Hook
Less than 1% of Bitcoin’s mining hashrate has signaled support for BIP-110. Yet a coded activation window opens in early August, ready to enforce a rule that would slash non-transaction data from 400KB to a mere 256 bytes per output. This is not a democratic failure—it’s a governance paradox where a minority of core developers can weaponize software to override the economic majority. The data is clear: the chain will soon face a hard fork, and the market hasn’t priced it in.
Context
Bitcoin’s identity war has been reignited by Ordinals and BRC-20 tokens, which turned the network into a decentralized data layer for images, text, and financial assets. Proponents celebrate the new fee revenue—Runes alone boosted miner fees by 32% in October 2024. Opponents, led by Luke Dashjr and Dathon Ohm, see this as spam that bloates the UTXO set and violates Satoshi’s vision of a pure peer-to-peer cash system. Their weapon is BIP-110, which limits OP_RETURN-like data to 256 bytes, effectively banning all existing inscription methods. The proposal has been integrated into Bitcoin Knots and will force-activate on nodes running that software in August, regardless of hashpower consensus.
Core
Let the on-chain data speak. As of July, only 0.3% of mined blocks carry the BIP-110 signaling flag. Miners—who directly benefit from the fee surge—have overwhelmingly rejected the proposal. Yet the activation timer, embedded in the code, will soon reject any block that contains oversized data payloads. This creates a clear fork scenario: those running BIP-110 nodes will orphan blocks from miners who continue producing non-compliant blocks. The result is a chain split into a “Core Chain” (no BIP-110, continuing Ordinals) and a “Covenants Chain” (enforcing the 256-byte limit).
Based on my audit of similar forced-activation events in DeFi protocols, the probability of a split is far higher than the market assumes. The support level is binary: either you signal or you don’t. With less than 1% signaling, the activation will trigger a mass rejection by miners. The real risk is not whether the rule takes effect—it’s whether the hashpower majority will abandon the BIP-110 chain, leaving it a ghost fork. If 90% of miners ignore the rule, the Covenants Chain becomes an empty ledger, and the crisis dissolves. But if even 20% of miners switch to enforce it, we have two competing networks with real value on each side. The data shows that Ordinals and Runes have created a sticky fee market—removing that revenue source would cut miner income by an estimated 15-30%, a hit that large-scale operations cannot absorb.
Decoding the algorithmic chaos of DeFi yield traps—here the trap is the illusion that Bitcoin’s social contract will prevent a split. The code does not negotiate.
Contrarian
The conventional narrative is that BIP-110 will either fail or kill Ordinals. Both are false. The bypass solution already proposed by Casey Rodarmor’s team splits files into 256-byte chunks, each compliant with the new limit. This turns every large inscription into a multi-transaction stream, increasing the number of transactions and thus the fee burden. BIP-110’s intended anti-spam effect backfires: it transforms sparse, high-data transactions into dense, low-data ones. The UTXO set will bloat further, not shrink. Moreover, the activation window is self-destructing—the rule automatically expires after one year. This is not a permanent ban; it’s a year-long disruption that forces the Ordinals community to build efficient data sharding and L2 solutions. In the long run, this pressure may create a more scalable, censorship-resistant data layer on Bitcoin, accelerating exactly what the purists oppose. The market’s fear of a dead Ordinals ecosystem is misplaced; the real story is the birth of a new, more resilient standard.
Reconstructing the timeline of a rug pull exit—but here the rug is not pulled by a scammer, but by the protocol’s own guardians, ironically proving that the most dangerous attacks can come from within.
Takeaway
Watch the hashpower distribution on August 1. If the share of blocks carrying BIP-110 jumps above 10% in the first week, we enter a two-chain reality. If it stays below 1%, the Covenants Chain becomes a minority fork with no economic viability, and Bitcoin’s social contract is reaffirmed. Either way, the event will force every stakeholder—miners, developers, holders, and L2 builders—to answer a question they’ve avoided: Is Bitcoin a settlement layer for value transfer, or a permissionless data base for the world? The data will not vote, but the hashpower will.