August 7, 2026, may go down as one of the most tense dates in Bitcoin’s modern history. Around block 961,632, a crucial mandatory signaling phase is set to begin for the activation of BIP-110 (Bitcoin Improvement Proposal 110).
Specifically, what does this text propose ? To the layman, reading a Bitcoin Improvement Proposal (BIP) often feels like reading an aerospace engineering manual written in a dead language. Yet, the core of BIP-110 is conceptually very simple : it aims to drastically restrict the storage of arbitrary—that is, non-monetary—data within the network’s transactions. The proposal specifically focuses on two aspects : capping OP_RETURN outputs at 83 bytes, and strictly limiting global data insertions to 256 bytes per transaction.
To grasp the impact of this measure, one must understand the role of the OP_RETURN opcode in Bitcoin’s scripting language. Historically, Bitcoin uses a stack-based programming language, intentionally non-Turing complete for security reasons, called Script. Early in the network’s history, ingenious developers began inserting external data (such as document hashes to prove their existence) using complex cryptographic tricks. This created what are known as Unspendable Outputs, which artificially and permanently inflated the UTXO (Unspent Transaction Output) set. The UTXO set is the database that every full node must keep in random-access memory (RAM) to quickly verify whether a coin has already been spent. An explosion in the size of the UTXO set is a lethal threat to decentralization, as it significantly increases the hardware costs required to run a Bitcoin node.
Technical Insight : The Problem of State Pollution (UTXO Bloat)
The Bitcoin network operates on the UTXO model. Unlike the bank account model (used by Ethereum), Bitcoin does not track global balances, but rather individual “coins” created by previous transactions. If you receive 1 BTC and send 0.1, the transaction destroys the original 1 BTC UTXO and creates two new ones : one of 0.1 BTC for the recipient, and one of 0.9 BTC (minus fees) that returns to you. Every node on the network maintains the complete list of all existing UTXOs. If malicious or negligent actors create millions of tiny UTXOs that will never be spent (often called “dust”), the database swells indefinitely. To counter this “UTXO Bloat,” Bitcoin Core developers have sought, throughout the protocol’s history, to impose strict rules on the creation of economically unviable outputs.
To resolve this structural problem, Bitcoin Core version 0.9.0, released in March 2014, officially standardized the use of the OP_RETURN opcode. This command allows a transaction output to be explicitly marked as “provably unspendable.” Network nodes can thus store this data on the blockchain, but they do not need to keep it in RAM within the precious UTXO set. A size limit was then imposed : initially set at 40 bytes, it was increased to 80 bytes in subsequent software versions (notably in version 0.11), to offer slight flexibility to secondary protocols like Omni Layer (which saw the birth of the Tether stablecoin, USDT, in its early days) or Counterparty.
BIP-110, by firmly capping this size at 83 bytes and limiting the global space to 256 bytes for any arbitrary data within scripts, launches a frontal assault against a new generation of protocols that have massively emerged since 2023 : Ordinals and Runes. The barely hidden objective of the BIP’s authors is clear : to slow down, or completely eradicate, the use of Bitcoin’s block space to store images (the famous Ordinals Inscriptions, acting as native NFTs on Bitcoin), audio files, video games, or fungible tokens like BRC-20 and Runes. To sound money purists, this data is considered outright “spam,” digital pollution that monopolizes a scarce resource (block space) to the detriment of legitimate financial transactions, notably the opening or closing of Lightning Network channels.
To understand the genesis and perceived urgency of BIP-110, it is imperative to look back at the cultural and technical earthquake that struck Bitcoin in early 2023. For more than a decade, Bitcoin had remained true to its reputation : a robust, slow, conservative, and single-minded network. Unlike blockchains such as Ethereum, Solana, or Tezos, which embraced complex smart contracts, decentralized finance (DeFi), and non-fungible tokens (NFTs), Bitcoin focused on one mission : being the hardest, most incorruptible, and censorship-resistant money ever created by humanity. Innovation took place on secondary layers, far from the base layer (Layer 1).
But in January 2023, developer Casey Rodarmor launched “Ordinal Theory” and its software implementation. By ingeniously leveraging features introduced by the major SegWit (2017) and Taproot (2021) upgrades, Rodarmor found a way to assign a serial number to each satoshi (the smallest unit of Bitcoin, or 0.00000001 BTC) and attach arbitrary data to it. This method, called an “Inscription,” did not require massive use of the highly limited OP_RETURN. Instead, it used the space reserved for “Witness” data introduced by SegWit, which additionally benefited from a mathematical 75% cost reduction (”discount”) compared to standard transaction data.
The result was cataclysmic. Overnight, users began inscribing images, text, HTML code, and even clones of the video game Doom directly onto the Bitcoin blockchain, permanently and immutably. Blocks, historically half-full, suddenly found themselves saturated. The average block size flirted with the theoretical ceiling of 4 megabytes (MB). Then, in the spring of 2023, an anonymous developer under the pseudonym “Domo” created the BRC-20 standard, allowing the issuance of fungible tokens (often “memecoins”) via JSON text files inscribed on satoshis. The hysteria was total, causing an explosion in transaction fees to levels unseen since the 2017 bull run. Average fees sometimes exceeded 30 US dollars for a simple transfer.
In April 2024, coinciding with the fourth “Halving” (the halving of the mining reward), Rodarmor launched a new protocol called “Runes.” Unlike BRC-20s, which cluttered the blockchain with inefficient JSON inscriptions creating immense volumes of useless data, the Runes protocol was designed to be more respectful of Bitcoin’s architecture. It relies on Bitcoin’s native UTXO model and uses the OP_RETURN opcode more efficiently to encode token issuances and transfers. However, even with this “optimization,” the transaction volume generated by Runes continued to flood the network. During the halving block (block 840,000), astronomical transaction fees paid by Runes issuers generated a historic reward for the ViaBTC mining pool, collecting nearly 37 BTC in transaction fees for a single block—amounting to several million dollars.
“Bitcoin is not your personal hard drive. It is not a cloud server for storing your virtual monkey pictures or casino tokens. Every byte you insert forces thousands of nodes around the world to download and keep it in perpetuity. It is a tragedy of the commons disguised as innovation.”
— Policy statement from the “Blockspace Purists” movement, 2024
To conclude, This is precisely the dynamic that BIP-110 seeks to annihilate. Purists, often affiliated with early adopters and the most conservative Core developers, consider these protocols to be exploiting a semantic loophole. In their view, the block space subsidized by the SegWit discount was intended to ease the burden of complex cryptographic signatures (such as multi-signature and Lightning contracts), not to offer cheap hosting for non-financial data. By drastically restricting OP_RETURN and global data insertion to 256 bytes, BIP-110 would make it technically impossible, or economically prohibitive, to use protocols like Runes or Inscriptions.
