Why Bitcoin miners are unlikely to fight a moral battle over Ordinals

The ongoing debate surrounding differing perspectives on how Bitcoin should be used reignited again yesterday.

Bitcoin developer and co-founder of Ocean mining pool Luke Dashjr launched a tirade of criticism toward inscriptions like Ordinals and BRC-20 tokens, declaring them a spam attack exploiting a vulnerability on the Bitcoin blockchain. Bob Bodily, co-founder and CEO of Ordinals marketplace Bioniq disagrees, arguing Bitcoin miners are unlikely to fight a moral battle over the issue.

“From a miner perspective, removing high fee transactions from the mempool reduces miner revenue. Who is going to actively adopt a new software upgrade to earn less revenue?” Bodily told The Block, suggesting it was very unlikely. “There is more demand for Bitcoin blockspace this year due to Ordinals, with over $100 million in network fees paid by these transactions. Miners want more revenue, and Ordinals have brought about a renaissance on Bitcoin with massive demand for block space.”

Assuming miners did decide to limit Bitcoin’s data storage capabilities, Bodily argued they would be “actively fighting a moral battle about what should be included on Bitcoin by choosing to receive less revenue.” Such a move would also undermine many of the benefits brought by the Taproot and Segwit upgrades and remove valid Bitcoin use cases, Bodily said.

Even in a scenario where limitations were enforced, Bodily believes that the demand for meta-protocol transactions like Ordinals on Bitcoin will remain in demand. “People will just start storing data in other places on Bitcoin. Sure, it might cost 2x more, or 4x more, but that isn’t going to stop anyone,” he said.

For example, “Stamps has always stored data in multisig transactions (like Counterparty) rather than in the witness data and would not be impacted by these limitations,” Bodily added.

Filtering inscriptions and CoinJoin transactions

One Bitcoin mining pool that disagrees is Luke Dashjr’s Ocean, which raised a $6.2 million seed round led by Block CEO Jack Dorsey last week to support its launch and other decentralized mining decentralization projects.

Dashjr said he had implemented a “fix” on the Bitcoin Knots implementation he maintains. However, Knots has been adopted by a fraction of the nodes running the most widely used software implementation of the protocol — Bitcoin Core.

Ocean is also using the Bitcoin Knots implementation to filter inscriptions transactions. “Among other improvements, this upgrade fixes this long-standing vulnerability exploited by modern spammers. As a result, our blocks will now include many more real transactions and help to bring an end to the DoS attack being performed on the Bitcoin network,” the mining pool confirmed on X yesterday.

Like Bodily, Casa CTO Jameson Lopp expects economic rationality to prevail, explaining on X that miners are now mostly large enterprises with a duty to maximize profit for shareholders, so they will mine any valid transaction that pays the highest fee rates.

“Luke is entitled to his opinions, but I suspect you'll find few folks who agree with classifying inscriptions as a vulnerability,” Lopp told The Block on Wednesday. “Classifying them as spam is subjective: it depends on if you believe that you should get to decide what use cases are an appropriate use of the Bitcoin protocol or if you believe that any valid transaction that pays a competitive fee should be allowed to purchase block space.” 

Ocean also appears to be censoring Samourai’s Whirlpool CoinJoin transactions from Dec. 6, according to the privacy-focused wallet. A CoinJoin transaction in Bitcoin involves pooling inputs from multiple users into a single, large transaction that generates numerous outputs of the same value — making it challenging for an observer to trace and identify which outputs are associated with which participants.

Dashjr said there was a bug in Whirlpool’s software causing the issue, something Samourai denied. “Samourai did this, not us. Would be happy to work with them to find a solution,” Dashjr later added.

An ongoing debate on how Bitcoin should be used

The rise in popularity of Ordinals on Bitcoin earlier this year fueled debate over whether or not inscriptions representing things like NFTs and BRC-20 tokens on Bitcoin should exist. Inscriptions rely on Bitcoin’s OP_RETURN function — used to store arbitrary data in the blockchain.

Some argue that these elements are unintended consequences of Bitcoin’s 2017 SegWit and 2021 Taproot upgrades, making inscriptions more economically feasible, and should be removed from Bitcoin. Others maintain that such unconventional uses are an integral part of any upgrade, and usage should continue as long as users comply with Bitcoin’s rules.

“Leveraging an ‘Ordinals envelope’ and storing data as code in the witness data is surely an unconventional thing to do,” Bodily said.

Transactions on the Bitcoin network have surged at various points this year, coinciding with pick-ups in inscriptions-related activity, reaching an all-time high of 607,000 average daily transactions in November, according to The Block’s data dashboard.

The share of Bitcoin miner revenue from transaction fees compared to the block reward subsidy has risen concurrently.

However, the surge in activity has also led to congestion, causing fees to rise, with Bitcoin users encountering delays in processing transactions without paying the higher fees. Average Bitcoin fees are currently around $25 to get a transaction in the next block as a result, rather than a $1 to $2 historical average, according to Bitcoin explorer Mempool.

Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.