Chapter 6: The BIP-110 Debate

Bitcoin’s “Spam War” — Both Sides

BIP-110 (also called BIP-444 / Reduced Data Temporary Softfork) is the most contentious proposal in Bitcoin since the block size wars. It proposes to limit arbitrary data in transactions, directly targeting Ordinals/Inscriptions. Understanding both sides requires everything from the previous chapters.

What Satoshi Said

Both sides of this debate claim Satoshi’s vision. Here are his actual words:

Pro-restriction camp cites:

“Messages should not be recorded in the block chain.” — BitcoinTalk (October 23, 2010)

Anti-restriction camp cites:

“The incentive can transition entirely to transaction fees and be completely inflation free.” — White paper, Section 6

And on Bitcoin’s resilience:

“The network is robust in its unstructured simplicity… Any needed rules and incentives can be enforced with this consensus mechanism.” — White paper, Section 12: Conclusion

The tension is real: Satoshi opposed non-financial data, but also designed a permissionless fee market as Bitcoin’s long-term security model.

What BIP-110 Does

Author: Dathon Ohm, backed by Luke Dashjr (Bitcoin Knots maintainer) Proposed: December 2025 Status: Draft, enforced by Bitcoin Knots nodes

Specific restrictions:

Key detail: Temporary

BIP-110 is designed as a 1-year soft fork. After expiration, the restrictions lift unless renewed. This is unusual — most soft forks are permanent.

Activation mechanism

Requires 55% hashrate signaling over a defined period. As of early 2026, support is around 3% of nodes (mostly Knots) and one mining pool (Ocean).

The “Anti-Spam” Case (Pro BIP-110)

1. Block space is for financial transactions

“Bitcoin was designed for peer-to-peer electronic cash. Using block space for JPEGs and meme tokens is a misuse of a scarce resource.”

The argument: Bitcoin’s value proposition is censorship-resistant money. Every byte used for inscriptions is a byte not available for payments. When blocks are full, inscriptions compete with financial transactions, driving up fees for everyone.

2. The witness discount was not meant for data storage

SegWit’s 4:1 discount was designed to make signatures cheap, not to subsidize on-chain data storage. Inscriptions exploit an unintended consequence.

Design intent:     Actual use:
Cheaper sigs  →    Cheap data storage
More TXs/block →   Fewer TXs/block (data fills witness)

3. UTXO set bloat

While inscriptions themselves don’t bloat the UTXO set (they’re in witness data), the ecosystem around them creates dust UTXOs. BRC-20 in particular creates many small UTXOs that every node must track.

4. Precedent for “anything goes”

If arbitrary data is acceptable, what’s next? Full movies? Malware? CSAM? The argument is that some content policy is necessary, and limiting data size is a neutral way to do it.

5. Luke Dashjr’s position

Luke (Bitcoin Knots lead) has consistently argued that non-financial data in transactions is spam. He views BIP-110 as restoring Bitcoin’s original purpose and fixing a policy mistake (the removal of OP_RETURN limits in Bitcoin Core v30).

The “Free Market” Case (Anti BIP-110)

1. Paid-for block space is not spam

“If someone pays the market fee rate, they have as much right to block space as anyone else. Bitcoin is permissionless.”

The argument: Bitcoin’s fee market is the mechanism for allocating block space. Inscriptions pay fees — often very high fees. Calling paid transactions “spam” is a value judgment that contradicts Bitcoin’s permissionless nature.

2. Filters don’t work — they make things worse

Historical precedent from Bitcoin Core’s OP_RETURN limits:

Every restriction pushes data embedding into worse methods. If you ban witness data, inscriptions will move to multisig scripts, fake outputs, or other creative workarounds — all of which are MORE harmful to the network.

3. Miner revenue matters

Inscriptions generate significant fee revenue for miners. Post-halving, the block subsidy keeps decreasing. Bitcoin’s long-term security depends on fee revenue replacing the subsidy. Banning a major fee source is counterproductive.

Block subsidy schedule:
2024: 3.125 BTC/block → ~$312K/block at $100K
2028: 1.5625 BTC/block → needs fees to maintain security
2032: 0.78125 BTC/block → fees become dominant

4. Soft fork risk

Any contentious soft fork risks a chain split. If BIP-110 activates with 55% hashrate but significant economic nodes reject it, you get:

• Chain A: BIP-110 blocks (restrictive)
• Chain B: Non-BIP-110 blocks (permissive)
• Confusion, potential value loss on both chains

Adam Back (Blockstream CEO, HashCash inventor) has explicitly warned that BIP-110 risks damaging Bitcoin’s credibility.

5. The slippery slope

Who decides what’s “legitimate” use of block space? Today it’s inscriptions. Tomorrow it might be privacy transactions (CoinJoin), time-locked contracts, or specific smart contract patterns. Establishing the precedent that Bitcoin transactions can be censored by content opens a dangerous door.

6. Jameson Lopp’s analysis

Lopp (Casa CTO, long-time Bitcoin developer) called BIP-110 “misguided,” arguing:

• Technical restrictions are trivially circumvented
• The proposal conflates policy preferences with protocol rules
• Bitcoin’s value comes from being neutral infrastructure

The Nuanced Middle

Some thoughtful positions that don’t fit neatly into either camp:

“Fix the discount, not the data”

Instead of restricting data, adjust the witness discount. If witness data cost 2 WU/byte instead of 1, inscriptions would cost 2× more. This preserves permissionlessness while reducing the subsidy for non-signature witness data.

“Separate the concerns”

• Consensus level: Allow anything that pays fees
• Relay policy: Individual nodes can choose what to relay (already possible — miners can filter their own mempools)
• Application level: Build better fee estimation and block space markets

“Wait for the market”

Inscription activity naturally ebbs and flows with market cycles. During quiet periods, blocks have plenty of room. The “crisis” may be self-correcting.

Current State (Early 2026)

• Bitcoin Core v30 (Oct 2025) removed the 83-byte OP_RETURN limit
• Bitcoin Knots enforces BIP-110 restrictions
• Ocean pool (backed by Jack Dorsey) mines some BIP-110-compliant blocks
• ~3% of network nodes enforce BIP-110
• The 55% hashrate threshold has not been met
• The debate continues

The Deeper Question

The BIP-110 debate is really about Bitcoin’s identity:

Is Bitcoin neutral infrastructure (like TCP/IP — it doesn’t care what data you send) or is it purpose-built money (like the Federal Reserve wire system — only for financial transactions)?

Your answer to this question determines your position on BIP-110, and probably every future debate about Bitcoin’s scope.

Key Takeaways

1. BIP-110 proposes temporary (1-year) restrictions on data sizes in transactions and witness
2. Pro: Block space should be for payments, witness discount wasn’t meant for data, UTXO bloat concerns
3. Anti: Paid fees = legitimate use, restrictions don’t work (data finds other paths), miner revenue, chain split risk
4. The real question: Is Bitcoin neutral infrastructure or purpose-built money?
5. Currently ~3% of nodes, far from the 55% hashrate threshold needed
6. Miner economics make this debate existential — see Chapter 10 for why fee revenue must replace the block subsidy
7. RGB and Taproot Assets offer non-bloating alternatives for tokens — see Chapter 12 for how these could resolve the debate by making on-chain data unnecessary for asset issuance

Next: Chapter 7 — Node Setup — Run your own node and verify everything yourself.