Quantum computers remain a major concern for Bitcoin and the crypto market, posing security risks to core cryptographic technologies. However, a new threat is emerging: the controversial BIP “Cat,” sparking heated debate among developers about labeling millions of inscription-related outputs as permanently unusable.
This draft BIP attempts to address concerns about blockchain oversaturation while raising important questions about ownership and the fundamental principles of Bitcoin. Community reactions have been varied, with some strongly supporting it and others warning of the potential to set a dangerous precedent.
Bitcoin developers debate BIP “The Cat”: a proposed solution for handling UTXO spam from Ordinals and Stamps.
Each Bitcoin transaction spends the coins received from the previous transaction. The outputs of a transaction are the amounts of Bitcoin sent to addresses. When an output remains unused, it becomes an Unspent Transaction Output (UTXO).
Simply put, UTXO is the portion of Bitcoin you can use next time.
This plan focuses on addressing the recent doubling of Bitcoin's UTXO count, reaching over 160 million in 2023, largely driven by Ordinals and Bitcoin Stamps .
In recent years, the number of Bitcoin UTXOs has increased dramatically, creating challenges for node operators and miners. According to a draft discussion , the number of UTXOs has risen from approximately 80–90 million to over 160 million in 2023.
Currently, nearly half of UTXOs contain less than 1,000 satoshi, with most existing primarily for data storage rather than actual currency transactions.
The main reason is that inscriptions via Ordinals, placing data in the Taproot witness field, and Bitcoin Stamps produce unusable output by using spoofed multisig addresses.
These methods bypass regulations like OP_RETURN, which were created from the outset to restrict non-payment-related data from reaching the blockchain. OP_RETURN's 80-byte transfer policy helped mitigate blockchain bloat, but the new techniques leverage the novel transaction format to store data outside the blockchain.
The impact is also significant. Each node has to download the entire UTXO set to verify transactions, increasing costs for miners and those operating multiple nodes.
Bitcoin developer Mark Erhardt argues that using stamp-style UTXO sets is "arguably one of the most technically damaging ways to undermine the blockchain."
Traditionally, Bitcoin has always prioritized financial transactions and limited data storage. Bitcoin Core developer Greg Maxwell said of the OP_RETURN limit: “Part of the idea here is to guide people toward maximizing savings.”
However, both Ordinals and Stamps have managed to circumvent these rules, leading to calls for stronger measures, such as "The Cat".
Inside the BIP proposal “The Cat”
This proposal introduces the concept of Non-Monetary UTXOs (NMUs), which are flagged by indexers with the NMU Bit . Inscription-related outputs identified in this way become non-consumable, meaning they can no longer be used as transaction inputs.
The nodes will remove these outputs from the dataset, reducing storage requirements and operating costs.
“The new BIP proposal, ‘The Cat,’ aims to combat spam from Bitcoin Ordinals and Stamps by freezing satoshi through consensus. The idea is to render millions of tiny data-only UTXOs unusable, removing these sats from circulation but simultaneously creating an unprecedented precedent for devaluing satoshi,” wrote Livecoins, a well-known account on X.
The classification will be value-based, focusing on UTXOs below 1,000 satoshi at certain times. When this feature is enabled, the node will ignore these NMUs during transaction validation.
Supporters argue that this method deters spam through economic mechanisms, eliminating the need for constant technical filtering. They, like TwoLargePizzas, believe the benefits extend beyond a one-time "cleanup."
By clearly stating that Bitcoin discourages data outside of payments, "The Cat" could deter future spamming attempts. Nona YoBidnes emphasized that spam accounts for 30–50% of all UTXOs, calling the proposal a strong "anti-spam warning" for the entire network.
BIP targets millions of unconsumed "dust" outputs, each consuming resources. For large-scale services, this accumulated burden results in real operating costs and slower node synchronization times for new users.
Debate: Property ownership and the core values of Bitcoin
Opponents present compelling arguments, claiming the proposal would fundamentally alter Bitcoin's attributes. Greg Maxwell, a prominent developer and privacy activist, argues that the storage savings are insufficient to justify "disabling UTXOs," calling it "property deprivation" that undermines Bitcoin's core value.
Programmer Ataraxia 009 warns that this change “could slide down a dangerous slope.” When blockchain consensus can freeze certain UTXOs, the future opens up the possibility of mass coin seizures.
This issue resonates with a public sentiment that places great importance on opposing censorship and property confiscation.
The debate centers on the question: Should Bitcoin differentiate between types of transactions at the protocol layer?
Supporters XEM spam inscription as an attack that needs to be eliminated, while opponents fear that the protocol will have the power to arbitrate whether every transaction is valid or not.
If the network is willing to delete satoshi for its own use, many fear this could pave the way for broader forms of interference later on.
The debate also highlights the tug-of-war over Bitcoin's "identity." Is Bitcoin merely a payment system, or does it also protect legitimate transactions from censorship?
Supporters cite traditional limitations on data storage, but opponents argue that existing Ordinals and Stamps remain valid under blockchain rules.
The community is still providing input during the XEM process of the draft before any official BIP is submitted. The outcome will impact not only the technical aspects but also how Bitcoin balances its core value with practical operational needs.
Regardless of the outcome of "The Cat," this debate has highlighted the conflict between operational efficiency and principles, as Bitcoin continues to expand and face new challenges.
