Hourglass V2 Update

This change was proposed in response to community feedback and is detailed in the latest version available on GitHub, with prior discussions accessible through the Bitcoin development group.

The implications of this restriction are significant, considering that 1.7 million BTC held in P2PK outputs would take approximately 32 years to migrate under this new rule. This timeline extends even when accounting for a high percentage of these coins being lost; for instance, if 75% were lost, it would still take around 8 years for the remaining coins to be moved. Moreover, in the extreme case where 99% of these coins are considered lost, the migration would require at least 118 days. This situation is expected to result in intense competition among legitimate holders who seek to regain unrestricted access to their funds, effectively transferring a substantial amount of wealth from these holders to miners in the process.

The proposal suggests that the Hourglass feature should be introduced through a flag day soft fork, activated at a predetermined block height announced well in advance. This approach aims to incentivize coin owners to move their holdings before the activation, similar to the incentives present in any confiscation proposal. If less than 25% of P2PK coins are lost, it is anticipated that the majority will be relocated prior to the soft fork's implementation. Unlike other proposals that might lead to the freezing or burning of unclaimed coins, Hourglass allows for the possibility of reclaiming them post-activation. It operates under the assumption that individuals leaving their coins in P2PK outputs beyond the activation deadline possess an extremely low time preference. Distinguishing between original keyholders moving their coins and a potential quantum attack remains challenging. However, those with a lower time preference—who are presumably less inclined to engage in fee-bidding wars compared to quantum attackers—might be more motivated to move their coins once the initial wave of activity subsides. This expected reduction in P2PK output movements, observable on the blockchain, could encourage further migrations by those who initially opted to wait.