Is Bitcoin on the brink of another civil war?

May 9th Is Bitcoin on the brink of another civil war?

The ongoing debate about filtering transactions on the Bitcoin blockchain has echoed ideological rifts as gaps within the BTC development community. 2015–2017 Blocksize Wars. The core has conflicts between proponents of stricter filtering aimed at restraining orders, inscriptions, and coin-jure intransactions, and proponents of more open and permitted protocols that treat all valid, paid fee transactions equally. Critics have warned that by lifting up the so-called OP_return restrictions, it could inflate the blockchain and deviate from Bitcoin’s financial objectives, but supporters argue that existing filters are ineffective and represent a form of soft censorship that undermines decentralization. The adoption of alternatives such as Bitcoin Knotand the results of this debate, which is a continuing concern about centralizing governance, could reconstruct how Bitcoin defines neutrality, policy enforcement, and its evolving role as the original biggest cryptocurrency.

Fix filters or transaction censorship?

Current discussions surrounding Bitcoin’s Mempool filtering policy have revealed deep divisions within the Bitcoin development community, particularly regarding the handling of non-monetary transactions, such as ordinals, inscriptions and privacy-enhancing coin-control transactions. Ordinances, inscriptions, stamps and coin joins are all Bitcoin transactions in effect under current consensus rules, and attempts to pay market rate fees for block space and filter them based on content or intent constitute a form of censorship driven by subjective disagreements rather than protocol-level invalidity. At the heart of the controversy is the proposal originally introduced by Peter Todd, which suggests removing legacy restrictions on arbitrary data storage via the OP_Return field. Proponents of the change argue that these filters have little effect on workarounds such as direct miner submissions and alternative relay networks, and that retaining such restrictions will result in an illusion of control without any real benefits. They argue that removing these constraints not only reflects the unauthorized nature of Bitcoin, but also reduces the centralization pressure caused by its reliance on the implementation of non-standard member pools.

On the other side, critics argue that lifting these constraints will accelerate the conversion of Bitcoin to general-purpose data ledgers rather than to financial networks, effectively breaking down core value proposals. Concerns have been raised about increased block space congestion, a larger set of UTXOs, and long-term impacts on decentralization. Developers like Ocean Mining’s Jason Hughes have gone on until they warn that such changes could turn Bitcoin into a “valuable Altcoin.” More broadly, opponents view Bitcoin Core as not wanting to incorporate community feedback as a sign of creeping centralization, with some node operators shifting to alternative implementations like Luke Dash JR’s Bitcoin Knot. This growing departure reflects not only policy disagreements, but also deeper erosion of trust in the management of the network through Bitcoin Core.

An important aspect of conflict lies in the distinction between consensus rules and relay policies. The proposed changes do not change the Bitcoin consensus mechanism, but rather change the behavior of the transaction relay layer, particularly the nodes in which types of transactions are propagated. Advocates of stronger filtering (including Luke Dash Jr., who capped op_return data on 42 bytes of Bitcoin Knots) argue that Coin Gene transactions, which provide so-called “spam” and privacy, can reduce the user experience and expose the network to legal scrutiny. Others, including privacy advocates, argue that such filters correspond to effective, consensus-approved censorship, creating slippery gradients where certain use cases, particularly cases that enhance privacy, are unfairly punished or excluded from block inclusion.

The meaning of this argument goes beyond the technical question of how Bitcoin nodes handle unidentified transactions. They touch on the philosophical foundations of Bitcoin. It is strictly useful as a financial network, whether it stays freely and is resistant to gatekeeping. Core developers have emphasized pragmatism and network efficiency, but critics are worried that Mempool policy is becoming a backdoor for soft governance. The knot (and, to a lesser extent, Libitcoin), calls for diversification of policy-making, and increased preferences among some miners in downstream forks suggest that Bitcoin is entering a new phase in which protocol design, ideological commitments, and governance structures must be actively reconstructed to retain its religious voice.

Many Bitcoiners focus on similarities with the Folk Wars

The current discussion of Op_return and Mempool’s filtering is accompanied by many impressive similarities to the 2015-2017 Bitcoin block-sized war, showing one of the most divisive chapters in Bitcoin history. At the heart of both conflicts is the fundamental disagreement regarding the purpose of Bitcoin, whether it will remain minimally censored and resistant to censorship or evolve to accommodate broader, flexible use cases. Just as block-sized wars advocated for larger blocks and pitted on-chain scaling against those who prioritize decentralization and node accessibility (to accommodate more transactions), the OP_RETURN controversy centers on whether it is necessary to selectively filter the block space of Bitcoin to exclude non-number of data, such as non-monetary data such as inscoinins and Coinins.

The block size debate began when some developers and companies increased the 1MB block size limit for Bitcoin and pushed to deal with rising trading fees and traffic jams. Their argument was that on-chain scaling of Bitcoin is essential to making it a competitive global payment system. The opponents argued that the average user centralizes the network by increasing block size by making it more difficult for the average user to run nodes and undermine Bitcoin’s decentralization and censorship resistance. This disagreement reached its peak at a very controversial period. There, several proposals such as Bitcoin XT, Classic, and Unlimited attempted to hard fork Bitcoin. However, these attempts did not provide sufficient consensus.

The resolution was brought in the form of a Separate Witness (SEGWIT), a soft fork that was activated via a user-activated soft fork (UASF) mechanism. The UASF is a grassroots movement, and users and miners signaled support for SEGWIT activation independent of core developers or major mining pools. This approach was ultimately successful, enforcing the activation of Segwit in August 2017, demonstrating the power of user-driven governance. However, the fallout was quick. Still against Segwit and in favor of the big block, he created Bitcoin Cash (BCH) and marked a permanent chain split. The compromise on segwit2x is then an agreement to activate Segwit and then double the block size, collapsed due to the lack of consensus, further strengthening the disparity.

Today, the OP_RETURN filtering issue reflects many of the same themes. Filter supporters have argued that it will maintain network efficiency and limit spam, but critics see it as a paternal excess that undermines Bitcoin’s neutrality and censorship resistance. Just as Blocksize War revealed who controls Bitcoin rules, users rather than developers and miners, this new argument is urging many people to reconsider what it means to run nodes and the obligations that software implementations need to be neutral. As users are already migrating to alternative clients like Bitcoin Knot, the similarities between UASF and Chain Split Moments in 2017 are not possible to ignore, and the results could redefine the power balance of Bitcoin’s governance model.

Are filtering transactions considered “spam”?

Bitcoin memory, short for “memory pool,” is a distributed staging area where valid but unconfirmed transactions are held by the complete node until the miner is included in the block. Each node maintains its own memory. In other words, there is no single authoritative pool, but a network of independently configured pools where transactions relay to each other. When Separated Witnesses (SEGWIT) was introduced in 2017, it moved certain parts of transaction data, particularly signatures (eyewitness data) outside traditional transaction structures, allowing for more efficient use of block space. Data stored in the Segwit Witness field is greatly discounted in the Bitcoin block weight calculation, counting only a quarter as standard transaction data. Importantly, witness data does not contribute to the UTXO set and is not verified by unupgraded nodes, making it a target for legal and controversial new use of Bitcoin block space.

Introduced in early 2023, ordinals and inscriptions utilize Segwitt’s witness space to engrave any data, such as images, text, or entire files, directly onto the blockchain. By using Taproot output and a malleable discount weighted witness structure, these protocols bypassed traditional limitations and embed metadata into transactions without violating consensus rules. Implementing coin joins like Whirlpool also utilizes sophisticated scripting and witness space to enable transaction adjustments that improve joint privacy. All these techniques work within Bitcoin rules and pay the required fee, but they branch out from traditional financial use cases and raise concerns among some developers and miners about the long-term sustainability and “intention” of Bitcoin’s block space.

Ocean, a Bitcoin mining pool led by Luke Dash Jr. and backed by Jack Dorsey, has implemented filters within the node infrastructure based on Bitcoin Knots that reject certain classes of transactions that are considered “spam.” These include ordinal inscriptions, but also coinjoin transactions such as those produced by the vortex of the Samourai wallet and similar coinjoin implementations based on the Wasabi wallet and JoinMarket. This filter works by imposes strict limits on the OP_RETURN size and rejecting transactions that use more witness space than would be considered acceptable in the Ocean policy. Ocean claims this will maintain the efficiency of the network and support Bitcoin’s financial focus, but critics have seen it as a form of censorship, warning that it will fragment members, weaken network neutrality and undermine the permitted nature of Bitcoin. Opponents of transaction filtering argue that filtering so-called “spam” transactions at the node or mining pool level is almost impractical. This is because users can easily bypass by sending transactions directly to the miner or encoding data in the non-filter portion of a valid transaction, such as the witness field. Attempts to implement such filters risk fragmenting members and undermining neutrality, and setting precedents for subjective censorship of transactions that otherwise pay a valid paid fee.

The suggestion to remove the size limit for the op_return relay will have a wide range of impact on the way Bitcoin nodes propagate and store data. Currently, Bitcoin Core enforces a default 80-byte limit on the Op_return output, limiting the type and amount of data to be embedded through its opcode. Removing this limit does not change the Bitcoin consensus rules, but it changes the way nodes relay transactions across the network, allowing for a wider use of OP_RETURN. This could reduce the incentive for users to hide data in the eyewitness field, which potentially tidy, but also makes node operators difficult to filter transactions based on content, challenging current practices like those adopted in the ocean. The argument depends on whether such filtering will maintain the functionality of Bitcoin or compromise the fundamental principles of neutrality.