Bitcoin is facing its biggest governance conflict in years. As the Bitcoin blockchain nears block height 961,632, debate is spreading over BIP-110, an improvement proposal to restrict the recording of non-financial data. Some are even raising the possibility of a chain split, drawing market attention.

On June 11 (local time), blockchain outlet CryptoSlate said BIP-110 includes introducing new consensus rules that limit the amount of non-financial data that can be included in transactions. It is interpreted as a measure effectively targeting uses such as Ordinals and Runes that record text, images and token-related data on Bitcoin’s base layer.

Supporters argue the proposal is intended to protect Bitcoin’s original purpose. They say non-financial data is taking up excessive block space, raising node operating costs and reducing Bitcoin’s usefulness as a payment network.

Bitcoin analyst Luis Marcano (루이스 마르카노) argued that if nodes applying BIP-110 reject blocks that include large data inscriptions, hashpower could ultimately move to the chain with higher economic value.

Opponents, meanwhile, are expressing greater concern about the way it is being pursued than about the rule change itself. Major upgrades to the Bitcoin network are generally carried out based on broad miner consensus. But BIP-110 applies a relatively low signalling threshold of 55 percent, and controversy is growing because it includes a plan to enforce it at the node level even without sufficient miner support.

As a result, some are raising the possibility of network fragmentation. Adam Back (아담 백), a prominent Bitcoin developer and chief executive of Blockstream, warned that BIP-110 is not only technically insufficient, but that forcing the rule without economic consensus would raise the likelihood of a minority chain split.

He also drew a line against comparisons with the 2017 SegWit activation process. He said broad consensus existed then across developers, miners and corporate infrastructure, but that support at that level has not formed now.

Bitcoin developer and security expert Jameson Lopp (제임슨 롭) also issued a critical view. He said the proposal was an excessive response under the pretext of spam prevention and argued it could cause some wallet function failures or problems moving funds. He also said users could bypass the restriction by using other transaction fields to record data, limiting its effectiveness.

The dispute is expanding beyond technical issues to the question of neutrality, a core value of Bitcoin. The opposing camp worries that Bitcoin’s principle of processing valid transactions that have paid fees, regardless of their content, could be undermined. They argue that if a precedent is set for blocking certain types of transactions, censorship could later expand to privacy-protecting transactions or politically sensitive transactions.

Supporters, in contrast, stress that BIP-110 is designed as a temporary measure applied for about 1 year. Opponents counter that a temporary rule change could instead create greater confusion for corporate wallets and cryptocurrency infrastructure operators.

In the market, views are that the likelihood of Bitcoin’s main chain actually splitting is not high for now. Bitfinex’s analysis team assessed the issue as closer to a "stress test for Bitcoin governance" than a "chain split threat". They cited that node support for BIP-110 remains limited and that major mining pools are also maintaining a wait-and-see stance.

Still, market participants are watching how infrastructure operators such as exchanges and custodians respond as the activation deadline nears. If some nodes maintain a separate chain, centralized exchanges may temporarily halt deposits and withdrawals to prevent replay attacks and verify chain stability.

In the industry, views are that BIP-110 is unlikely to shake Bitcoin’s economic standing in the near term, but will be an important case for testing the Bitcoin ecosystem’s decision-making structure and governance system.