BIP-110: How Bitcoin rejected a controversial update and why it matters
A significant event took place in the Bitcoin ecosystem a few days ago. I wrote an analysis for the Smarty Labs project blog, which you can view here
Here is a plain-language summary and an explanation of why this matters.
What happened. In early August 2026, there was an attempt to implement a rather controversial update to Bitcoin known as BIP-110. The proposal failed. The fact that it failed, and the specific way it happened, reveals a great deal about how Bitcoin is actually governed.
Why it was proposed. Bitcoin’s blockchain was originally created for payments (we all believe in it), but in recent years, it has been actively used for data storage - images, text, tokens and other crap embedded directly into transactions. One part of the community views this as an abuse of the system: growing database that every network participant is required to store, which finally drives up transaction fees for standard payments, especially during the peak periods. BIP-110 offered a compromise and a temporary fix: banning the recording of large volumes of arbitrary data for one year, limiting data to only what is essential for Bitcoin transactions, and to develop a permanent solution in parallel.
Why the conflict happened. Another part of the community, including prominent public figures (such as Michael Saylor and Adam Back), opposed the measure. Their arguments were also quite compelling: the network cannot and should not decide which paid transactions are "valid," and such a ban would set a precedent for censorship that could later be turned against anyone. Importantly, the authors proposed activating the new rules with the support of only 55% of miners (rather than the traditional level of 90–95%) that almost guaranteed a network split into two incompatible branches.
What happened: Support of only 2.5% of miners was secured. Proponents of the update switched their nodes to support mode, and on August 8, these nodes rejected the first block lacking the required signal, splitting off into their own network branch. This branch mined two blocks before stalling. The new blockchain inherited the computational difficulty of the main Bitcoin network but lacked even a fraction of the necessary computing power. Moreover, mining it made no economic sense: the new coin had neither a market price nor exchange listings. There was no economic incentive. The main network continued to operate unchanged, and the event had no impact on users or their funds. The following day, BIP-110 was officially closed.
Results:
- Bitcoin’s rules remained unchanged. The system's built-in resilience against contentious changes worked exactly as intended.
- A lesson in governance: it is impossible to change Bitcoin without the support of the network's economic stakeholders (miners, exchanges, and major holders), no matter how many enthusiasts install the "correct" software.
- The underlying debate -whether Bitcoin is merely a form of money or also a tool for data storage - remains in agenda, and further proposals regarding updates on this topic are to be expected.
Why I consider this event significant:
Bitcoin is no longer just a tool for cypherpunks. Serious Wall Street players, investment banks, and other professional financial market participants are now involved with Bitcoin. Financial derivatives are built upon it, and pension funds invest in it. Against this backdrop, the operation of Bitcoin itself remains driven by a community of enthusiasts and technical teams, without any central decision-making authority, where established processes allow virtually anyone to participate in its development and evolution. This very aspect has long drawn criticism from traditional, conservative-minded financiers (to say nothing of the debates surrounding its value and backing). Yet, this latest instance has once again underscored the resilience of Bitcoin and its surrounding ecosystem against arbitrary changes, demonstrating that decentralization functions at both the technical and governance levels.