BIP-110 Critics Warn of Self-Custody Risks, Fund Exposure

Critics Warn Bitcoin Upgrade Could Render Funds Unspendable

A contentious debate surrounding Bitcoin’s proposed BIP-110 soft fork has escalated, with critics arguing that the upgrade could destabilize certain wallets and potentially render some users’ Bitcoin permanently inaccessible if implemented.

The concerns were raised by crypto investment advisor Farside Investors, who challenged assertions made by BIP-110 proponent Fred Krueger in a recent social media post. Krueger had claimed that BIP-110 would preserve Bitcoin’s core monetary properties, leaving its 21 million coin supply, proof-of-work consensus, Lightning Network functionality, multisig wallets, self-custody capabilities, and address formats unchanged.

“The primary effect is that large arbitrary data used by Ordinals, Runes, and similar protocols would no longer be valid,” Krueger stated.

Farside Investors, however, disputed this assessment. They contend that BIP-110 would effectively ban several Taproot scripting features, including the OP_IF opcode, which is utilized by Miniscript. According to Farside’s explanation, following the fork, wallets supporting Miniscript would still permit users to create and send funds to addresses constructed using these now-prohibited scripts. While such transactions would appear valid under BIP-110’s own rules, the Bitcoin sent to these addresses would become unspendable, as the necessary conditions for spending would no longer be recognized under the new consensus rules.

Ironically, the latest version of Bitcoin Knots, a node implementation that supports BIP-110, could itself generate these incompatible addresses, Farside pointed out.

Furthermore, Farside highlighted that BIP-110 would also prohibit the creation of new pay-to-public-key (P2PK) outputs. This script type was widely used in Bitcoin’s early days and currently holds over 1.7 million BTC. While spending existing P2PK outputs would remain permissible, Farside noted that under certain circumstances, the proposal could lead to temporary fund freezes or expose users to theft risks, despite incorporating safeguards like grandfathering older outputs and limiting enforcement to approximately one year.

The proposal is set to activate if 55% of miners signal their support during a difficulty adjustment period. Alternatively, if this threshold is not met, activation could occur through a mandatory signaling process commencing at block 961,632, which is anticipated in August 2026.

The dispute over BIP-110 is emblematic of a broader disagreement regarding network congestion on Bitcoin. Krueger and his supporters argue that inscriptions, BRC-20 tokens, and similar applications have created unnecessary bloat on the network, and BIP-110 offers a method to discourage such transactions without altering Bitcoin’s fundamental monetary policy.

Conversely, other voices, including the Block Runner podcast account, have rejected this rationale. They emphasize that the 126.7 million inscriptions on Bitcoin represent a mere 1.267 BTC in value, a negligible amount they likened to a coin lost at sea. According to this perspective, miners who profit from this activity, such as AntPool, ViaBTC, SpiderPool, F2Pool, and Luxor, are actually contributing to offsetting Bitcoin’s diminishing security budget. They also point out that BIP-110 itself has garnered only limited support from miners and nodes.

Despite the ongoing debate, network activity has remained robust, largely unaffected by price fluctuations. Recent data from CryptoQuant indicates that usage levels have been near record highs, even as Bitcoin’s price dipped below $60,000, suggesting that demand for blockspace, regardless of the controversy, is unlikely to wane in the near future.