The alliance is unusual. Michael Saylor, the corporate whale who turned MicroStrategy into a leveraged Bitcoin ETF, and Adam Back, the cypherpunk who helped birth Hashcash, rarely agree on anything. Yet they stand together against BIP 110. That alone should freeze the market’s attention.
BIP 110 is not a protocol tweak. It is a proposed change to Bitcoin’s consensus layer that both Saylor and Back explicitly label a “dangerous precedent.” The exact technical details remain obscured—deliberately or through journalistic laziness—but the opposition is a signal. In a system governed by informal consensus, the alignment of capital (Saylor) and code (Back) carries weight.
Context: The Governance Vacuum
Bitcoin has no formal governance. There is no board, no token vote, no foundation with veto power. The BIP process is a suggestion engine, not a parliament. Proposals are debated on mailing lists, tested on signets, and ultimately accepted or rejected by node operators and miners. This organic model has worked for 15 years, but it is opaque. When a proposal triggers public condemnation from two of the ecosystem’s most visible actors, the market is left to interpret shadows.
BIP 110, according to fragmented leaks, targets the block reward schedule. Some sources suggest it introduces a demurrage mechanism—a slow decay of unspent UTXOs over time. Others claim it adjusts the difficulty algorithm to favor ASIC mining pools. Neither version is confirmed, but both would alter Bitcoin’s core value proposition: fixed supply and permissionless access.
Core: Mathematical Skepticism Meets Governance Risk
I have audited 40+ token models since 2017. The first lesson is that governance is a technical bug. Every protocol that relies on “community consensus” without a formal escalation path eventually fractures. Bitcoin survived the blocksize war because the majority had a clear incentive to preserve the status quo. Today, the incentive landscape has shifted.
Let’s model the risk. Assume BIP 110 introduces a 1% annual demurrage on UTXOs older than 12 months. The immediate effect is a tax on hodling—a direct attack on the digital gold narrative. The long-term effect is a transfer of value from long-term holders to active transactors. Who benefits? Exchanges, payment processors, and miners. Who loses? Institutional custodians like MicroStrategy.
Saylor’s opposition is rational. His firm holds over 200,000 BTC, most in cold storage. A demurrage would erode his balance sheet by ~2,000 BTC per year. That is real capital destruction. Back’s opposition is more technical: demurrage requires script changes that might weaken Bitcoin’s security assumptions, specifically the ability to verify coin ownership offline.
The market has not priced this risk. The ETF flows remain positive, and the narrative of “digital gold” dominates. But volatility is the tax on unproven consensus. BIP 110, even as a rumor, introduces a tail risk that the asset’s monetary policy can be altered by a coalition of miners and a handful of developers.
Contrarian: The Opposition Is the Signal, Not the Noise
Here is the counter-intuitive view: the public opposition from Saylor and Back is a sign that the governance system is working. The BIP process is designed to surface disagreements early. The fact that two influential voices can halt momentum is a feature, not a bug. It prevents stealth changes that could destroy trust.
But that trust is fragile. The real risk is not that BIP 110 passes—it likely will not, given the backlash. The real risk is that the perception of instability spooks the institutional capital that entered via ETFs in 2024. These investors are not Bitcoin purists. They are asset allocators who modeled Bitcoin as a fixed-supply, rules-based asset. Any hint of discretionary rule changes will trigger a reassessment of risk premiums.
Opacity is the enemy of alpha. Without a clear disclosure of BIP 110’s technical specifics, every investor is flying blind. The hedge funds that exploit basis trades will ignore this noise. The long-term allocators will hesitate. And hesitation, in a liquidity-driven market, translates to sell pressure.
Takeaway: Watch Liquidity, Not Governance Theater
The macro context is everything. We are in a bull cycle fueled by global M2 expansion and spot ETF demand. Bitcoin’s price action remains tightly correlated with the Fed’s balance sheet. Governance squabbles are endogenous noise—they matter only when they break the liquidity channel.
If BIP 110 dies in committee, which is the base case, this article becomes a footnote. But if the proposal is forcibly activated via miner signalling, we face a fork scenario. In that case, the market will vote with capital. I expect the chain with the most liquidity—the one backed by ETF issuers—to survive.
Based on my modeling of similar events (2017 SegWit, 2020 Stablecoin debates), the optimal response is to do nothing. The volatility spike will create arbitrage opportunities in the perpetual futures market. The basis between March and June futures on CME will widen. That is the trade, not a directional bet.
Volatility is the tax on unproven consensus. BIP 110 is currently unproven. Wait for the details, then decide. Until then, treat the noise as information—but not as a signal to trade against the trend.