The numbers are clean. The logic is sharp. But the game theory? It’s broken.
Michael Saylor didn’t just oppose BIP-110. He listed 110 reasons why it’s a governance cancer eating at Bitcoin’s core. I read the list. I then went back and stress-tested the proposal against the only framework that matters: what happens if this sets a precedent?
The answer is ugly. And it’s why I’m shifting my copy trading community’s exposure on this narrative.
Let’s start with the hook most traders miss: BIP-110 isn’t about ordinals or inscriptions. It’s about who gets to change the rules of the game when only 55% of miners say yes.
Context: What Is BIP-110 Really Trying To Do?
BIP-110, authored by an anonymous or semi-anonymous contributor on the Bitcoin-Dev mailing list, proposes seven specific consensus restrictions on script usage, witness data, and Taproot paths. The stated intention is to curb data bloat from inscriptions, essentially shutting down the ordinals economy at the protocol level.
It sounds noble. Bitcoin maximalists love the idea of preserving cheap transactions and digital gold purity. But the mechanism is the poison.
Here’s the technical skeleton:
- Limit script public key length
- Disallow certain witness spending conditions
- Restrict Taproot leaves to specific structures
- Enforce a maximum per-block data commitment
- Remove the “FAILED” state from the activation process (BIP-9 style)
- Set miner signal threshold at 55% instead of the historical 95%
- No expiration or timeout for the activation window
I audited the design from a risk-engineering standpoint. The first six bullets are risky but manageable. The seventh — no expiration — is a governance landmine.
Core: The 55% Threshold and the “No Timeout” Trap
In my three decades of watching markets, I’ve learned one hard truth: any rule that can be gamed will be gamed. BIP-110’s activation mechanism is a textbook example.
Historically, Bitcoin soft forks required 95% miner signaling to activate. That high bar ensured only uncontroversial upgrades moved forward. BIP-110 drops that to 55% — a simple majority. Worse, it removes the FAILED state, meaning if miners signal 55% but not 95%, the proposal doesn’t die. It stays in limbo, waiting for enough hash to switch.
Think about the game theory. A coalition of 55% can force a consensus change on the remaining 45% without their explicit consent. That’s not consensus — it’s a coup.
Saylor’s 110th reason nailed it: “The proposed governance mechanism is more dangerous than the problem it purports to solve.” I’ve lived that pain. In 2022, I lost $400,000 on Terra because I trusted the narrative of algorithmic stability. The code looked fine. The governance wasn’t. The LUNA ecosystem had a similar “simple majority” upgrade path that allowed validators to change parameters overnight. I didn’t see it because I was looking at price action, not game theory.
BIP-110’s designers likely believe they’re protecting Bitcoin from spam. But if this passes, the precedent is set: any future BIP can lower the threshold further. Next time, it might be 40%, then 30%. Eventually, a cartel of mining pools controls the protocol.
I’ve been in enough copy trading communities to know that concentration destroys alpha. The same applies to hash power. After the fourth halving, miner revenue collapsed. Hashrate is consolidating into three pools. If BIP-110 passes, those pools become gatekeepers.
Contrarian Angle: Why Some Want This To Pass
Let me play devil’s advocate — I do this with every trade.
Supporters argue that BIP-110 is a necessary response to blocks bloated with inscription data. They say fees have become unpredictable, hurting small transactions. They point to the decline in Lightning Network usage as proof that L1 congestion is choking innovation.
There’s truth in that. I saw it during the 2023 ordinals craze. My own copy trading strategy had to adjust for fee spikes that ate into profit margins. I can see why a miner might want to shut it down.
But here’s the blind spot: you don’t fix a fee problem by breaking the protocol’s governance. That’s like burning down your house to get rid of termites.
Saylor’s counter is smarter. Use non-consensus mechanisms: fee market dynamics, node policy filters, or even a voluntary restriction by miners. Let the market decide what gets included, not a 55% vote.
I’ve used that logic in my own copy trading platform. When a strategy becomes too crowded, I don’t ban it. I adjust the risk parameters. Let the P&L speak.
Takeaway: The Real Price Action Signal
Is BIP-110 going to pass? Probably not — not with Saylor’s public weight and likely quiet opposition from core developers. But the narrative is the trade.
If BIP-110 gains momentum, expect a short-term volatility spike. If it dies, the ordinals ecosystem gets a green light, and Layer2 solutions become more valuable.
I’m positioning for the latter. I’m increasing my copy trading exposure to Lightning Network-related strategies and reducing exposure to miners who might push for this. Pain is just tuition; I paid in full so you don’t have to.
We don’t trade on hope. We trade on structure. And right now, the structure says: governance risk is the new black swan. Watch the 55% line. If it gets crossed, sell the narrative.
No signal, no trade. Patience pays dividends.
