BIP-110 Puts Bitcoin Exchanges and Custodians on Alert

Bitcoin faces a significant governance and operational milestone as the proposed BIP-110 soft fork approaches its mandatory-signaling period. The proposal would impose consensus-level restrictions on several forms of transaction data, making coordination among miners, node operators, users, exchanges, and custodians central to its deployment.

The proposal’s timeline has also made the prospect of a chain split an operational consideration for organizations that custody Bitcoin, operate exchanges, run full nodes, or rely on Bitcoin’s base layer for settlement.

BIP-110 Activation Mechanics and Protocol Restrictions

According to analysis published by Bitcoin Magazine, BIP-110 enters mandatory signaling at block 961,632, projected around August 9, 2026. It must lock in no later than block 963,648, projected for late August, and its new transaction rules are projected to activate at block 965,664 in early September.

The proposal uses a 55% signaling threshold. A CryptoRank report describing the BIP text states that miner-driven lock-in requires 1,109 of 2,016 blocks to signal during a difficulty-adjustment period. The same report describes a mandatory-signaling period running from blocks 961,632 through 963,647.

BIP-110 restricts large data pushes, oversized output scripts, undefined witness versions, Taproot annexes, deep Taproot control blocks, OP_SUCCESS opcodes, and certain Tapscript conditionals. UTXOs created before activation are grandfathered, while standard monetary uses remain compatible with the proposed rules.

The Bitcoin Magazine analysis says the restrictions would apply for 52,416 blocks, or about one year. CryptoRank’s account of the BIP text further states that the rules expire after that active period.

Reported Miner Signaling Levels

A CryptoRank report, citing BGeometrics data retrieved on July 3 and current through July 2, reported 38 BIP-110 signaling blocks out of 9,066 blocks produced since May 1. That measurement equals 0.42% of blocks during the stated period.

The report also said that the latest seven-day window in the dataset, from June 26 through July 2, showed eight signaling blocks out of 1,000 total blocks, or 0.8%. It characterized those levels as far below the 55% threshold required for miner-driven lock-in.

Bitcoin’s consensus process depends on coordination among miners, users, and nodes. Miners decide which valid chain to extend, users decide which coins, deposits, and payments to recognize, and nodes independently choose the rules they enforce. Durable consensus emerges when those groups converge on the same chain.

Chain Split Dynamics and Corporate Impacts

For most corporations that hold Bitcoin as a treasury reserve asset, BIP-110 has limited direct implications because standard monetary transactions remain compatible with the proposal’s rules. Corporations using Bitcoin for payments also face limited direct impact from ordinary on-chain payments, while ordinary Lightning payments occur off-chain.

A chain split could nevertheless affect organizations that use or support Bitcoin infrastructure. If miners build a chain that does not comply with BIP-110, enforcing nodes can separate from the broader network. Non-BIP-110 nodes may continue following the branch with the greatest accumulated proof of work, while BIP-110 nodes could remain on a compliant branch with less accumulated work.

Corporations that run their own full nodes have a direct implementation choice. During mandatory signaling, a BIP-110 node rejects blocks that do not signal bit 4. After activation, it also rejects blocks containing transactions that violate BIP-110, while a non-BIP-110 node can accept blocks that remain valid under the existing rules.

Lightning Network operations can also be affected by a chain split because channel monitoring, force-close behavior, and the chain a Lightning node treats as authoritative depend on the underlying chain. The Bitcoin Magazine analysis notes that many corporations use third-party payment providers, which can reduce the direct operational burden for those users.

Exchange Settlement and Double-Spend Considerations

Bitcoin Magazine advises exchanges and institutional custody operators to prepare for settlement uncertainty during an extended split. Under that scenario, the ordinary six-confirmation standard can lose much of its value because each branch may independently show six confirmations.

Operators should monitor both branches, raise confirmation requirements, pause large deposits or withdrawals when risk rises, and delay final settlement until one branch has decisively accumulated more work or a transaction has sufficient depth on all viable branches. Different validation rules can produce chain splits, false confirmations, and double-spend risk.

If a deposit appears on both branches, an operator may need to assess the confirmation depth and work on each branch before treating it as final. If a transaction appears on only one branch, the source analysis recommends waiting for that branch to prevail or applying chain-specific accounting. Because BIP-110 does not prohibit monetary transactions, monetary transactions can remain valid across both rule sets.

Operational Planning Ahead of the Activation Window

Under the deployment mechanics described in the CryptoRank report, miner-driven lock-in requires the 55% signaling threshold during a difficulty-adjustment period and has a lock-in deadline of block 963,648. If that threshold is not reached during the relevant period, miner-driven lock-in does not occur during that period.

For miners, the central consideration is which branch other miners, nodes, and users are expected to recognize and extend. Mining companies may need to track chainwork, signaling, validity under both rule sets, their pool’s position, and the market value assigned to each branch if independent chains develop.

For exchanges and custodians, the practical preparation is to lengthen settlement procedures and maintain visibility into both chains should a split occur. For node-running corporations that support BIP-110, the Bitcoin Magazine analysis identifies running a BIP-110 implementation as the relevant operational step. For most corporate Bitcoin users, however, the proposal changes little unless a chain split develops.