Glassnode data shows 4.12 million Bitcoin (BTC) are held in quantum-exposed addresses due to address reuse, partial spending, and custody practices, more than double the 1.92 million BTC exposed by Bitcoin’s older script types.

The on-chain firm splits Bitcoin’s quantum-exposed supply into structural risk stemming from the protocol’s design and the exposure of public keys, and operational risk arising from how holders manage their addresses and outputs.

Why Structural and Operational Exposure Are Not the Same

Structural exposure covers outputs where the public key appears on-chain by default. The bucket includes early Pay-to-Public-Key (P2PK) coins from the Satoshi era, bare multisig, and modern Pay-to-Taproot (P2TR) outputs.

Operational exposure works differently. Address types like Pay-to-Public-Key-Hash (P2PKH) and Pay-to-Witness-Public-Key-Hash (P2WPKH) hide public keys behind hashes at rest. However, once a holder reuses an address or partially spends from it, that protection no longer applies to any remaining balance.

Glassnode puts the two buckets at 30.2% of all issued Bitcoin combined. Together, they show that the operational share is 2.1 times larger than the structural share.

“The main insight is that most current at-rest exposure is not simply a legacy script-design problem – it is a key- and address-management problem,” the firm said.

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Where Wallet Behavior Shows Up On-Chain

The report revealed that exchanges form the largest identifiable subset of operationally exposed BTC. They hold about 1.66 million BTC, roughly 40% of the pool.

“It also appears high in relative terms: roughly half of labeled exchange-held BTC falls into the susceptible bucket, compared with less than 30% of non-exchange supply,” Glassnode said.

Exposure varies sharply between custodians. Glassnode marks Coinbase balances at 5% exposed. Meanwhile, Binance sits near 85% and Bitfinex at 100%.

Other Bitcoin holding entities also diverge. WisdomTree appears fully exposed. Grayscale holds about half its supply in exposed outputs. However, sovereign wallets in the US, UK, and El Salvador show zero exposure.

Glassnode notes exchange-held BTC has drifted from roughly 55% operationally safe in 2018 to about 45% today.

Bitcoin Improvement Proposal 360 (BIP-360) would harden Taproot. However, much of the operational bucket can shrink today through address rotation and avoided reuse, without any consensus change.

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Read the Original story Glassnode Finds 20% of Bitcoin Quantum-Exposed by Behavior, Not Code by Kamina Bashir at beincrypto.com