Bitcoin holders could lose real BTC if they try to sell coins created by a potential BIP-110 chain split without first separating their balances.
Summary
- BIP-110 nodes will reject non-signaling blocks beginning at Bitcoin block 961,632.
- A minority chain could emerge without built-in replay protection if miners continue producing compatible blocks.
- Transactions selling forked coins could also move the holder’s real BTC on the main chain.
- Miner signaling stood near 2.6% on Friday, far below the proposal’s 55% threshold.
BIP-110 fork could put real Bitcoin at risk
Bitcoin developer Kevin Loaec warned holders against moving coins following a possible BIP-110 chain split, citing the risk of replay attacks.
A split would create two transaction histories with the same balances at the point of separation. Anyone holding 10 BTC before the fork, for example, would initially control 10 coins on each resulting chain.
This second balance may appear to offer free money if a buyer offers to purchase the BIP-110 coins. However, both networks could initially recognize the same signed transaction.
A buyer could copy the transaction used to transfer the forked coins and broadcast it on the main Bitcoin network. If accepted, the seller would transfer the same amount of real BTC to the buyer’s address.
The attack would not give the buyer access to the holder’s entire wallet. Only the inputs included in the signed transaction would move, while transaction fees could be charged on both chains.
Loaec said large holders may be targeted first because a successful replay involving their wallets would produce a larger return. Holders who do not know how to separate the balances can avoid that risk by leaving their coins unmoved, as there would be no signed transaction to replay.
Why Bitcoin could split at block 961,632
BIP-110, formally called the Reduced Data Temporary Softfork, seeks to restrict images, text and other non-payment data stored through Bitcoin transactions for about one year.
Miners can activate the proposal early by signaling support in 1,109 of a 2,016-block difficulty period, equal to 55% of blocks. That threshold has not been reached.
The proposal also contains a mandatory signaling mechanism. From block 961,632 through block 963,647, nodes enforcing BIP-110 will reject any block that does not signal support through bit 4. Lock-in would occur no later than block 963,648, with the new data restrictions becoming active at block 965,664.
Most miners are not signaling for the proposal. The BIP-110 tracker showed support near 2.6% on Friday, making it possible that enforcing nodes reject the chain supported by most Bitcoin mining power.
A second chain would emerge only if miners continue extending the BIP-110 branch. Without enough mining power, that branch could produce blocks slowly or stop advancing entirely. The split is therefore possible, but not guaranteed.
Replay protection remains absent during the split
BIP-110 does not automatically make transactions valid on one branch and invalid on the other. Its restrictions on transaction data are not scheduled to activate until block 965,664, expected around the beginning of September.
Until the chains produce coins unique to their respective histories, ordinary transactions may remain valid on both. Users would need to “split” their coins by obtaining and spending outputs that exist on only one branch before transacting safely.
Wallet providers or exchanges could eventually create tools to handle that process. However, users who attempt to sell forked coins immediately may have no clear way to confirm that the transaction cannot be replayed.
US holders could also face tax and record-keeping questions if the minority-chain coins acquire a market value. The immediate concern, however, is technical: spending the new asset could unintentionally transfer an equivalent amount of BTC.
BIP-110 opposition grows before signaling window
crypto.news previously reported that Blockstream co-founder Adam Back and Strategy founder Michael Saylor opposed BIP-110, citing censorship and chain-split concerns.
Saylor described the proposal as a consensus change arising from a dispute over spam and warned that it would establish a dangerous precedent. Bitcoin developer Luke Dashjr has continued supporting BIP-110, arguing that non-payment data increases storage costs and moves Bitcoin away from its monetary purpose.
The mandatory signaling window is expected to begin this weekend, although the timing could shift because Bitcoin blocks do not arrive at exact ten-minute intervals. Holders who cannot verify that their coins have been separated face the lowest replay risk by waiting until wallets, exchanges, and miners clarify which chain they support.