Quantum Sunset Economics: a working paper analyzing PACT adoption

Ahmed Raza, an independent researcher, recently shared a comprehensive analysis on the economics and governance implications of Dan Robinson's PACTs proposal. In his working paper, which can be accessed here, Raza presents significant findings and introduces a detailed comparative framework alongside a Python reference implementation for the protocol’s commitment side, available here.

One of the key findings from Raza’s research is that the exposed-key UTXO surface constitutes about 25% of the circulating supply, which includes roughly five million coins. This includes the 1.1M Patoshi cluster, as determined through a BigQuery cohort analysis provided in the supplementary materials of the paper. The study also highlights a major design feature in voluntary mechanisms like PACTs: larger dormant holders face disproportionately higher privacy costs, making them less likely to participate voluntarily. Raza suggests that early standardization and the development of a pooling service could effectively equalize these privacy costs across different holder sizes. He notes that without such measures, a holder of 100k BTC would incur a privacy cost ten thousand times greater than a holder of just 10 BTC.

Raza's paper also evaluates six policy options using a five-criterion comparative framework. These policies range from doing nothing to implementing specific Bitcoin Improvement Proposals (BIPs) and considering alternate mechanisms like Rubin’s proposal. Additionally, the paper discusses regulatory analyses of three CRQC-arrival scenarios, which include obligations under VASP and OFAC frameworks.

For further improvement and discussion, Raza seeks feedback on several aspects of his analysis. He questions whether the convexity assumption used in section 5 of his paper might be too aggressive. He also probes the community for thoughts on the viability of the proposed pooling service, querying whether there have been similar thoughts or existing implementations that could be either custodial, non-custodial, or based on multisignature technologies. Furthermore, he invites discussion on the treatment of P2TR compared to P2PK as exposed entities within the context of his study, and finally, seeks insights on the potential synthesis between PACT and Rubin's proposals, particularly focusing on which features should be prioritized.