Bitcoin Update: The BIP-110 Battle Could Change Everything on the Blockchain by the End of August

The BIP-110 aims to limit certain data recorded in Bitcoin for 1 year, but at what cost?

Since the rise of Ordinals, inscriptions, and certain uses of OP_RETURN, the Bitcoin community has been debating the primary function of the network. For its strictest advocates, the network must remain focused on currency and payments. For others, as long as a transaction adheres to the rules and pays fees, it should be allowed to be included in a block.

We already explained this divide in our previous article on BIP-110, which emerged in the Bitcoin Knots ecosystem in response to the easing of OP_RETURN limits on the Bitcoin Core side.

Specifically, BIP-110 proposes a temporary soft fork, expected to last about 1 year after activation, aimed at limiting several methods used to record large amounts of data in Bitcoin, particularly through the famous OP_RETURN.

However, this limited duration is not just a technical detail; BIP-110 is also presented as a pause period, intended to give the Bitcoin community time to decide what to do with non-monetary data. In theory, the restrictions would automatically expire after about 52,416 blocks, or nearly 1 year.

This limited duration is also a political gamble; BIP-110 and its supporters do not claim to definitively solve the issue of non-monetary data but rather to create a window of about 1 year during which the Bitcoin ecosystem could find a more sustainable answer.

However, this debate has existed since the arrival of Ordinals in 2023, without a solution convincing a clear majority of nodes, miners, and economic actors.

How BIP-110 Could Create 2 Competing Versions of Bitcoin

Despite the skepticism regarding its chances of activation, the consequences of BIP-110 could be radical for some Bitcoin users.

Indeed, the proposal does not adopt the 95% threshold often associated with cautious soft forks but instead provides for activation at just 55% signaling. Thus, if this threshold is reached, nodes that have implemented BIP-110 will begin to apply its new rules. The network could then split as soon as a miner produces a block containing a transaction valid under current rules but rejected by BIP-110.

BIP-110 nodes would reject this block, while others would continue to accept it, creating 2 competing histories.

The reverse scenario is also problematic; if miners do not signal sufficiently, the BIP-110 activation client still plans a forced lock-in at the deadline. In other words, nodes that have installed it could end up applying these rules alone.

With signaling close to 1%, they would likely find themselves isolated, waiting for blocks compatible with their version of the network, or on an almost unused chain.

For ordinary users, the impact would likely be negligible if BIP-110 remains marginal. However, if its adoption reaches a significant share of the network, for example, 20% or more of the hashrate, the update will lead to a temporary decrease in hashrate on the main chain, orphaned blocks, confusion for wallets and exchanges, and then a battle over which chain still deserves the name Bitcoin.

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