What is BIP-110? Why does it divide the Bitcoin community?

Proposal to change Bitcoin consensus rules sparks controversy

A proposal to change Bitcoin consensus rules has sparked disagreements among developers, miners, businesses and users about how the network should evolve and who should decide.

At the heart of the controversy is Bitcoin Improvement Proposal 110 (BIP-110). If implemented, BIP-110 will temporarily restrict several methods of embedding arbitrary data in Bitcoin transactions.

Proponents believe that the proposal will reduce blockchain spam and strengthen Bitcoin's role as a currency, while critics point out that it could refuse effective transactions and lead to network fragmentation.

The debate sparked responses from Bitcoin developer Luke Dashjr, Blockstream CEO Adam Back, Strategy Executive Chairman Michael Saylor, Casa Chief Security Officer Jameson Lopp, and Bitcoin advocate Samson Mow.

"There are 110 things more dangerous to Bitcoin than spam. BIP-110 turned a spam controversy into a change of consensus that would invalidate some currently valid and fee-paying transactions,"Saylor wrote on X. "This precedent is the danger. We should save our energy for the truly important threats."

Bitcoin transactions are not limited to payments. Through transaction scripts and witness data, text, images, token metadata and other information can also be carried.

As a soft fork, BIP-110 will tighten Bitcoin's consensus rules by restricting several techniques used to embed data. The proposal limits most new transaction output to 34 bytes, restores the 83-byte limit of OP_RETURN output, limits certain witness elements to 256 bytes, and temporarily limits several Taproot features commonly used in inscriptions. (Inscriptions are to Bitcoin what NFT and similar assets are to blockchain networks such as Ethereum and Solana.)

Critics believe that BIP-110 will invalidate some transactions currently valid under Bitcoin Consensus rules and set a precedent for future protocol changes. In a blog post in February, Jameson Lopp said that BIP-110 would weaken two key characteristics of Bitcoin: censorship resistance and predictability.

"Bitcoin's advantages lie in its censorship resistance and predictability," Lopp wrote. "BIP-110 shows that the protocol can be modified to review subjectively 'undesirable' transactions, thereby eroding its image as a permission-free programmable currency."

The mandatory signaling period for BIP-110 begins in August. According to the monitoring panel of the proposal, only 1% of miners have expressed support so far.

Adam Back, CEO of Blockstream, believes that Bitcoin's decentralized design prevents users from imposing their preferences on others, and its technical consensus process deliberately resists change. He wrote that supporters are free to create their own forks, but "Bitcoin will not join them."

"There is now an unacceptable fact, which unfortunately is true," Back wrote on X. "If you don't want to listen to reason, self-education, and learn, then the same radical freedom applies to you: your permission-free exit is to join forces and create a fork."

The current controversy dates back to early 2023, when Bitcoin developer Casey Rodarmor created the Ordinals protocol, which allows images, text, videos and other digital content to be engraved directly onto a single Satoshi (the smallest unit of Bitcoin). Ordinals leverages the features introduced by Bitcoin SegWit and Taproot upgrades to create NFT-like assets directly on the Bitcoin blockchain.

With the popularity of Ordinals and BRC-20 tokens, demand for Bitcoin block space has increased, driving up transaction fees. Proponents say the fees generate additional revenue for miners and enhance Bitcoin's long-term security.

However, critics, including Dashjr, believe that the inscription abuses the Bitcoin network, describing it as spam rather than a legitimate financial transaction.

In an article titled "Bitcoin Alliance" posted on X on Tuesday, Samson Mow argued that Bitcoin participants should see themselves as an alliance rather than a community, with developers, miners, businesses, educators and users contributing to the network in different ways.

"During block-sized wars, there was never a mentality on our side of 'If you don't support us, you are against us'," he wrote. "The community block camp has never forced anyone to join. We just 'understand' and are confident in our position."

For reference, the core controversy in the Block Size Wars (2015-2017) is whether Bitcoin should increase its 1MB block size limit to allow more transactions to be processed in a single block on the network. In the end, the "small block" camp won, and "large block" supporters branched out and created Bitcoin Cash in 2017 and Bitcoin SV in 2018.

Mow wrote that he agreed with concerns about blockchain spam, but opposed BIP-110 because he believed protocol changes required broad consensus. Mow also criticized the way Bitcoin core developers handled recent OP_RETURN policy changes, arguing that both sides had exacerbated the escalation of the dispute.

"The way they handle OP_RETURN changes is full of stupid mistakes, from blocking users on GitHub to ninja ACKs," he wrote. "Any normal person can expect how ordinary users will react. People store their time and value in Bitcoin. Anything that appears to threaten this will trigger strong opposition."