BIP-110: The Proposal Dividing Bitcoin on Its Future

The Bitcoin Improvement Proposal (BIP)-110, which aimed to temporarily limit certain types of transactional data on the blockchain, has sparked one of the most heated governance debates in several years. According to the source, the text is now considered unlikely to be activated due to a lack of significant industry support. This debate, while technically complex, touches the very heart of Bitcoin's philosophy: who decides what can be done with the network?

BIP-110 aimed to restore Bitcoin's original vision

BIP-110 sought to tighten the network's consensus rules to make non-financial transactions more difficult. Its proponents argue that these uses exploit technical loopholes rather than intentional features. The central argument is that non-financial data, such as Ordinals inscriptions or Runes protocols, unnecessarily bloat the blockchain, increasing the bandwidth required to run a full node and favoring large mining companies at the expense of decentralization.

To understand the issue, it must be recalled that Bitcoin was designed as a peer-to-peer electronic payment system. The activation of the Taproot upgrade in 2021 allowed images, text, and other data to be embedded directly into Bitcoin transactions. These "inscriptions" gave rise to Ordinals, which enable the creation of non-fungible tokens (NFTs) on Bitcoin, and later to Runes, a protocol for issuing memecoins. For defenders of these uses, this is a legitimate use of block space: users pay fees for this space and use it as they see fit. The network should not judge the nature of the data, whether financial or not.

Proponents of BIP-110 counter that these applications are not in line with Bitcoin's original vision. According to them, Ordinals inscriptions exploit a vulnerability in the code by using data fields intended for other purposes. They argue that these uses disproportionately increase the blockchain's size, making it more costly and difficult to run a full node. Yet decentralization relies on anyone's ability to operate a node. If only large players can afford it, the network becomes more centralized and vulnerable to censorship.

Critics see it as an attempt at censorship

Opponents of BIP-110, including many prominent developers and investors, view the proposal as an arbitrary restriction on Bitcoin's uses. For them, the network should not decide what can or cannot be stored on it: users pay fees for block space and use it as they see fit. This debate reflects a broader fracture over Bitcoin's very identity: a simple peer-to-peer electronic payment system, or an open platform for all applications.

Critics argue that BIP-110 is a form of censorship because it discriminates between "good" and "bad" uses of Bitcoin. They recall that one of Bitcoin's fundamental principles is network neutrality: it should not favor one type of transaction over another. By limiting non-financial data, BIP-110 would introduce an arbitrary distinction that could be expanded to other types of transactions in the future. This precedent would be dangerous for user freedom.

Furthermore, opponents point out that the market has already spoken: transaction fees generated by Ordinals and Runes have reached significant levels, representing a non-negligible portion of miners' revenues. If these uses were banned, miners would lose a revenue source, which could reduce network security. The debate thus highlights an economic dilemma: should the purity of the original design be prioritized, or the economic viability of the network?

A foregone failure due to lack of miner support

BIP-110 failed to gain the support of miners or the rest of the ecosystem. Without this crucial support, the proposal cannot be activated. This observation illustrates how Bitcoin governance works: major decisions require broad consensus, not imposition by a faction. The debate, however, is far from over and will continue to fuel discussions on the network's future.

For a Bitcoin Improvement Proposal (BIP) to be adopted, it must gather sufficient consensus among miners, developers, and users. In the case of BIP-110, the lack of miner support was particularly detrimental. Miners, who secure the network by validating transactions, have an interest in maximizing their revenues. However, the fees generated by Ordinals inscriptions and Runes represent a growing share of their income. By limiting these uses, BIP-110 would reduce their revenues, which explains their opposition.

The debate around BIP-110 also reveals the limits of Bitcoin governance. Unlike other blockchains like Ethereum, which have a more centralized decision-making process, Bitcoin relies on decentralized consensus. This makes changes difficult to adopt, especially when they are controversial. BIP-110 likely failed because it did not convince a majority of the community. However, the mere fact that this proposal was seriously discussed shows that the issue of block space usage has become central.

In conclusion, BIP-110 has highlighted a deep fracture within the Bitcoin community. On one side, purists who want to preserve Satoshi Nakamoto's original vision; on the other, pragmatists who accept the network's evolution based on usage. This debate is healthy for the ecosystem as it helps clarify Bitcoin's values and goals. Even if BIP-110 seems doomed to fail, the questions it raises will remain relevant as long as Bitcoin continues to evolve.