Roughly 1-2% of Bitcoin's hash power has been signaling support for BIP110 in recent weeks. That number is the whole story here, and it’s the reason the next few weeks could get messy for anyone running Bitcoin Knots.
Let me put my cards on the table before the analysis: I think BIP110 is both useless and harmful, and I expect it to fail. Scenario 1 below is where I’d put my money. I’ve still tried to write this as factually as I can, walking through each outcome on its own terms, because a clear map of what could happen seems more useful right now than another round of arguing.
What Knots actually shipped
The OP_RETURN fight escalated far enough that Bitcoin Knots implemented BIP110, a consensus protocol change that temporarily limits the size of OP_RETURNs and intends to reduce other types of data on Bitcoin’s blockchain as well.
It does not have consensus. Not everyone agrees there’s a problem that needs solving in the first place, or that BIP110 solves it in any meaningful manner, and it restricts Bitcoin in potentially harmful ways. The clearest signal: Bitcoin Core, still by far the most-used Bitcoin implementation, hasn’t adopted it.
None of that stops the clock. Starting from block 961,632, to be mined on or around August 8, BIP110 nodes like Bitcoin Knots will reject blocks that don’t signal support for the upgrade. Here’s how that plays out.
Scenario 1: (almost) no miners signal
If current miner signaling is any indication, this is what to expect.
If you run Bitcoin Core or any other non-BIP110 enforcing node or wallet, which covers the vast majority of the Bitcoin ecosystem, nothing changes. Blocks get mined as usual. Transactions process normally. If you’re not tracking this on social media, you might not notice anything happened at all, and in practical terms nothing did. BIP110 doesn’t touch you.
Knots users get a different experience. Their software rejects non-signaling blocks, so they’d see essentially no new blocks, maybe a handful per week. Incoming and outgoing transactions wouldn’t confirm, or would confirm incredibly slowly. The nodes stall. They become unusable.
At that point BIP110 proponents pick from three doors: wait and hope things improve (see scenario 3), give up and switch back to non-BIP110 software, or push another protocol change, such as hard forking to a different proof-of-work mining algorithm.
That last option would possibly allow GPU mining again, letting more people mine blocks and build a chain that enforces the BIP110 rules. It would also mean permanently splitting off from the rest of the Bitcoin ecosystem to create what amounts to a new cryptocurrency.
Scenario 2: (almost) all miners signal
Several prominent BIP110 proponents predict this one. The mandatory signaling window opens and miners suddenly signal en masse. Or at minimum a majority signals and rejects any non-signaling blocks, so every block that lands in the chain carries a BIP110 signal.
Under that outcome all nodes, Knots and Core alike, stay compatible. The signals indicate miners plan to start enforcing the BIP110 rules another two weeks later. BIP110-violating transactions should stop appearing in blocks by early September.
This is the success case. A small faction of developers, miners and users pushed the upgrade, and it takes effect across the whole network anyway.
But there’s a catch worth understanding. Blockchain signaling is a useful coordination mechanism for soft fork deployment, and it does not technically guarantee the new rules get enforced. Miners can signal support without running BIP110 software at all. They might do exactly that just to keep their blocks from being rejected by Knots nodes during the mandatory signaling window.
Bitcoin’s rules are ultimately enforced by economic nodes. Nothing currently indicates most of them will enforce BIP110 even if every block signals. So if miners later accept BIP110-violating transactions anyway, economic nodes accept those blocks and BIP110 nodes don’t. The chain splits after all, just later than expected.
Scenario 3: a sizable minority signals
This is the one that splits the chain immediately.
Right now roughly two percent of miners signal support, probably too little to matter, which lands you back in scenario 1. So imagine it jumps tenfold. You also have to imagine that minority rejects non-signaling blocks itself. Otherwise it’s indistinguishable from scenario 1 and BIP110 nodes stall anyway, because they require every block to carry a signal.
A minority that both signals and rejects starts building its own chain of signaling-only blocks. Confirmations there would run significantly slower than usual, maybe one or two per hour, but BIP110 nodes stay reasonably usable. After a few months mining difficulty adjusts and blocks come in closer to six times per hour again. A couple weeks after that, the BIP110 rules take effect.
Core and other non-enforcing nodes keep working fairly normally through all of this. Their blocks slow a little, maybe four or five per hour, then difficulty adjusts within a couple weeks and brings that back to six per hour on average. The BIP110 rules never take effect on that chain.
You’d end up with a BIP110 blockchain and an original-rules blockchain running side by side as two different cryptocurrencies, indefinitely.
The wipeout problem nobody wants to talk about
Scenario 3 has its own caveat. If the BIP110 chain later overtakes the original chain in length, because miners moved over to it, every node, Core and Knots alike, accepts the BIP110 chain as the only chain. The original chain gets discarded. Wiped out.
That one-sided wipeout risk is exactly why BIP110 proponents expect all miners to signal preemptively and prevent a split in the first place. Miners won’t want to mine a chain that can be discarded later, the argument goes, because that means losing every block reward they earned on it.
There’s a counter to that. Users and miners who want to protect the original chain can manually invalidate any block on the minority BIP110 chain while it’s still the minority chain. Their nodes then refuse to switch to it no matter how long it gets, which makes the split permanent too.
If it splits, what do you actually hold?
A permanent split means the creation of a new cryptocurrency, a forkcoin. Everyone holding BTC at the moment of the split automatically receives the equivalent amount of coins on the new chain, not unlike Bitcoin and Bitcoin Cash in 2017. Reality tends to be messier than that description suggests, and a BIP110-triggered split under any of these scenarios will likely bring complications.
Start with the naming fight. There’ll almost certainly be disagreement over which side is “Bitcoin” (“BTC”) and which is the forkcoin. Most people will probably treat the original-rules chain as Bitcoin and give the BIP110 chain some other name. Call it “BIP110 coin” for now.
Getting at those BIP110 coins requires BIP110-specific software, which means Bitcoin Knots or something like it. They won’t show up on Core nodes or most wallets.
And BIP110 doesn’t currently include replay protection. Transactions on one chain can be copied, or “replayed,” on the other. Send BTC and you could unknowingly send the equivalent BIP110 coin to an identical address on the BIP110 chain, or the reverse.
What the forkcoins would be worth is anyone’s guess, including whether they’d be worth anything. The lack of interest in buying BIP110 coins through fork future contracts suggests demand after a split may be thin.
If you want to make sure you receive BIP110 coins in the event there are any, self-custody your BTC so you hold your own private keys, and don’t send transactions until the dust settles and there’s more clarity on how to proceed. That’s the practical move regardless of which scenario lands.
