‎The Data Bloat Dilemma: Is BIP-110 the End of Bitcoin as Digital Gold?

[Omj1014]

‎As the first block supporting BIP-110 was mined just this week, the Bitcoin community finds itself at a historic crossroads. Following the massive OP RETURN limit increase to 100,000 bytes in Bitcoin Core 30.2, we are seeing a fundamental shift in how the protocol is used.
‎While some argue that allowing larger on-chain data from advanced smart contracts to high resolution inscriptions is the natural evolution of a fee-generating network, others fear we are sacrificing Bitcoin’s core identity as Digital Gold for Digital Storage. With the Bitcoin Core 30.2 release now stable, we must ask:
‎Does the rapid growth of the UTXO set threaten long term decentralization?
‎Will institutional investors, who value scarcity and simplicity, be deterred by a bloated chain?
‎Is the trade-off of higher miner revenue worth the potential cost of making full nodes harder to run for the average person?
‎Let’s discuss whether we are witnessing a necessary upgrade or the beginning of an identity crisis for the network.

[d5000]

There is no BIP-110. It's simply an unilateral upgrade of the Knots client It's run by less than 5% of the miners (mainly Ocean and some other minuscule pools and solo miners). So it will never activate. At least if the Knots nodes don't foolishly fork away and create a second BCash.

And yes, if for some reason this aberration was activated, it would be the end of the digital gold era. Because it would mean that some decision of some random crazy "developer" without any support in the community could lead to the de facto confiscation of coins.

Bitcoin would not be anymore the people's decentralized money. It would be a bank managed by the Knots team (=1 person), who would decide who to censor and who not.

Edit: Seems I was wrong, someone has integrated it into the BIP tree on February 6. Not that this changes anything. It's not a serious proposal.

Edit 2: To those who think there is a "fundamental shift": You can follow OP_RETURN usage in real time here. (in short: nothing has changed with Core 30.).

[hd49728]

‎Does the rapid growth of the UTXO set threaten long term decentralization?

UTXOs don't have anything to do with Bitcoin decentralization which is from programming, BIP contributions and consensus, Bitcoin hashrate distributions as well as Bitcoin node distributions.

UTXOs might increase or decrease with time when people are more or less active to use the Bitcoin blockchain or when they consolidate their Bitcoin inputs or small inputs or just don't do any consolidations.

How are UTXOs used in Bitcoin?
Validating transactions
Calculating address balances

Do you see any of two above points related to Bitcoin decentralization?

[crwth]

Digital Storage? From what I understand, UTXOs are in RAM, right? This would affect the node memory requirements and possibly syncing times and speed. This isn't connected with the blocksize thing.

I don't think it will be the end because, at the end of the day, BTC would be evaluated on its value, and that would come from investors. If people thought that the OP_RETURN size changed, the investors would say:

No more! I wouldn't invest in BTC anymore!

I think everyone knows the answer: it's not the reason it would end BTC as the digital gold.
^{(Liquidity is more important for investors.)}

[d5000]

UTXOs don't have anything to do with Bitcoin decentralization which is from programming, BIP contributions and consensus, Bitcoin hashrate distributions as well as Bitcoin node distributions.

That's not 100% correct. A bigger UTXO set does increase the cost of validation for nodes, and thus full nodes would be cheaper to run. (@crwth: indeed the set is partly stored in RAM, so it increases RAM requirements; but it's also stored on disk, it however must be fastly accessible so a SSD is a must for that).

However, the OP_RETURN increase just wanted to target that problem. OP_RETURN outputs do NOT create new UTXOs because they can be safely ignored by the nodes, i.e. they're not added to the UTXO set.

There are techniques to store data in the blockchain, like Bitcoin Stamps' "fake public key" approach, but also the Ordinals technique, which create UTXOs that will never get spent. This approach was cheaper as using OP_RETURN until Core 30's increase, because you could fit more data in a single transaction than OP_RETURN's 80 bytes.

The idea behind Core 30's OP_RETURN increase is to eliminate the cost difference, and so make it attractive for NFT fanbois (who can't be stopped, see below) to switch from "fake public keys" to OP_RETURN which is the least harmful method to store data (and OP_RETURN data can perhaps be permanently deleted in the future by most nodes).

Core 30's OP_RETURN increase doesn't create any new incentives for storing data, so it neither is a valid reason for an UTXO set increase, nor does it create a new "cheap" method to store data. Other methods are still cheaper.

Now BIP 110 aims to ban some of the harmful UTXO set increasing storage techniques in addition to ban big OP_RETURN data outputs. The problem is that the filters can be circunvented, as it was recently shown by Martin Habovštiak. And there's also this method which cannot be banned by any upgrade because it uses vulnerable "fake" private keys (!).

So the BIP 110 filtering approach only creates new problems (de facto confiscated coins) and doesn't solve any old problems.

[ABCbits]

‎Following the massive OP RETURN limit increase to 100,000 bytes in Bitcoin Core 30.2

That change exist since version 30.0.

‎Does the rapid growth of the UTXO set threaten long term decentralization?

FYI, massive UTXO growth already happened far before Bitcoin Core 30.0. See https://statoshi.info/d/000000009/unspent-transaction-output-set?orgId=1&from=now-5y&to=now&timezone=browser&refresh=10m.

UTXOs don't have anything to do with Bitcoin decentralization which is from programming, BIP contributions and consensus, Bitcoin hashrate distributions as well as Bitcoin node distributions.

That's not 100% correct. A bigger UTXO set does increase the cost of validation for nodes, and thus full nodes would be cheaper to run. (@crwth: indeed the set is partly stored in RAM, so it increases RAM requirements; but it's also stored on disk, it however must be fastly accessible so a SSD is a must for that).

And that's why low RAM allocation (to store UTXO) with relative slow storage (that store UTXO) makes initial sync much slower.

[DaveF]

There is no BIP-110. It's simply an unilateral upgrade of the Knots client It's run by less than 5% of the miners (mainly Ocean and some other minuscule pools and solo miners). So it will never activate. At least if the Knots nodes don't foolishly fork away and create a second BCash...

I so hope they do fork off.
It's been proven that BIP-110 is easy to bypass.
Let them go off and play in their own world and let the rest of us have a BTC that does not confiscate coins and does not censor transactions.

I mean, I know they will be back with some other crazy scam like BSV coming from BCH but whatever.

That or perhaps we could have the 2026 fork wars again with scammers taking the money of all the stupid people who invested in their coins. Would feel bad for a bunch of them, but it was still fun to watch people proclaim that they are following the one true BTC.

And crap that was the end of 2017 that that happened. 8 1/2 years. Feels like it was so long ago.

-Dave

[bitcoindusts]

‎As the first block supporting BIP-110 was mined just this week, the Bitcoin community finds itself at a historic crossroads.

As I understand what really happen is is that a block mined broadcasting or giving signal that they support the activation of BIP-110, not that the BIP-110 software support had been activated.  I find this crazy because this kind of debate had happened 8 years ago and yet to get approved.

I think someone is steering trouble and wanted to create another fork where they can get huge payout from the fork coins just like what happened with other BTC forks.

‎Does the rapid growth of the UTXO set threaten long term decentralization?

Obviously it does, since it the rapid growth of UTXO means there is a need of higher hardware, fewer people can afford to run it, thus affecting the decentralization of Bitcoin.

‎Will institutional investors, who value scarcity and simplicity, be deterred by a bloated chain?

No, investors will always prioritize liquidity. As long as the liquidity of Bitcoin is high, investors do not care about other things.

‎Is the trade-off of higher miner revenue worth the potential cost of making full nodes harder to run for the average person?

I do not think it is worth the trade off because the decentralized nature is one of the signature feature of Bitcoin, if it is being removed or minimized, then every one else is affected.  Remember Bitcoin is not made of miners alone.

This is also the reason why the previous BIP110 proposal were rejected.