Welcome to the Tuesday takeover. Ben made it to Seoul and is preparing for some upcoming panels at Origin Summit. He’ll be back tomorrow to share his conference takeaways. For now, David Canellis from the Empire newsletter is back to get you caught up as Bitcoin faces one of its biggest — and most controversial — tests in recent history.

D.R.E.A.M. (Devs Rule Everything Around Me)

Sometime next month, the next major release of the Bitcoin Core client software, v30, will drop. Anyone who runs a node using the new version will have a higher default limit on the amount of data stored inside transactions.

I’ll spare you most of the heavy technical details, but essentially, the Core client has so far only ever allowed nodes to accept transactions with up to ~80 bytes of data written to its OP_RETURN opcode.

80 bytes is obviously not a lot of data in modern contexts. Still, people have been smuggling all sorts of non-transactional data onto the Bitcoin blockchain for pretty much its entire existence — even if it meant splitting images, videos or other media up into tiny slices and ferrying them onto the ledger via multiple transactions. 

Third-party software could then be used to extract and stitch together the embedded data outside the Bitcoin Core client itself.

Developer Casey Rodarmor effectively removed a lot of that friction with the release of the Ordinals protocol in January 2023. Instead of writing up data inside a transaction’s OP_RETURN data, users could instead embed data within transactions using taproot scripts, which were incorporated in November 2021. 

UXTOs with inscriptions — Ordinals — are considered non-fungible tokens akin to the NFTs on account-based chains like Ethereum and Solana.

As there are much higher limits on the witness data of taproot scripts, Ordinals of up to 4MB (the Bitcoin block size limit) could suddenly be written to the chain, including audio, video, images, even entire video games. 

Although, Ordinals of that size require a miner to accept the transaction directly, as Bitcoin Core’s standard relay rejects single transactions of more than 100k vBytes. And it will still take a third-party browser or similar software to actually display the media as intended, as Core itself does not compile the data that’s written to the chain (you can’t view Ordinals JPEGs via the client, for instance).

The debate starts at precisely this point. Is that media “spam,” and if it is, should developers devise ways to stop it from making it to the chain?

Answering those questions, unfortunately, takes more nuance than can fit into this newsletter. What’s obvious is that non-transactional data has always found its way onto the Bitcoin blockchain — and that includes abhorrent content such as CSAM. The 80-byte limit on OP_RETURN data was a deterrent only because it added friction to the process: Anyone truly intent on consuming any extra media written to the chain, pre-Ordinals, could do so, it just took extra steps.

Of course, Rodarmor, with Ordinals, made it much easier to both write and consume media that’s written to the chain. And when Bitcoin Core developers release v30 of the client, it will be easier to write larger amounts of OP_RETURN data as well.

Conveniently for rabble rousers and dissenters, there’s no honest way to answer the question of what constitutes spam on Bitcoin. It’s a matter of taste, and users have always had multiple avenues for attaching messages and other data to transactions. Remember that even Satoshi themself wrote a secret message inside the genesis block. 

The Bible verse embedded in Bitcoin’s 666,666th block is another one. That block also includes two transactions sent to separate addresses, one starting with “1GoD” and the other “1BibLE.” 

Perhaps the only reason those transactions were made at all was to write those messages to the chain, which sounds eerily similar to onchain graffiti — or spam — to me.

What I’ve summarized here is a very surface-level explanation, and there are numerous caveats and technical sidebars left out. And that an alternative client in Bitcoin Knots has apparently grown in popularity as v30 nears release might even be beneficial for the decentralization of Bitcoin. Knots both features stricter default limits and adds certain other filters to reduce what its developers consider “spam.” More client diversity is hardly ever a bad thing, even if Knots developers themselves have driven much of the debate.

But what’s most interesting is that this is a debate that only developers can move forward. Bitcoin noderunners (and ultimately miners) do technically have power, in that they can signal whether they disagree with Core’s changes by refusing to run the new version of the client. (Bitcoin Core is backwards compatible, allowing users to decide what iteration of the software they run at all times.) 

It’s questionable, however, whether many miners would willingly opt to restrict the types of transactions submitted by users, as doing so would leave money (transaction fees) on the table. That said, some pools (particularly OCEAN) have still chosen to filter certain transactions.

Considering that bitcoin, with the 80-byte OP_RETURN limit, has grown into a multi-trillion dollar asset owned by governments and covered by some of the world’s largest financial institutions, one might expect that those who are heavily invested in the asset itself might actually hold some sway over what Bitcoin is.

Michael Saylor, whose firm, Strategy, owns more bitcoin than practically anyone else, is repeatedly asked about what he thinks about the whole thing. So far, he’s offered some answers that don’t make total sense on a technical level, leaning more toward ossification (the code should rarely be changed, if at all) over regular improvements. 

“If I wanted to destroy Bitcoin, I would just fund infinite developers who are very talented and [tell] them to make it better,” he said recently.

And what if Saylor were to threaten dumping all of Strategy’s bitcoin if Core developers were to push some future hypothetical change that he didn’t agree with? Would the developers jump? 

It’s doubtful, but it’s a scenario worth contemplating in light of the increased centralization of supply. You might then wonder what influence Tom Lee might have over Ethereum, for example, if BitMine continues to accumulate more of the ETH supply.

More than likely, you’ll soon find that developers indeed reign supreme. The active participants of each blockchain ecosystem, for the most part, can only ever be reactionary to the decisions those developers make. 

After all, it’s always “devs do something” and not “whales do something.”

— David Canellis 

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