Authored by: Ashrith Rao
Compiled by: Chopper, Foresight News
Bitcoin didn't need to face both a price decline and internal ideological disputes simultaneously. Yet now, both troubles have arrived at its doorstep.
Since the release of version v30 of the Bitcoin Core client in October 2025, a divergence in philosophy has been brewing; meanwhile, the crypto market is trying to find a price bottom amidst this turmoil.
BIP-110: Countdown to Bitcoin Fork Standoff Begins
The key deadline for this struggle is set for August 7, 2026, corresponding to block height 961632. What unfolds at that time may determine whether Bitcoin's next cycle will continue on a single main chain or split into two.
In December 2025, developer Dathon Ohm proposed BIP-110 (Note: BIP stands for Bitcoin Improvement Proposal), the "Reduced Data Ephemeral Soft Fork." This is a planned one-year soft fork proposal.
The proposal focuses on data management within blocks and carries no inherent political agenda: within approximately one year, it would limit OP_RETURN (Note: OP_RETURN is a script used to write additional data in Bitcoin transactions) output data to 83 bytes; set a maximum of 34 bytes for the vast majority of new output scripts; and impose constraints on various technologies carrying external data, including large data pushes, witness items, and certain unspecified witness versions.
Historical data already on the blockchain would not be purged; the rules would only constrain future new transactions. The focal point of controversy centers on inscriptions and various non-financial data continuously occupying Bitcoin block space since 2022.
Proponents of the proposal argue that such applications deviate from Bitcoin's original purpose as a payment and settlement system, increase the operational costs of running full nodes, and persistently expand the Unspent Transaction Output (UTXO) set.
What has truly sparked significant controversy is the proposal's activation mechanism. Relying on the bit-4 signaling mechanism, BIP-110 designs a market-led, smooth lock-in activation path: within a 2016-block difficulty period, it requires 55% of the hashrate to vote in favor.
Since monitoring went live on December 1, 2025, the proposal's hashrate voting share has remained persistently low, staying within the 0.3%~0.4% range. The latest observation data shows a minimum of 0% and a maximum of only 0.86%. If the conventional voting channel fails to meet the threshold, the proposal will initiate an enforcement plan: mandatory activation at block height 961632.
By this time point, regardless of the stance of the majority of the network's hashrate, nodes running clients compatible with BIP-110 (primarily Bitcoin Knots) will begin rejecting blocks that do not comply with this rule.
Critics argue that this strategy, modeled after the 2017 UASF (User Activated Soft Fork), escalates what seemed like a minor technical discussion into a major governance dispute.
Current Hashrate Data
The current Bitcoin network hashrate is approximately 940 EH/s, while BIP-110's voting hashrate is less than 1%, roughly only 5 EH/s. Currently, the vast majority of observable voting blocks come from the mining pool Ocean, an entity linked to Jack Mallers and Adam Back.
The majority of Bitcoin hashrate controllers either remain indifferent or explicitly oppose the proposal. The vast chasm in hashrate support highlights the significant potential consequences should BIP-110 initiate its forced path.
When a minority of nodes forcibly imposes a rule that the vast majority of hashrate and nodes refuse to recognize, the ultimate outcome is not the implementation of the rule but rather the creation of two independently valid blockchains. Both chains would accept blocks that comply with BIP-110's strict rules; however, non-BIP-110 nodes can accept blocks that do not meet the restrictive conditions, while BIP-110 nodes would outright reject them.
The fact that BCH's current price is merely a fraction of BTC's is the most direct illustration of how the market views a forked chain lacking sufficient hashrate support.
Positions of Various Parties Gradually Clarify
As the deadline approaches, the strength of the opposing camp is not diminishing but increasing.
On July 18th, Michael Saylor published a lengthy article titled "110 Reasons to Oppose BIP-110," launching a fierce critique. He argued that Bitcoin's consensus layer should not define the "legitimate use" of fee-paying transactions. Compared to whether spam transactions proliferate, he is more wary of the risk of setting a precedent. Once consensus rules start distinguishing between "compliant transactions" and "non-compliant transactions," this paradigm could become permanently entrenched and potentially abused by those manipulating future rule iterations.
He also pointed out that BIP-110 would limit future upgrade potential. Solutions like BitVM, which rely on data flexibility for contracts, would be constrained by the proposal.
Adam Back and Jameson Lopp have also raised similar but independent points: this activation mechanism itself is highly risky. Past successful Bitcoin upgrades, such as Segregated Witness (SegWit) and Taproot, all garnered over 90% hashrate support before formal implementation. In comparison, a 55% threshold is already low. And with the current natural voting support rate below 1%, forcing activation would only create division, not consensus.
Many practitioners have chosen neutrality. Jimmy Song publicly stated, "I don't know enough about this mechanism to judge the consequences of either path," a remark that drew considerable criticism. In this heated debate, a neutral stance is seen by many as avoiding taking a position.
On the other side, Bitcoin Knots developers and BIP-110 supporters point to the changes in the Core v30 release from October 2025: the client increased the default relay policy limit for OP_RETURN from 83 bytes to approximately 100,000 bytes—an increase of over 1200 times.
The Core team defines this as a relay policy adjustment, not a consensus rule change, arguing that relying on relay filtering cannot completely eliminate spam data, as external data can be embedded in ordinary transaction outputs in forms like hashes, making it difficult to distinguish and block.
Technically, this viewpoint holds true; relying on the relay layer cannot completely prohibit arbitrary data storage. This is precisely the core argument of BIP-110 opponents—the proposal treats the symptoms, not the root cause. It not only struggles to eradicate the problem but may directly cause a blockchain split in the attempt to fix it.
It was Core's release of the v30 update in October 2025 without broad community communication that led to the Bitcoin Knots fork; months later, BIP-110 emerged as a countermeasure.
The Second Risk Point: Sztorc Proposes eCash Hard Fork
Aside from BIP-110, the market faces another variable in August. Concurrently with BIP-110, Paul Sztorc, the proposer of the Drivechain proposal (BIP 300/301), announced plans to initiate an independent hard fork targeting block height 964,000.
This plan would create a brand new SHA-256d public chain with an initial state identical to Bitcoin's. After the fork launches, the network difficulty resets; at the fork block, all BTC holders would receive the new forked asset in equal amounts.
Unlike BIP-110, this fork does not impose data limits. Its core goal is to advance scaling and sidechains, implementing sidechain scaling solutions that have been delayed for years from mainnet deployment.
The two fork events have independent origins but will create a compounding risk effect. Around the time the mandatory signaling period begins, exchanges, custodians, wallet service providers, and institutional holders all need to simultaneously decide whether to support BIP-110 while also handling the 1:1 distribution of forked tokens. The two are not coordinated; they are merely coincidental in timing, yet will place immense pressure on the entire industry within a three-week span.
Market Impact
Since reaching a high in October 2025, Bitcoin is currently in a phase of building a market bottom. Although some institutions continue to accumulate during the decline, BlackRock's IBIT Bitcoin ETF saw significant outflows in June.
The market is already digesting macro-level pricing reassessments, and governance disputes with potential forking tail risks have arrived one after another; had this occurred at a bull market peak, such risks might have been easily overlooked by the market, but the current environment amplifies panic.
Prediction markets have not yet treated BIP-110 as an independent, highly liquid, binary major event. Bitcoin price contracts on Polymarket in mid-to-late July show traders generally expect Bitcoin prices to remain within the $50,000 to $60,000 range in early August.
This also aligns with hashrate data: if hashrate voting remains below 1% three weeks in advance, BIP-110 is highly unlikely to lock in activation through the conventional channel.
The most direct suspense is whether the Bitcoin Knots camp's nodes will still insist on the enforcement strategy after the conventional activation path fails. The final decision-making power is not controlled by market forces but lies in the hands of a small group of client maintainers.
If the forced path is implemented, the market might react in a predictable way: the original chain, supported by the vast majority of miners and exchanges, will most likely become the core for liquidity, hashrate, and price discovery.
"The market will ultimately resolve the dispute" and "The market can resolve the dispute without cost" are two entirely different propositions.
A chain fork would create numerous short-term troubles: risks of replay attacks, confusion over exchange listing rules, uncertainty regarding custodial asset ownership, and risk premiums (manifested as widening bid-ask spreads and shrinking order book depth). In an environment where market confidence is already weak, the impact would be more pronounced.
On August 7th, the market faces a severe test, determining whether Bitcoin can truly shake off the shadow of the 2017 governance crisis.
