretical for now, as practical post-quantum cryptography for Bitcoin is still under development and no consensus exists on how the network would respond if its encryption were ever broken.