A dispute over Bitcoin’s proposed BIP-110 soft fork has intensified after critics argued that the upgrade could break certain wallets and leave some users with permanently unspendable BTC if it activates.

This is according to crypto investment advisor Farside Investors, who were challenging claims made by BIP-110 supporter Fred Krueger in a June 28 post on X.

BIP-110 Could Break Wallets and Freeze Funds

In his Sunday post, Krueger stated that BIP-110 would leave Bitcoin’s monetary properties untouched, with the 21 million coin supply, proof-of-work, Lightning, multisig wallets, self-custody and address functionality all being unchanged.

“The primary effect is that large arbitrary data used by Ordinals, Runes, and similar protocols would no longer be valid,” he noted.

However, Farside disputed that assessment, saying that BIP-110 would ban several Taproot scripting features, including the OP_IF opcode used by Miniscript. According to its explanation, after the fork activates, wallets that support Miniscript will still let users generate and send funds to addresses built on the now-banned scripts.

While those transactions will look valid under BIP-110’s own rules, the BTC sent to them will become unspendable because the required spending conditions will no longer apply under the new consensus rules.

Ironically, the latest version of Bitcoin Knots, one of the node implementations supporting BIP-110, could itself create these incompatible addresses.

Farside went further, pointing out that BIP-110 will also ban the creation of new pay-to-public-key (P2PK) outputs, a script type that was used extensively during Bitcoin’s early days and is holding more than 1.7 million BTC.

However, spending the existing P2PK outputs would still be allowed, although under certain circumstances, per the investment company, the proposal could temporarily freeze funds or expose users to theft risks, despite including safeguards such as grandfathering older outputs and limiting enforcement to about one year.

The proposal can become active either if 55% of miners signal support during a difficulty adjustment period or, if that does not happen, through a mandatory signaling process starting at block 961,632, which is expected to be reached in August 2026.

Debate Extends Beyond Wallet Compatibility

The fight over BIP-110 is part of a wider argument about what’s clogging Bitcoin’s network space, with Krueger and other supporters saying that inscriptions, BRC-20 tokens and similar uses have created unnecessary bloat on the network, and the new proposal is a way to discourage such transactions without changing BTC’s monetary policy.

But others, including the Block Runner podcast account, have rejected that reasoning, insisting that the 126.7 million inscriptions on Bitcoin account for just 1.267 BTC of value, a fraction it likened to a coin dropped in the ocean.

According to them, miners actually profiting from that activity, including AntPool, ViaBTC, SpiderPool, F2Pool, and Luxor, are helping offset Bitcoin’s declining security budget, while BIP-110 itself has only thin miner and node support.

The network’s activity has stayed high through this period despite price action. Recent data from CryptoQuant showed that usage was near record territory even with BTC plunging below $60,000, a sign that demand for blockspace, whether contested or not, isn’t going away any time soon.

Source: CryptoPotato