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

The discussion around a new Bitcoin Improvement Proposal (BIP), titled "Proof-of-Activity Reclamation (PoAR)," has sparked considerable debate among developers. The proposal, introduced by Donald Dienst, aims to address the issue of long-term economic impacts caused by lost and abandoned Unspent Transaction Outputs (UTXOs). The mechanism suggested involves the automated and rule-based recycling of coins that have been inactive for more than 20 years. These coins would be returned to the undistributed pool and slowly reintroduced into circulation through future block rewards, extending incentives for miners while adhering to the 21 million BTC cap. The full details of this proposal can be examined here.

However, several objections have been raised concerning the implications of the PoAR proposal. Notably, the implementation of such a plan would necessitate a hard fork, a process where older nodes in the network would reject blocks that allocate a higher-than-expected miner reward. This approach diverges significantly from previous updates like SegWit and Taproot, which were implemented as soft forks. Additionally, the proposal is critiqued for potentially disrupting long-term inheritance schemes. An example provided illustrates how a newborn inheriting 1000 BTC with a 30-year timelock could lose their rightful inheritance due to the reclamation of these "inactive" coins. This aspect underscores a broader concern that the proposal might penalize users who engage in long-term planning and exhibit a low time preference, including those securing funds for inheritance, security, or economic reasons.

Another critical point of contention is the shift in the source of funding for network security. Historically, miners are compensated over the long term through transaction fees paid by active transaction senders. The PoAR proposal, however, suggests reallocating value from long-term holders who are not actively participating in transaction flows. This reallocation is viewed by some as an unconsented tax on these users, fundamentally altering the dynamics of who contributes financially to maintaining the Bitcoin network's security.