Hardly Anyone Knows, But a Major Battle is Raging Inside Bitcoin – Is Another Hard Fork Coming?

A new divide has emerged within the Bitcoin ecosystem that could shape the future of the network.

This time, the debate is about how much data can be stored on the Bitcoin blockchain and whether the network will remain solely as “money” or will be opened up to different use cases.

Node operators who verify BTC transactions are actually making a policy choice when deciding which software version to use.

• The latest version of Bitcoin Core allows for more data to be stored per transaction.
• The alternative version, called Knots, rejects this expansion and maintains the data limit per block.

Until now, Bitcoin Core has been the most widely used software, the “official” version of the network. However, Knots is rapidly gaining popularity; currently, about a quarter of the network runs it.

This dispute began with a pull request on Bitcoin Core’s Github page in April. Supporters of the proposed amendment argue that the data limit per transaction is “arbitrary” and should be removed. They argue that removing this limit would allow Bitcoin to remain “policy-neutral” and enable the effective use of more privacy tools.

However, Core developers believe these limitations have already been overcome in various ways and that the change will not make a meaningful difference.

This change could enable new use cases for Bitcoin (such as NFTs, Layer-2 solutions, and limited smart contracts). But this is precisely the concern of Knots proponents. According to Knots, Bitcoin’s goal was simply to create “unstoppable money”; storing data like other blockchain networks would be counter-intuitive.

Furthermore, it’s argued that allowing more data on the blockchain would increase the risk of illicit content being embedded within the chain. A 2018 study found that such content, albeit small, existed on the chain.

A similar crisis occurred in 2018 and went down in history as the “Blocksize War.” At that time, a group advocating for increased block sizes created a new chain called “Bitcoin Cash.”

Today’s discussion raises the possibility of another major hard fork.

Bitcoin was born as an alternative to politically controlled money. But this new debate demonstrates that even the idea of “government-free money” cannot escape its own governance conflicts.

*This is not investment advice.