Quantum Sunset Economics: a working paper analyzing PACT adoption

The revised version of the paper, now known as v2, incorporates significant changes and new findings based on previously provided feedback. Key updates in this revision include a reclassification of P2SH (Pay to Script Hash) and P2WSH (Pay to Witness Script Hash) addresses. These address types are now considered exposed once they engage in an outgoing spend that reveals the redeem or witness script publicly on the blockchain. This adjustment results in an additional 1.99 million BTC being classified as exposed, shifting the overall exposed percentage of Bitcoin supply from 25.30% to 35.30%.

Further clarifications were made in the paper, particularly in the double-counting issue noted in Table 1's footnote. It has been clarified that the BigQuery output expansion erroneously counted multisig outputs multiple times per constituent address rather than per Unspent Transaction Output (UTXO), which led to an inflated count by approximately 210,000 BTC for script-hash rows. However, this did not affect the reported headline figure for exposed Bitcoin.

The analysis also delved into the categorization of address types based on the number of required signatures (k of n multisig configurations). However, due to limitations in the available data from the bigquery public data.crypto_bitcoin dataset, a detailed breakdown into precise k by k decomposition could not be achieved, leading to a binary classification system instead. Results show that 82.4% of the newly classified exposed BTC fall under the multisig or other complex script categories, highlighting their prevalence especially in institutional settings and advanced wallet configurations like Lightning network channels.

A new section, 6.5, discusses the implications of multisig configurations under different quantum attack models. It suggests that while multisig can provide a temporary defense against quantum attacks, its effectiveness might diminish as computational capabilities grow, therefore emphasizing the need for durable post-quantum solutions through institutional pooling. Additionally, Section 3.8 introduces considerations regarding xpub disclosures, noting that these pose a significant risk as they could expose all derived addresses on the disclosed branch, further supporting the argument for centralized institutional custody and reporting mechanisms to mitigate such risks.

The sensitivity analysis around the alternative P2TR (Pay to Taproot) classification was also updated, demonstrating a nuanced understanding of exposure dynamics depending on transaction types and address usage patterns, resulting in a finely tuned estimate of 34.57% of the total Bitcoin supply being potentially exposed under revised conditions. These comprehensive revisions and insights significantly enhance the analytical depth and practical relevance of the study.