Bitcoin Core 30 Update to Remove 80-Byte OP_RETURN Limit

An upcoming Bitcoin software update, scheduled for October 30, will significantly increase the data limit on the OP_RETURN function. This change, part of the Bitcoin Core 30 update, will remove the current 80-byte limit and allow each output to carry up to 4 megabytes of data. This decision follows a statement signed by 31 Bitcoin Core developers on May 5, supporting the change known as merged pull request (MPR) #32406.

The OP_RETURN function has been a contentious issue within the Bitcoin community. It enables the storage of non-financial data on the blockchain, such as images, text, and documents. This capability fueled the Ordinals craze last year, allowing users to post various types of data, including non-fungible token-like collections and historical documents like the Afghan war logs published by WikiLeaks in 2010.

Critics of the change argue that allowing more non-financial data on the blockchain could clog the network with spam and detract from its primary function as a peer-to-peer transaction system. Alexander Lin, co-founder of a crypto investment firm, described the data limit expansion as a "terrible mistake," claiming it increases systemic risk to Bitcoin's core property as sound money. Others, like Peter Todd, the lead author of the proposal, believe the increase will expand Bitcoin’s use cases beyond finance.

Bitcoin Core developers have taken a hands-off approach, favoring user autonomy in how the blockchain is utilized. Gloria Zhao, a Bitcoin Core developer, stated that preventing certain transactions from being mined reflects a misunderstanding of the relationship between open-source software users and developers. This stance has led to frustration among some Bitcoin users, with Satoshi Action Fund CEO Dennis Porter expressing a loss of faith in Bitcoin Core development and hinting at potential withdrawal of support.

Since the introduction of MPR #32406 on April 28, Bitcoin Core’s market share of Bitcoin nodes has decreased from around 98% to just over 88%. The Bitcoin Knots client has gained almost all of this lost market share, now sitting at 11.48%. Some commentators, like Matthew R. Kratter, suggest that this decision could lead to long-term trouble for Bitcoin Core, with its dominance potentially falling to the 20-30% range within the next one to three years.