Hook
Miner support for BIP-110 has collapsed below 1% with just three weeks until the proposal's activation deadline. This is not a technical failure—it is a liquidity signal. As a cross-border payment researcher who has watched Bitcoin's governance evolve since 2017, I recognize this pattern: when economic actors (miners) vote with their hashpower, they are saying no to a change that would disrupt their revenue stream. Ordinals fees now account for over 10% of total transaction fees on some days. Killing Ordinals means killing miner income. The market has already priced in this rejection, but the implications for Bitcoin's layer-2 ecosystem and institutional adoption are far from settled.
Context
BIP-110 is a Bitcoin Improvement Proposal that modifies block size limits. Specifically, it targets the OP_RETURN opcode, which Ordinals use to embed arbitrary data (images, text) onto individual satoshis—creating inscriptions analogous to NFTs. The proposal was framed by its proponents as a way to curb network spam and reduce regulatory risk from non-financial data on Bitcoin. However, Adam Back, a core Bitcoin developer, publicly criticized the effort, stating that the supporters "don't understand Bitcoin" and are attempting to use protocol changes for political censorship. The controversy exposed a deep philosophical rift: should Bitcoin's layer-1 be modified to block specific applications, or remain neutral?
My experience auditing over 50 ICO smart contracts during the 2017 Ethereum collapse taught me that governance debates often mask underlying economic incentives. In this case, miners—the backbone of Bitcoin's liquidity—have made their position clear. With support below 1%, BIP-110 cannot reach the activation threshold. The proposal is effectively dead, but the debate it sparked will echo through the next cycle.
Core
Miner voting is the ultimate liquidity event in Bitcoin's economy. When miners reject a proposal, they are signaling where the capital flow should go.
Let me break down the data. BIP-110 uses BIP-9 signaling, where miners set a bit in the block header to indicate support. Over the past three months, support dropped from ~30% to under 1%. This cliff is not random—it correlates with the rise in Ordinals-related transaction fees. In January 2024, Ordinals fees peaked at 20% of total network fees on some days. For miners, that is real revenue. BIP-110 would effectively outlaw the mechanism generating those fees, reducing their income without compensation.
From a macro-liquidity perspective, this is straightforward: capital (hashrate) flows to where it earns the most return. Miners are the ultimate block-space providers. They sell capacity to users. Ordinals created a new demand source for block space—a demand that generates fees. Any proposal that destroys that demand is automatically opposed by those who benefit from it.
Market-wise, this event is a non-event for Bitcoin price. The macro asset (BTC) is not priced on internal governance noise. But for the Ordinals ecosystem, it is a green light. The risk of a protocol-level ban is gone. Institutional investors who were wary of investing in Bitcoin-based NFTs can now proceed with more certainty.
However, the contrarian angle lies in what this reveals about Bitcoin's supposed "decentralization." The fact that a small group of mining pools effectively vetoed a proposal backed by influential developers shows that power is concentrated, not distributed. During the 2022 bear market, I modeled centralized exchange insolvency risks. The same concentration exists here: the top three mining pools control over 50% of hashrate. Their collective decision to reject BIP-110 was not a democratic vote of the community—it was an economic oligarchy protecting its profit margin.
This is not a victory for immutability. It is a reminder that liquidity concentration dictates protocol direction.
Contrarian
The mainstream narrative will spin this as "Bitcoin's governance working perfectly" or "the community rejected censorship." I disagree. The real story is that Bitcoin's protocol changes are hostage to miners' short-term financial interests. Ordinals fees are a speculative bubble—they may not persist through a bear market. If Ordinals activity drops by 80% next year, will miners suddenly support a similar proposal? The answer is yes, because their incentive changes.
This is the liquidity trap of Bitcoin governance: decisions are driven by immediate capital flows, not long-term network health. In my 2020 analysis of DeFi yield farming, I warned that unsustainable APYs would collapse when liquidity rotated. The same principle applies here. Ordinals generated a fee windfall, so miners protect it. But what if that windfall vanishes? The proposal could resurface in a different form.
Furthermore, the regulatory angle is being ignored. BIP-110 was partly motivated by fear that Ordinals content (e.g., copyright-infringing images) could attract SEC enforcement. By rejecting the proposal, miners have chosen to keep those risks on the table. If regulators do crack down, the decentralized governance will have no mechanism to respond—leaving the network vulnerable to external shocks.
Takeaway
With BIP-110 dead, Ordinals survive. Capital will now flow into Bitcoin L2s and decentralized applications that build on this new asset layer. I expect a rotation from governance debates to actual yield generation on Bitcoin—BTCFi (Bitcoin DeFi) will be the next narrative. But do not mistake this for a healthy ecosystem. The governance stress test has passed only because miner incentives aligned with one faction. The next test—a real liquidity crisis—will reveal whether Bitcoin's governance can adapt or fracture.
Andrew Thompson | Macro Watcher Liquidity First Institutional Yield Skeptic