The Case for Bitcoin’s Ossification

The cost from unintended unforeseen consequences exceeds the benefits of innovation to the base layer.

Bitcoin developers are once again debating ossification versus innovation in the protocol. This debate has waged for years but is now reaching a fever pitch as discussion about covenants rages on. Up for consideration is whether the core developers should push a new soft fork to allow for covenants. Many covenant proposals are now circulating, ranging from narrow to broad scope.

Covenants allow Bitcoin users to share unspent transaction outputs, UTXOs. Today, individual entities and users have access to their own UTXO. However, as the cost of transacting on the base layer increases over time due to greater transaction fees, it will be more expensive for individuals to afford Bitcoin transactions. If multiple people can share a UTXO, they can split the cost of transacting across this group, allowing more user access to the base layer.