Quantum computing poses a significant threat to Bitcoin and the broader cryptocurrency landscape due to its potential to undermine the cryptographic foundations that secure these digital assets. Recently, however, a more immediate concern has risen within the Bitcoin community regarding a controversial Bitcoin Improvement Proposal (BIP) referred to as “The Cat.” This proposal has ignited heated discussions among developers about the possibility of designating millions of inscription-related outputs as permanently unspendable.
The draft BIP aims to tackle the issue of blockchain bloat, which has been exacerbated by the proliferation of Unspent Transaction Outputs (UTXOs) resulting from Ordinals and Bitcoin Stamps. Each Bitcoin transaction utilizes coins from previous transactions, and when an output remains unspent, it becomes classified as a UTXO. The Bitcoin network has witnessed a dramatic rise in UTXOs, climbing from approximately 80 to 90 million earlier in 2023 to over 160 million, with many of these outputs holding insufficient value for practical transactions. Nearly half of these UTXOs contain fewer than 1,000 satoshis, functioning primarily as storage rather than means of exchange.
This surge in UTXOs has raised challenges for node operators and miners, who are required to validate the entire UTXO set. Prominent Bitcoin developer Mark Erhardt has criticized the use of Stamps in particular, deeming it a “technically egregious” application of the blockchain. Historically, Bitcoin has favored monetary transactions, limiting unnecessary data storage to maintain efficiency. The OP_RETURN function was introduced to deter such practices by placing limitations on the use of blockchain for non-monetary data.
The proposed “Cat” BIP suggests the introduction of Non-Monetary UTXOs (NMUs), which would be flagged by indexers. Outputs classified as NMUs would be rendered nonspendable and excluded from transaction validations, effectively pruning the UTXO set and alleviating the storage burden on nodes. These NMUs would be determined based on specific value thresholds, particularly targeting outputs under 1,000 satoshis.
Proponents of the BIP argue that it would create an economic disincentive against spamming the network. Supporters believe that “The Cat” could send a strong message about Bitcoin’s rejection of unnecessary bloat. Critics, however, raise serious concerns, viewing the proposal as a fundamental shift in Bitcoin’s property rights and core philosophies. Notable developer Greg Maxwell argues that such a move could be perceived as a form of asset seizure, fundamentally undermining Bitcoin’s resistance to censorship and expropriation.
Opponents of the proposal warn that freezing certain UTXOs might open the door to future confiscation of digital assets, thereby threatening the decentralized and anarchistic principles that underpin the Bitcoin community. This ongoing debate raises crucial questions about whether the Bitcoin network should engage in discriminating between transaction types at the protocol level. While some view inscription spam as a threat, others caution against empowering the protocol to judge the legitimacy of transactions.
The discourse also reflects broader tensions regarding Bitcoin’s identity, particularly concerning its role as a monetary system versus its commitment to censorship resistance. Supporters of the BIP point to a tradition of restricting data storage, while critics emphasize that Ordinals and Stamps currently operate within existing rules.
As discussions continue surrounding the draft BIP, the outcome will have far-reaching implications for technical decisions and how Bitcoin balances its foundational values with operational necessities. Regardless of the proposal’s fate, the conversation underscores the ongoing struggle between the need for efficiency and adherence to core principles as Bitcoin navigates an evolving landscape filled with both challenges and opportunities.
