Thoughts on Removing the Bitcoin OP_Return Limit

Recently, the Bitcoin core development team proposed a suggestion to remove the size limit on OP_Return outputs. OP_Return is a type of output that allows the storage of arbitrary non-transactional data on the Bitcoin blockchain. Currently, Bitcoin core nodes do not forward transactions that exceed the established limit, but this is not a consensus rule, and nodes will still accept blocks containing such transaction outputs.

This proposal has sparked controversy. Supporters argue that such restrictions should be lifted, while opponents worry that this could increase spam. Some people hope that Bitcoin will only be used for financial transactions, viewing data such as images as non-standard transactions.

However, the trend of storing images on the Bitcoin blockchain has long begun. The "Ordinals" craze that arose in early 2023 is a typical example. Unlike using OP_Return, Ordinals store images in the input scripts of Taproot outputs. This method can be more economical than OP_Return in certain cases, as it benefits from the fee discounts brought by Segregated Witness.

Data shows that the usage of Ordinals has been very high, with over 88 million inscriptions generated and transaction fees worth over $660 million paid. This field has attracted a large amount of investment, giving rise to many related businesses and tools.

There are differing opinions on whether these images constitute spam. Some believe that it should be judged based on the creator's intent: is it for personal entertainment or speculative profit, or is it a malicious attack on others? According to the theory of subjective value, the value of goods and services depends on individual assessment rather than objective standards. Since some are willing to pay high fees for images on the blockchain, we find it difficult to deny their value.

From the perspective of the Bitcoin mining industry, many large mining companies welcome new applications like Ordinals, viewing them as important sources of revenue. In a highly competitive industry, these companies need to maximize returns and shareholder value. The operation of Bitcoin relies on the coordination of incentive mechanisms rather than a consensus of participants' goals.

Retaining OP_Return restrictions may lead miners to establish private systems that bypass the public memory pool, which could bring numerous negative impacts, such as undermining Compact blocks technology and increasing mining centralization pressure. Therefore, Bitcoin developers should strive to maintain the competitiveness of the software, ensuring that the public memory pool and transaction selection algorithms have an advantage in maximizing revenue.

For node operators, if the blockchain is full, increasing the use of OP_Return may actually make running a full node easier. OP_Return outputs do not cause the UTXO set to expand and do not require a complex verification process.

In preventing spam, transaction fees are a core component of the Bitcoin security model. To enter the blockchain, one must bid higher than other users; this is the only viable spam prevention model. Regardless of the nature of the transaction, as long as one is willing to pay a sufficiently high fee, they can almost always enter the blockchain.

Although the OP_Return limitation has existed for many years, it may now be time to face the economic reality and stay competitive. We should embrace this reality: if attackers or spammers are willing to bid higher than other users, they can do so. However, this situation is unlikely to persist in the long term. Many investors in blockchain images may suffer losses, but this will become a valuable lesson that ultimately makes Bitcoin stronger.