BitMEX Proposes Canary Fund to Detect Quantum Threats in Bitcoin

The cryptocurrency community has been grappling with the potential threat posed by quantum computers capable of breaking Bitcoin's encryption. In response, BitMEX Research has proposed an innovative solution that uses a 'canary fund' approach to detect and mitigate this risk. This method would create a special Bitcoin address using a cryptographic proof called a 'Nothing-Up-My-Sleeve Number' (NUMS). If a powerful enough quantum computer were able to spend from this address, it would trigger a freeze of vulnerable coins, thereby proving the existence of a quantum threat.

The canary fund would operate as a bounty system, where donors contribute BTC to the special address. The funds would be locked until a malicious actor attempts to steal them using a quantum computer. If successful, they would receive the donated BTC and trigger the freeze of vulnerable coins. This approach provides an alternative to previous proposals that suggested freezing dormant coins to prevent theft.

BitMEX's solution also includes a 'canary watch state' that prevents automatic freezes unless the canary fund is compromised. Investors participating in the canary fund would be able to withdraw their BTC at any time using multisignatures. Additionally, there is a safety window where quantum-vulnerable transactions could still be allowed after a five-year mark, but with outputs locked for a period.