This is a segment from the Supply Shock newsletter. To read full editions, subscribe . Bitcoin miners are earning more than $1.2 billion per month to secure the chain. What are they securing, exactly? At its core, the collective hash power of honest miners ensures that bad actors can’t suddenly build up and release a second, dubious chain that might usurp the current one’s claim as the longest. Together with full node operators, miners also protect the chain from non-standard transactions. But miners can only ever select transactions that full nodes (which they generally operate themselves) have already deemed to be valid. So, how do those nodes decide which transactions are valid? That’s the role of Bitcoin Core’s relay code, which enforces standardness rules that determine whether a transaction ever makes it to a miner’s mempool at all. Those standardness rules (also referred to as policy rules) secure Bitcoin in a very different way. They effectively define what Bitcoin is and isn’t, and they’re routinely up for debate. On This Day: Ordinals take Bitcoin This time around, discussion has centered on the lifting of a policy rule that capped OP_RETURN outputs at 80 bytes, limiting the amount of arbitrary information that can be posted to the network through individual transactions. Two years ago to the day, however, Bitcoin was reckoning with the sudden popularity of digital collectibles protocol Ordinals, which utilizes three other opcodes introduced under the Taproot umbrella in 2021. At the time, 425,000 transactions were sitting in the Bitcoin mempool, as represented by Jochen Hoenicke’s full node, breaking the previous record of almost 262,000 from peak bull market in December 2017. Average bitcoin transaction fees spiked to more than $31, up from $2 days earlier. Through Ordinals, files of close to 4MB (enough to fill an entire block ) have been written to Bitcoin including images, videos, audio and video games without relying on OP_RETURN, thereby avoiding its 80-byte limit altogether. The purple arrow points to May 7, 2023, when Ordinals hype really set in . All this has made Bitcoin a content storage network, to some degree. Each Ordinal is, essentially, tokenized non-financial data that can be traded peer-to-peer — the type of nonsense utility that had been typically reserved for virtual machine chains like Ethereum and Solana. These days, Ordinals activity has cooled, but has its moments. Bitcoin Core developers, in lifting the 80-byte policy rule on OP_RETURN data, are hoping to reduce the incentives for further workarounds that might damage the network in unknown ways. “The change re-affirms that Bitcoin is governed by transparent, minimal rules rather than editorial preference,” Blockstream engineer Gregory Sanders wrote . “By retiring a deterrent that no longer deters, Bitcoin Core keeps the policy surface lean and lets the fee market arbitrate competing demands.” Times like these remind us that Bitcoin is not sentient, but it does evolve. For living things, it’s the biological code inside DNA that informs how they grow. On the other hand, Bitcoin’s “blind watchmaker” is the collective resolve of its active developers, even if they don’t have unanimous support for their proposed changes, as expressed through the willingness of miners, node operators and users to adopt them. Or, as Sanders put it: “Dissenting parties remain free to modify software, run stricter policy, or propose new resource limits if empirical harm emerges.” Get the news in your inbox. Explore Blockworks newsletters: Blockworks Daily : Unpacking crypto and the markets. Empire : Crypto news and analysis to start your day. Forward Guidance : The intersection of crypto, macro and policy. 0xResearch : Alpha directly in your inbox. Lightspeed : All things Solana. The Drop : Apps, games, memes and more. Supply Shock : Bitcoin, bitcoin, bitcoin.
