A Novel Post-Quantum Approach: "Proof-Of-Decay" (Cryptographic Half-Life) for Unmigrated Dormant UTXOs

Traditional solutions have focused on either implementing a “hard freeze”—permanently locking unmigrated coins after a predetermined deadline—or taking no action, leaving these funds perpetually exposed to potential quantum-enabled theft. Both approaches create an all-or-nothing environment: either the first entity to act, be it a malicious hacker or a legitimate owner, claims the entirety of at-risk balances, or those assets become irretrievable.

A novel alternative proposes introducing a “proof-of-decay” mechanism, drawing inspiration from the concept of radioactive half-life. This protocol modification would establish a cryptographic decay function tied to block height, which gradually diminishes the value of any exposed UTXO that remains unmigrated beyond a designated quantum transition grace period. During this grace interval, holders are encouraged to upgrade their keys to post-quantum secure formats. Should they fail to do so, their balances would begin to decrease programmatically—potentially losing a fixed percentage at regular intervals, such as every 50,000 blocks. The reduced satoshis could then be systematically burned or allocated to the coinbase reward pool, thereby supporting Proof-of-Work miners and maintaining network security.

Implementing such a model fundamentally alters the incentives for both attackers and dormant asset holders. For adversaries, the possibility of harvesting vast sums from compromised addresses is diminished, as the recoverable balance wanes predictably over time. This steady decay also serves to mitigate abrupt, market-shaking supply shocks that might otherwise occur if large quantities of dormant coins were suddenly liquidated following a successful attack. Moreover, this approach offers a nuanced form of fairness for owners who regain access to their keys after prolonged inactivity: although their holdings will have decreased, they are not entirely lost, sidestepping the harshness of total freezes.

However, significant criticisms challenge the effectiveness of the proof-of-decay strategy. First, the model does not truly remove attacker incentives; rather, it reframes the issue as a timing optimization problem. Once the grace period concludes, adversaries can coordinate rapid, mass extractions of all exposed UTXOs, reaping substantial rewards before decay takes a meaningful toll. Second, the decay schedule assumes a linear progression in quantum capabilities, but a sudden leap in quantum technology could enable swift exploitation of vulnerable keys before balances diminish significantly. Thus, the system remains susceptible to catastrophic losses if technological advances outpace the decay timeline. Finally, the policy penalizes passive holders—including heirs or owners who simply misplace their keys—by reducing their balances over time, without resolving the fundamental vulnerability. In instances where a wallet is already compromised, decay exacerbates the loss for rightful owners while allowing attackers to maximize their gains through strategic timing.

In summary, while the proof-of-decay concept introduces creative economic deterrents and aims to soften the impact of quantum threats, its efficacy is questionable given persistent attacker motivation, unpredictable quantum progress, and the inadvertent penalization of legitimate, inactive holders. Further technical discussion is necessary to evaluate whether consensus-level enforcement of decay rates can be achieved without undue complexity and whether this approach offers superior game-theoretic protections compared to more absolute measures.