[BIP Proposal] Proof-of-Activity Reclamation (PoAR)

The correspondence from Donald D. Dienst addresses the critical issues surrounding Bitcoin's long-term viability, emphasizing the potential economic implications of permanently lost coins due to irrecoverable private keys. Dienst proposes a rules-based mechanism aimed at reintroducing these lost bitcoins back into circulation, asserting that such coins, effectively removed from the economy, no longer have an active owner and thus do not impact any current participant when reclaimed through what is referred to as a "security tax."

Dienst acknowledges the concerns raised by Boris, particularly regarding long-term inheritance planning and time-locked contracts. He suggests that extending the inactivity window to a significant length, possibly 100 years, could serve as a compromise. This extension aims to balance the preservation of multi-generational ownership rights with the economic necessity of keeping the currency viable. By setting clear expectations and implementing wallet alerts, the proposal seeks to navigate the delicate balance between respecting ownership and ensuring Bitcoin's functionality as both a store of value and a medium of exchange.

Furthermore, Dienst speculates on the future implementation of such a proposal, suggesting it might only be feasible alongside a broader hard fork that includes other critical updates, such as enhancements for post-quantum security. He underscores the inevitability of people losing access to their digital wallets and posits that without intervention, Bitcoin could face a paradox of irreversible deflation and economic stagnation, contrasting the inflationary trends of fiat currencies.

The letter concludes with a call to action, urging the Bitcoin community to consider opt-in, transparent solutions to address the eventuality of lost coins. Dienst argues that maintaining the status quo may lead to Bitcoin becoming functionally unusable, advocating for a proactive approach to preserve its utility and relevance in the digital age.