This post was originally published on this site.
Key Takeaways
-
The Cat BIP proposes freezing certain non-monetary UTXOs to curb blockchain bloat.
-
Developers are split on whether Bitcoin should prioritize money over data use cases.
-
Ordinals could lose transferability if their UTXOs are deemed non-monetary.
A new Bitcoin Improvement Proposal (BIP) draft , informally titled “The Cat,” has generated a lively debate within the Bitcoin development community.
The Cat proposes a consensus-level change that would render certain unspent transaction outputs (UTXOs) unspendable, reigniting a debate over one of the most contentious questions in Bitcoin development: whether the network should tolerate non-monetary use cases that constrain throughput.
The Challenge of UTXO Bloat
xBitcoin does not track account balances in the way traditional banking systems do. Instead, every transaction creates outputs, and if an output has not yet been spent in a later transaction, it remains part of the global UTXO set.
Each full node must store and validate this entire set to independently verify the state of the network. The larger the UTXO set becomes, the more disk space, memory, and processing power nodes require.
For most of Bitcoin’s history, UTXOs were overwhelmingly monetary in nature. They represented coins that were expected to be spent again in the future. However, that assumption has been weakened by the rise of Ordinals, Bitcoin Stamps, and token protocols that deliberately create tiny outputs to anchor data on-chain.
These UTXOs contain little economic value and are never meant to be spent. Yet, because they are technically valid outputs, they must be tracked indefinitely by every full node.
What Does The Cat Propose?
The Cat draft attempts to address UTXO bloat by formally recognizing that not all outputs serve a monetary purpose.
It proposes a one-time snapshot of the blockchain to identify outputs associated with known data-embedding schemes and classify them as non-monetary UTXOs. Once classified, these outputs would be unspendable at the consensus level and would no longer function as coins.
By removing the ability to spend or trade small outputs, the proposal aims to eliminate the economic motivation to create large volumes of non-monetary UTXOs in the first place.
This framing places the draft squarely within a long-running philosophical divide.
One group, largely composed of node operators and conservative protocol developers, views Bitcoin primarily as a monetary system. From their perspective, uses that permanently bloat the UTXO set without serving payment or savings functions are seen as technical debt imposed on the entire network.
On the other side are developers and users in the Ordinals and inscription ecosystem, who see Bitcoin as a neutral settlement layer where any valid transaction should be treated equally.
Implications for Ordinals
If implemented, “The Cat” proposal could have severe consequences for Bitcoin Ordinals.
Many existing inscriptions rely on UTXOs that would likely fall into the non-monetary category described in the draft. If those outputs were rendered unspendable, they would lose their ability to be transferred, bundled, or economically interacted with on-chain.
While the data itself would remain embedded in Bitcoin’s history, its role as a tradable or programmable asset would be fundamentally altered. Future inscription systems might adapt by increasing the value of outputs or avoiding UTXO creation altogether, but existing projects would face a sharp and possibly terminal disruption.