Core–Knots Split: Policy Drift, Fees, and Network Reliability

• My 'briefing notes' summarize the content of podcast episodes; they do not reflect my own views.
• They contain (1) a summary of podcast content, (2) potential information gaps, and (3) some speculative views on wider Bitcoin implications.
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Summary

The September 27, 2025 episode of What Bitcoin Did features Samson Mow analyzing the Core vs. Knots split. The discussion centers on mempool policy divergence, OP_RETURN defaults, fee-floor erosion, UTXO growth, and governance trust. The stakes span miner competitiveness, exchange reliability, and treasurer confidence, signaling concrete research and policy needs.

Take-Home Messages

1. Policy fragmentation: Divergent relay and standardness settings degrade compact-block efficiency and RBF reliability.
2. Weakening fee floors: Sub-1 sat/vB inclusions complicate estimation and reduce fees as a coordination tool.
3. UTXO growth pressure: Rising RAM footprints raise barriers to entry for smaller miners and nodes.
4. Cadence before scope: Slower releases with evidence gates lower governance friction while preserving critical fixes.
5. Market-structure risk: Sovereign accumulation plus off-chain claims heightens price-discovery and attestation challenges.

Overview

Samson Mow frames the Knots-Core dispute as a collision between policy changes and operational realities that surfaced after the ordinals era. He links the present split to documentation that reframed a reported bug as intended behavior and to shifting norms around non-monetary data. He presents this as a governance signal that undermines confidence in release stewardship.

A central claim is that mempool policy divergence creates measurable performance costs across the network. Mow argues that compact-block efficiency, RBF success, and propagation suffer when nodes and pools enforce different filters. He treats these costs as user-visible friction that wallets and exchanges must absorb.

UTXO growth and RAM are positioned as quiet constraints on decentralization. Mow warns that higher validation and memory requirements tilt competitiveness toward larger miners with better capital access. He frames hardware thresholds as a function of policy defaults rather than hashrate alone.

On software choices, he recommends holding at Core 29 while evaluating a “middle” client to avoid abrupt shifts. He supports slower release cadence and clearer demand tests for features with ambiguous benefits. He rejects alarmist claims that a single release “destroys” Bitcoin yet characterizes the trajectory as an operational risk that requires measurement and restraint.

Stakeholder Perspectives

1. Miners: Prefer predictable fee dynamics and bounded RAM growth to protect small-operator viability.
2. Exchanges: Need coherent mempool norms to reduce liveness failures and customer support load.
3. Wallet Developers: Seek stable relay policies to keep fee estimation and RBF behavior dependable.
4. Client Maintainers: Balance security fixes and scope control while preserving governance legitimacy.
5. Institutional Treasurers: Require assurance that settlement reliability is not eroded by client fragmentation.

Implications and Future Outlook

If relay and standardness policies continue to diverge, confirmation variance and failed replacements will rise for end users. Measurement of compact-block hit rates, propagation delays, and RBF outcomes becomes a priority to guide defaults. Clearer OP_RETURN guidance can reduce adversarial incentives and moderate UTXO growth.

UTXO RAM creep will shape mining structure if left unchecked. Smaller operators will exit or outsource validation unless client defaults and pruning strategies blunt memory pressure. Conservatism in release cadence, paired with targeted fixes, can lower political temperature while maintaining safety.

Macro dynamics will test market plumbing when sovereign accumulation intersects with off-chain claims. Custody attestations and inventory transparency will matter more as price discovery leans on opaque venues. Stakeholders that invest early in auditability and policy coherence will absorb shocks with fewer externalities.

Some Key Information Gaps

1. What measurable impacts do divergent mempool policies have on compact blocks, RBF success rates, and propagation delays? Quantifying user-visible effects will guide pools, wallets, and exchanges toward safer defaults.
2. What is the projected RAM footprint of the UTXO set under different data and fee regimes over 5–15 years? Forward curves for memory use inform miner investment, client pruning strategies, and decentralization policy.
3. Does removing OP_RETURN limits reduce UTXO bloat or instead incentivize larger on-chain data payloads? Evidence on behavioral responses will determine whether defaults mitigate or amplify resource strain.
4. Under what conditions do sub-1 sat/vB inclusions become economically rational for miners? Modeling these thresholds can stabilize fee markets without collusive coordination.
5. How exposed is price discovery to off-chain “paper Bitcoin” during nation-state accumulation? Attestation standards and inventory audits are needed to maintain trust as official demand rises.

Broader Implications for Bitcoin

Network Reliability as Public Infrastructure

Reliability metrics such as propagation latency, compact-block success, and RBF efficacy will be treated like public-utility indicators as adoption deepens. Standardized reporting could inform risk models for exchanges, custodians, and payment processors. Over time, policymakers may benchmark Bitcoin settlement against these metrics when evaluating systemic importance.

Decentralization Boundaries Set by Hardware Economics

If UTXO RAM growth outpaces commodity hardware, de facto participation will consolidate among well-capitalized miners and service providers. Client-level pruning, efficient data structures, and conservative defaults become governance levers that preserve entry for smaller actors. These design choices will shape regional mining diversity and regulatory posture toward the sector.

Policy Signaling Through Client Defaults

Default settings on OP_RETURN, relay filters, and fee policies function as soft regulation with hard consequences. As defaults shift, wallets, pools, and exchanges will realign behavior without formal rulemaking. This dynamic elevates transparency and change-management discipline as core elements of technical governance.

Auditability as Market Hygiene

Sovereign and institutional accumulation will pressure custody attestations and inventory disclosures across ETFs, lenders, and venues. Standardized proofs and periodic audits will become prerequisites for trust and for access to regulated capital pools. Successful frameworks could generalize to other bearer-asset markets with similar settlement properties.

Release Cadence as Risk Control

A slower, evidence-gated cadence can lower integration risk across heterogeneous production stacks. Enterprises will budget fewer emergency patches and reduce operational drift if feature scope stabilizes. This approach supports long-horizon planning for infrastructure that treats Bitcoin as a critical settlement layer.