When Michael Saylor and Adam Back publicly denounce a Bitcoin Improvement Proposal, the ecosystem stops to listen. Last week, a hastily drafted BIP 110 surfaced in the Bitcoin-dev mailing list, and within hours, two of the most influential voices in the space—Saylor, the corporate Bitcoin maximalist, and Back, the cypherpunk who helped birth the proof-of-work algorithm—issued coordinated warnings. “This is a dangerous precedent,” Saylor tweeted, while Back quietly seconded the sentiment in a rare public statement. The crypto press erupted, yet almost no one could explain what BIP 110 actually proposed. The lack of transparent discussion was itself a red flag.
I have spent the past decade auditing cryptographic protocols and designing decentralized governance systems. What I see in this episode is not merely a technical debate, but a test of Bitcoin's fundamental social contract. Bitcoin's governance is often romanticized as a pure meritocracy—code is law, and miners, developers, and users self-organize around rough consensus. But the reality is messier. BIP 110, as far as I can reconstruct from fragmented sources and leaks, attempts to modify Bitcoin's inflation schedule by introducing a small, programmable tail emission to fund long-term development. On paper, it sounds reasonable: security budget concerns are real, and after the last block is mined in 2140, transaction fees alone may not sustain the network. Yet the proposal was written by a group of developers with ties to a prominent venture capital fund, raising fears of centralization and rent-seeking.
The core of the controversy lies in the mechanics. BIP 110 uses a novel cryptographic primitive called 'inflationary vaults' that allows a multisig committee to mint new coins up to 1% of the existing supply per year, with the proceeds distributed to approved development teams. Proponents argue this is a low-risk, reversible upgrade—activate it for a trial period, and if the community dislikes the results, the vault can be frozen via a supermajority miner vote. But Saylor and Back are not convinced. From my own experience auditing similar trust-based systems during the DeFi summer, I have seen how 'reversible' mechanisms can become permanent when vested interests align. The Ethereum community learned this the hard way with the DAO fork. Once you introduce a minting key, even a multisig one, you introduce political vulnerability.
Let me be blunt: Bitcoin's strength is its unforgiving monetary policy. Every modification that introduces discretionary emission weakens the narrative of digital scarcity. I have witnessed governance battles before—in 2017, during the SegWit2x civil war, I helped mediate between factions in the Paris Bitcoin meetup. That conflict was rooted in a legitimate scaling debate, but it also revealed how quickly community trust can evaporate when a handful of players attempt to force change. BIP 110 feels eerily similar. The authors bypassed the usual period of open discussion, perhaps fearing immediate rejection. In doing so, they triggered the very backlash they sought to avoid. Saylor and Back, by opposing the proposal so early, are signaling that the settler class—the long-term holders and infrastructure builders—will not tolerate rule changes without broad consensus.
Code is law, but people are the soul. This phrase is not a platitude; it is a governance principle. A protocol that cannot adapt to evolving needs will ossify, but a protocol that changes too easily becomes centralized in practice. BIP 110's inflationary vault may have been designed with good intentions—to ensure Bitcoin's security budget never becomes an existential threat. However, the way it was introduced, without a clear discussion of who controls the vault and how funds would be allocated, undermines the very decentralization it claims to protect. I have written about this in my analysis of DAO treasury management: the most dangerous risk is not the code bug, but the ambiguity of authority. When you don't clearly define 'who decides,' the strongest coalition dictates the outcome.
Let us examine the technical assumptions behind BIP 110 more closely. The proposal uses a threshold ECDSA signature scheme to represent the vault committee. My cryptographic training tells me that while threshold schemes are robust against single-point failures, they introduce complexity in key generation and rotation. More importantly, the committee is selected through an opaque process—invite-only, based on past contributions to Bitcoin Core? The lack of transparency is a flashing red light. In my own work designing the Paris Protocol DAO, we learned that the legitimacy of any committee must be earned through verifiable on-chain identity and periodic elections. Bitcoin L1 has no native identity layer, so BIP 110 proposes a reputation-based system relying on 'community trust.' But trust is not measurable. As Nick Szabo once said, 'Trusted third parties are security holes.' BIP 110 would create a permanent security hole.
Moreover, the inflationary vault creates perverse incentives. Once miners realize they can earn extra revenue from tail emission, they may lobby for its expansion. History teaches us that seigniorage is addictive. Central banks erode purchasing power because printing is easy; Bitcoin was designed to make printing hard. Even a 1% annual inflation, when compounded over decades, dilutes the holdings of every HODLer. The proponents claim the inflation is temporary and capped, but 'temporary' in crypto often becomes 'permanent' after the first fork. Look at Litecoin's halvings—each one was intended to mirror Bitcoin, but proponents now debate adjusting the schedule. The slippery slope is real.
Don't govern the exit, govern the entrance. This is another principle I repeat in my governance workshops—meaning, design systems that make it harder for bad actors to enter rather than relying on penalties to kick them out. BIP 110 governs the exit (it can be frozen by miners), but it fails to govern the entrance: anyone with sufficient capital and political connections could potentially become a vault signer. Without strict admission criteria—like proof of work, or public nomination and removal by a larger stakeholder vote—the vault becomes a captured institution.
Now, consider the contrarian angle: perhaps BIP 110 is a necessary stress test. Bitcoin governance has remained static for years; the last major change was SegWit in 2017. Since then, the ecosystem has grown by orders of magnitude, yet the decision-making process remains informal—emails, public comments, and signaling tweets. This fragility is dangerous. A more structured governance mechanism, even an imperfect one, could provide a clearer path for future upgrades like OP_CAT or covenants. The opposition from Saylor and Back might reflect not a rejection of any change, but a rejection of this specific change because it fails the legitimacy test. If the same proposal had been discussed openly for months, with a formal vote by miner hash power and node operators, would they still oppose? Probably not. The lesson is not 'never change Bitcoin,' but 'change Bitcoin only with deep community consent.'
Yet I remain skeptical. The speed with which Saylor and Back moved to quash BIP 110 suggests an established power structure that can veto proposals without a vote. This is not pure decentralization; it's an oligarchy of influential voices. Bitcoin's governance has always had an element of 'lazy consensus'—if no one strong enough objects, a change can be merged. But now we see that a few individuals can effectively shut down a proposal. Is that healthy? In my view, it's a double-edged sword. It prevents reckless changes but also concentrates decision-making. The community must find a middle ground—perhaps a formalized Bitcoin Governance Council with rotating membership, but still grounded in proof-of-work voting.
For investors and users, the near-term impact is minimal. BIP 110 is all but dead after the public backlash. Yet the underlying tensions remain. The next proposal will surface, and the next, until Bitcoin either ossifies completely or evolves into a system with better governance. My recommendation: read the raw materials. Search for the BIP 110 email thread on the bitcoin-dev list. Form your own opinion based on evidence, not tweets. And remember, the strongest defense of Bitcoin is not magically keeping it unchanged, but ensuring that any change respects the principle that code is law, but people are the soul.
The bear market taught us that community is everything. In 2022, when I ran the 'Blockchain Anchor' mentorship program, I saw how fear and uncertainty can tear groups apart. Bitcoin's community must not allow a governance disagreement to turn into a schism. We need more empathy, more transparency, and a clearer path for legitimate upgrades. BIP 110 may be defeated, but the conversation it started is just beginning. Let this be a wake-up call: don't govern the exit, govern the entrance, and listen more than you code.