Bitcoin Network Upgrade to Remove Transaction Data Limit

According to Cointelegraph, Bitcoin Core developers have announced a significant change in the upcoming network upgrade, which will remove the existing limit on transaction data. This decision aims to enhance the efficiency of data inclusion in transactions. The announcement, made by Bitcoin developer Greg Sanders on GitHub, states that the next release will, by default, relay and mine transactions with OP_RETURN outputs exceeding 80 bytes, allowing any number of these outputs. This change marks the end of a long-standing limit that was initially intended as a signal to use block space sparingly for non-payment proof of publication data. However, Sanders noted that the limit has outlived its utility. The proposal, known as PR 32359, was created by Bitcoin pioneer Peter Todd at the request of Chaincode Labs. OP_RETURN is a special type of Bitcoin transaction output that enables the storage of small amounts of data on the blockchain. It gained popularity during the ordinals inscriptions craze in early 2024. Unlike regular transaction outputs, OP_RETURN outputs are not spendable and do not contribute to the unspent transaction outputs (UTXOs) bloat. Sanders explained that the original limit is no longer effective as users have found ways to circumvent it, such as using fake output addresses, which are detrimental to the network. Some mining services have already been ignoring the limit, leading to large-data inscriptions occurring regardless, often in more abusive forms. Removing the limit is expected to result in a cleaner UTXO set, more consistent network behavior, and better alignment with Bitcoin's actual usage. The decision to remove the cap was made after considering three possible paths: keeping the cap, raising the cap, and removing the cap. The removal option garnered broad, though not unanimous, support. However, the change has sparked controversy among some users. Bitcoiner Samson Mow expressed concerns on X, stating that many users find the change undesirable for various reasons. He suggested that users could refuse to upgrade and remain on version 29.0 or opt for another network implementation. Critics have raised issues about the proposal being introduced without a proper consensus process. Marty Bent, managing partner at Ten31 Fund, emphasized the lack of consensus on the OP_RETURN issue. Additionally, concerns have been raised about potentially deprioritizing Bitcoin's financial utility and undisclosed conflicts of interest.