As quantum computing edges closer to practical reality, a nuanced risk picture is taking shape for Bitcoin. Rather than a sudden, network-wide catastrophe, researchers and industry observers are highlighting a tiered vulnerability focused on dormant addresses with exposed public keys. Many of these are among the oldest coins from Bitcoin’s early era, and their combination of long-standing exposure, high value, and inertia in defense makes them salient targets for a first generation of quantum-enabled attackers, should such capabilities mature.

Key takeaways

• Dormant Bitcoin addresses with exposed public keys represent a concentrated risk, especially among early-era holdings that haven’t moved in years.
• Quantum threats affect public-key cryptography (ECDSA/Schnorr) more directly than hash functions, meaning on-chain exposure of a public key is a critical vulnerability.
• The risk separates into on-spend attacks (tight time windows tied to block confirmations) and at-rest attacks (longer horizons when keys are exposed but no immediate transaction is triggered).
• Large, long-dormant holdings — including many 50 BTC block rewards from the early mining era — create a high-value target pool that could attract quantum-driven attacks first.
• Beyond technology, the dormant-wallet challenge raises governance questions about asset salvage, protection, and how the protocol might accommodate or address historically inaccessible coins.

Where the risk converges on Bitcoin’s cryptography

Bitcoin relies on two cryptographic pillars: the hash function SHA-256 for mining and block security, and public-key cryptography (ECDSA/Schnorr) for transaction signatures. Quantum computers would affect these components in distinct ways. Hash functions are relatively resilient; even with Grover’s algorithm, they would be weakened but not rendered obsolete. Public-key cryptography, however, presents a sharper exposure path. With Shor’s algorithm, a sufficiently powerful quantum computer could derive a private key from a known public key. In practical terms for Bitcoin, that means any coins whose public key has been revealed could theoretically be spent by an attacker if a quantum-capable adversary can perform the computation in time to act on a vulnerability.

The on-spend vs at-rest distinction and why it matters

Understanding the timing of attacks is crucial to assessing risk. There are two broad categories of quantum attacks:

On-spend attacks

• Trigger a transaction to reveal the user’s public key.
• Attackers must derive the private key within a short window — roughly the span of a single block, or about 10 minutes — to successfully move funds.

At-rest attacks

• Target coins whose public keys are already exposed on-chain.
• Aim for a longer horizon: days, weeks, or longer — with time as the primary constraint, not a rapid transaction window.
• No immediate transaction trigger is required; attackers can plan and execute when they have sufficient quantum capability.

The contrast is telling. On-spend attacks face a tight clock, while at-rest attacks operate on a long-term timescale, hinging on technical breakthroughs rather than a race against a block window. If a large tranche of the supply has already disclosed its public keys, the window for opportunistic action expands dramatically.

Dormant wallets: three vulnerability factors

Dormant wallets—those that have not actively moved funds or upgraded security—combine three attributes that amplify risk:

• No defensive action: Active holders can migrate funds, refresh security models, or move assets into newer, quantum-resistant formats. Dormant holders lack such pathways, leaving coins exposed without recourse.
• Long exposure windows: Since public keys may already be on-chain, attackers can operate offline with less urgency, reducing the urgency imposed by short confirmation times.
• High-value concentration: Many early Bitcoin holdings have appreciated substantially in value. High-value, dormant coins create a prime target profile for any future quantum-era exploit.

Notes from industry observers emphasize that coins in inactive wallets cannot upgrade their security after the fact. Thus, the burden of adoption and migration would fall to active participants and future protocol changes, not the dormant accounts themselves.

Which wallets are most exposed

The risk is not uniform across the blockchain. Several categories stand out as more exposed than others:

Old P2PK outputs

• These early formats reveal public keys directly on-chain when spent, offering little additional protection against quantum-enabled adversaries.

Address reuse

• When an address is spent from and then reused, the public key becomes visible after the first spend. Any remaining funds in that address become more vulnerable as well.

Certain modern script formats, such as those associated with Taproot, also expose public-key material in ways that could fall into an at-rest exposure category under quantum assumptions. While Taproot was designed to improve efficiency and privacy, it does not entirely escape the theoretical risk if keys remain exposed long-term due to address reuse or legacy holdings.

The scale of the problem: dormant coins dominate the risk

Quantifying quantum risk goes beyond theoretical math; it hinges on measurable exposure. Reports indicate that billions of dollars’ worth of Bitcoin remains in addresses whose public keys are exposed, with a significant portion tracing back to early-era mining rewards. A notable share of these coins has not moved for more than a decade, creating a silent pool of assets that could become vulnerable as quantum capabilities advance. Among the most cited examples are the large blocks rewarded to miners in Bitcoin’s infancy — many of these blocks yielded 50 BTC rewards that subsequently remained idle for years. This concentration implies that the largest quantum-targets are often the largest Bitcoin holdings.

A deeper challenge: Dormant wallets and network governance

The emergence of a quantum threat for dormant wallets also raises governance and policy questions that extend beyond pure cryptography. If a future quantum attack were to surface, the Bitcoin community might face difficult choices about asset salvage, fund protection, or even temporary protocol adjustments to address long-dormant coins. Questions include whether such coins should remain spendable, whether there should be mechanisms to protect or freeze longitudinal holdings, and how public policy interacts with the immutable nature of the protocol when a subset of assets appears irrecoverable by design.

Why this doesn’t mean Bitcoin is broken

Crucially, observers stress that there is no current, widely accepted evidence that quantum computers capable of breaking Bitcoin’s cryptography exist today. The development path toward practical, scalable quantum systems is expected to span years, if not decades, of sustained engineering progress. The risk is not imminent, but incremental and evolving. In the near term, the impact is likely to be selective rather than universal as early-stage quantum capabilities emerge and defenses are refined. Active users can adapt more quickly than dormant wallets, which means mitigation may initially favor those who actively manage their keys and upgrade security models.

What can be done in the meantime

Holders and the broader ecosystem can take concrete steps to reduce exposure and accelerate readiness:

• Minimize public-key exposure: Avoid address reuse and curb unnecessary early revelation of public keys, maintaining better separation between on-chain activity and key exposure.
• Migration pathways: Develop and promote clear routes for moving funds into quantum-resistant formats as these technologies mature, ensuring a smooth transition for users who want to upgrade their security posture.
• Continued protocol research: Ongoing work explores integrating quantum-resistant cryptography with Bitcoin’s core properties, aiming to preserve security and decentralization without introducing new central points of failure.

Practically, these measures primarily benefit active participants today, highlighting the gap between movable funds and long-dormant assets. The broader lesson is that a staged approach to upgrading cryptography may be essential to maintain resilience as technology evolves.

In summary, the dormant-wallet vulnerability reframes the quantum risk narrative for Bitcoin. It underscores a layered challenge: the network isn’t threatened as a monolith, but certain pockets of the supply could be more fragile than others if and when quantum capabilities advance. The future resilience of Bitcoin will depend not only on breakthroughs in quantum hardware but on decisive action by the ecosystem to strengthen, migrate, and adapt the way keys are managed across the lifecycle of the blockchain.

Readers should watch for ongoing research into quantum-resistant cryptography, milestones in post-quantum upgrades, and policy discussions about how to handle historical holdings that may be irretrievably exposed to future computational breakthroughs. The next phase will likely hinge on practical migration pathways and protocol-level safeguards that can extend protection to both active and dormant users without compromising Bitcoin’s core principles.

Listed cryptocurrency firm Exodus Movement (EXOD) is suing W3C, the parent company of crypto card and payments specialists Baanx and Monovate, and its chief executive, Garth Howat, to complete its $175 million acquisition of W3C, agreed in November of last year.

A lawsuit in the Delaware Court of Chancery seeks to compel Howat to comply with obligations under the November 24, 2025 Stock Purchase Agreement.

Howat and W3C accepted $80 million worth of loans from Exodus upon signing the deal, with $10 million given to Howat personally, who then declared that they did not need to repay these loans, according to the lawsuit.

“Defendants Garth Howat and W3C are engaged in a blatant, reckless, and improper campaign to escape closing a transaction for the sale of W3C to Exodus that they had promised to complete in a binding agreement,” the lawsuit states.

“They have attempted to pilfer millions of dollars from one of their own subsidiaries. They have falsely backdated documents filed with government authorities. They have purported to summarily dismiss entire boards of directors, as well as the CEO and CFO of their key operating entity, and replace them with lackeys of their choosing, despite being precluded from doing so by the binding agreement,” it said.

Howat did not immediately respond to a request for comment.

W3C companies Baanx and Monovate were behind the Crypto Life digital asset cards business that worked with the likes of Mastercard and MetaMask.

JP Richardson, CEO and Co-founder of Exodus commented, “We have a binding agreement with W3C and expect it to be fully honored. We’re confident in the path forward and anticipate a swift resolution.”

TLDR

• The American Bankers Association disputed the White House analysis on stablecoin risks.
• Bankers said policymakers must study a market where stablecoin yield remains allowed.
• Lawmakers drafted a compromise to restrict yield-like rewards on stablecoins.
• The Senate Banking Committee has not scheduled a hearing on the bill.
• Senator Cynthia Lummis called for urgent action to advance the legislation.

U.S. banking leaders have challenged a White House report that downplayed risks from stablecoins. They argue that stablecoin yield could draw deposits away from traditional banks. The dispute has stalled the Digital Asset Market Clarity Act in the Senate.

Bankers Dispute White House Findings on Stablecoin Yield

The American Bankers Association rejected a recent Council of Economic Advisers report. The group said the report examined the wrong policy scenario. It argued that economists should have studied a market where stablecoin yield remains permitted.

ABA economists wrote, “The CEA paper minimizes the core risk by starting from the wrong question.” They said a ban on yield for payment stablecoins would protect insured deposits. They also said such a rule would support stablecoins as payment tools rather than deposit substitutes.

Bankers warned that allowing yield could speed deposit migration. They said returns from stablecoins may exceed bank interest rates. They argued that customers would move funds to chase higher rewards.

The ABA estimated that stablecoin markets could grow from $300 billion to $2 trillion. It said yield would act as the main driver of that expansion. It added that growth at that scale would reshape deposit flows.

Senate Negotiations Stall Over Crypto Bill

Lawmakers have struggled to advance the Digital Asset Market Clarity Act. The bill seeks to set rules for U.S. crypto markets. However, disagreements over stablecoin yield have delayed committee action.

Senators from both parties considered bankers’ concerns about deposit flight. They discussed how depositors fund lending activities. They then drafted a compromise to limit certain reward structures.

The compromise would ban yield on holdings that resemble deposit accounts. It would allow activity-based rewards similar to credit card programs. Still, banks have not publicly endorsed the proposal.

Senator Cynthia Lummis urged action on the social media platform X. She wrote, “America needs Clarity.” She also said the time to move the bill forward is “now or never.”

The Senate Banking Committee has not scheduled a hearing. Lawmaker advocates had expected a session before the month’s end. As of this week, no official date appears on the calendar.

Bank representatives have kept a lower public profile. However, they continue to circulate policy papers and letters. They argue that early safeguards would limit systemic shifts.

The White House economists had said banks face limited risk. They examined a scenario where Congress bans yield. Bankers countered that lawmakers must assess a no-ban environment.

The Aave DAO on Sunday approved the first binding component of the “Aave Will Win” framework, which founder Stani Kulechov calls “the most important proposal in Aave’s history,” directing 100% of revenue from all Aave-branded products to the DAO treasury and consolidating economic rights under the AAVE token.

The vote closed with roughly 75% support, a significantly stronger result than the initial Temp Check in early March, which narrowly cleared amid concerns that Aave Labs-linked addresses had tipped the balance.

The approved package includes a $25 million stablecoin grant from the DAO’s Collector Contract, split between an immediate $5 million allowance and streamed payments over six and 12 months, plus 75,000 AAVE tokens vesting linearly over 48 months from the Ecosystem Reserve, double the timeline outlined in the original temp check.

In exchange, Aave Labs commits to routing all revenue from Aave Pro, the Aave App, Horizon, Aave Kit, and swaps on aave.com to the DAO treasury, a stream that Kulechov said is already generating $10 to $20 million on top of protocol revenue, which hit $140 million in 2025.

“If you own AAVE, you own not just the economic rights of the protocol, but the brand, the users, and the integrations,” Kulechov wrote on X, laying out an ambitious multi-year roadmap spanning consumer products, fintech integrations, and regulatory licensing.

The proposal resolves a governance crisis that erupted in December when a delegate discovered that Aave Labs had been redirecting roughly $200,000 per week in interface fees, previously flowing to the DAO, to itself via a CowSwap integration. That controversy spiraled into a broader confrontation over tokenholder rights, brand ownership, and the power balance between Labs and the DAO.

The fallout was severe. BGD Labs, one of the core teams working on Aave V3, announced its departure in February. The Aave Chan Initiative followed in early March. And last week, risk management firm Chaos Labs became the third major contributor to exit.

The AAVE token has lost roughly 75% of its value since its August 2025 high near $356, though it rallied approximately 5% following the vote to trade near $95.

The vote comes just two weeks after Aave V4 launched on Ethereum mainnet, introducing a hub-and-spoke architecture that allows independent lending markets to share liquidity through a unified system. The framework formally ratifies V4 as the protocol’s long-term technical foundation.

Under the new framework, Kulechov outlined a zero-tolerance policy on “value leakage,” requiring that all service providers build exclusively for Aave with measurable performance goals.

Aave is DeFi’s largest lending protocol with roughly $25 billion in total value locked across multiple chains.

This article was written with the assistance of AI workflows. All our stories are curated, edited and fact-checked by a human.

Kraken’s Chief Security Officer Nick Percoco has revealed that the crypto exchange is being extorted by criminals who are threatening to leak videos of client data. 

Percoco shared the news on X today, detailing how it identified two instances of its staff accessing its client systems and leaking them online. 

He claims that in 2025, the exchange discovered one of its support staff had leaked client data after somebody tipped the firm off about footage circulating on criminal forums. 

Read more: Hyperbridge exploited less than two weeks after April Fools’ day hack prank

In this instance, Percoco says the firm was able to revoke the staff member’s access and enact additional security controls. 

Percoco says the firm has since learned of another more “recent” breach, and as before, it terminated the individual’s access to company systems. 

He claims that Kraken then received extortion demands.

“The criminals threatened to distribute materials from both the February 2025 incident and the recent incident to media outlets and on social media if we did not comply. We will not pay these criminals,” he said.

Clients included in the leaks were informed, and Percoco said it only affected “approximately 2,000 in total (0.02% of clients).”

Tom Duff Gordon, the vice president of international policy at U.S.-listed cryptocurrency platform Coinbase (COIN), has left the firm for pastures green.

Duff Gordon, who had been with Coinbase for close to 4 years, left the exchange to join OpenAI as head of EMEA Policy, a Coinbase spokesperson said via email.

Duff Gordon had previously spent 8.5 years working as a banker at Credit Suisse. He did not immediately respond to a request for comment.

An expert on crypto regulations, Duff Gordon recently pointed out that U.K. banks are blocking millions of customers from accessing legal and compliant services, by failing to distinguish between Financial Conduct Authority-registered firms with low fraud rates and higher-risk operators.

The White House’s main crypto adviser, Patrick Witt, said that work is still being done to lock in the compromise that he thinks will move the Digital Asset Market Clarity Act forward in the U.S. Senate, though he said several other points are also being worked out behind the scenes.

In an interview on CoinDesk TV Monday, the executive director of the President’s Council of Advisors for Digital Assets suggested Monday that the common ground that key senators from both parties said they’d secured on stablecoin yield seems to be intact.”We’re hopeful that the compromise that has been reached will be durable and will hold,” Witt said. “Solving that was a must-have before we could get onto the other outstanding issues,” which he said he’s now pivoted to, though some of the issues have already been resolved.

Apart from the question of yield on stablecoins, over which bankers had successfully convinced some in the Senate that their deposit base could be in peril, the Clarity Act had a number of other potential hangups. Among those have been the illicit financial protections in the decentralized finance (DeFi) space, and a request from Democrats that senior government officials (most pointedly, President Donald Trump) be barred from profiting off of the crypto sector.

Though Witt wouldn’t identify the topics that have been settled in the ongoing talks, he said that the negotiations “made considerable progress in the background” while the yield argument between banks and crypto firms got most of the attention.

“We’re very close to closing them out,” he said. “All of these issues felt intractable and unsolvable at one point in time. So the fact that we’ve been able to close out a lot of them gives me confidence that we can close out these other ones, too.”

The Clarity Act would need a markup hearing in the Senate Banking Committee before it can be advanced toward a final Senate vote. It had been close to such a hearing at the beginning of the year, but the bank lobbyists raised objections to stablecoin yield that delayed the process.

Last week, White House economists issued a report that downplayed the threats the banking sector contended are posed by giving stablecoin holders a return that resembles interest from a bank account. On Monday, the American Bankers Association answered back, saying the White House argument was flawed. Witt said the view of bankers is wide-ranging, depending on how close they are to the technology.

“They’re grappling with it,” he said. “These are all important issues to their members.

And, you know, some of them are going to view stablecoins more positively. Some are going to be a little bit more threatened by them.”

Read More: Trump’s crypto adviser rejects Jamie Dimon on treating yield-bearing stablecoins like banks