Bunker mode?

Yesterday, Justin Drake urged the industry to prepare for a scenario where accelerated AI development breaks elliptic curve cryptography before quantum computers do, stating this left-tail outcome could arrive in months rather than years. His post calls on the blockchain industry to "calmly begin planning for bunker mode," involving a controlled mass migration of assets to addresses that have never signed a transaction and whose public keys remain hidden behind a hash. 

An address that has only received funds exposes a hash of its public key, while one that has signed a transaction exposes the public key onchain. Per Drake, if ECDSA falls, only exposed keys are at risk. Drake's guidance is for large, sophisticated holders to move the bulk of their funds to never-signed addresses, then sweep any remaining balance to a fresh address after each signature. This band-aid solution needs no new cryptography or wallets, and Drake warns that a rushed migration would do more harm than good. The long-term fix is hash-based cryptography, which Ethereum's roadmap already favors for quantum resistance and which Drake wants accelerated.

The catalyst for Drake's post was OpenAI's Oct. 6 publication of 722 mathematical results from an internal frontier model in a GitHub repository, along with formalizations of many of the proofs so they can be checked by computer. The average result required compute roughly equivalent to three hours of ChatGPT Pro thinking. If open math problems now fall to a few hours of inference, Drake's concern is that a long-standing hardness assumption could fail in months rather than years. Still, the release is about open problems across mathematics, not cryptography. The model also remains internal, though OpenAI says it is working to release it responsibly, which is the timeline that bunker mode is really betting on. OpenAI’s model attempted 4,000 problems and failed to solve most of them.

Responses to Drake’s post were mixed, with strong arguments both for and against it. Dragonfly's Haseeb Qureshi called it a sober call, stating that “the risk is not quantum, but just conventional mathematics overturning unproven cryptographic hardness assumptions.” Vitalik Buterin, while cautious, argued that “we should take the risks to cryptography from AI-accelerated math seriously, and minimize our exposure to not just quantum-vulnerable cryptography, but also potentially AI-vulnerable cryptography.”

Coinbase's head of cryptography, Yehuda Lindell, called Drake’s post “a really bad take” and said there is no evidence of a break in decades-old hardness assumptions like elliptic curve cryptography. Ledger CTO Charles Guillemet said avoiding address reuse is reasonable for large holders but warned that a mass migration could create operational mistakes that lose funds with higher probability than the risk being mitigated. Vitalik also noted that he has lost more money in botched migrations than in all hacks combined.

BTC traded lower on the day, breaking the recent range low alongside a red day in equities and a continued selloff in bonds. For an investor, the implications of Drake’s post, and the left-tail risk that AI development at the frontiers of mathematics and cryptography presents to crypto assets may be out of our domain of expertise, but certainly not out of scope for consideration. The determination of whether Drake’s post is well-founded or FUD requires edge in a domain most asset allocators do not have. This risk makes the case for diversification. Crypto can hedge certain left-tail exposures of government seizures or overnight currency devaluation, but carries the risk of this security break. On the other hand, stocks, bonds, real estate, and physical gold remain unbothered by a break in these cryptography assumptions. Regardless of an investor’s portfolio weighting, the “bunker mode” guidance would render general crypto applications largely unusable to the mainstream public in current form.

— Luke

BTC traded lower yesterday, but the term structure on Pendle’s Boros remains in contango. The positive slope reveals the market pricing rising funding rates into year end, a historically bullish indicator that precedes both rising prices and interest rates.

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