Bitcoin's BIP-110 Faces Test as Nodes Prepare to Reject Miner Blocks

Bitcoin is approaching a critical juncture as a small group of nodes prepares to enforce BIP-110, a controversial proposal to restrict the amount of non-payment data stored on the blockchain. Despite near-zero support from miners, proponents are pushing forward with a user-activated soft fork (UASF) strategy, aiming to activate the new rules around block 965,664, following a mandatory signalling period expected on August 9.

BIP-110 is designed to make inscription techniques used by Ordinals and Runes impractical, with supporters arguing that their use for non-financial data consumes block space, increases costs, and undermines Bitcoin's primary function as digital money. Critics, however, point to the lack of miner consensus as evidence that the proposal is effectively dead.

Proponents of BIP-110 counter that miners do not govern Bitcoin; they merely produce blocks, while nodes decide on rule compliance. This philosophy echoes the SegWit activation in 2017, which occurred despite initial miner resistance. If BIP-110 activates, nodes running the specific software will begin rejecting blocks that fail to signal compliance, potentially leading to a network split. In such a scenario, the BIP-110 branch could emerge with a significantly smaller hash rate.

Several exchanges are planning to temporarily pause deposits and withdrawals around the activation window to mitigate potential disruptions. This reflects the understanding that Bitcoin's consensus relies on coordination among miners, exchanges, and wallet providers, not just hash rate or node counts alone. Prominent figures such as Michael Saylor and Adam Back have publicly opposed BIP-110, arguing that Bitcoin's strength lies in its high threshold for consensus changes and that the fee market should dictate block space usage. Supporters, however, view BIP-110 as a restoration of Bitcoin's intended behavior, asserting users' right to reject changes they deem detrimental.