Bitcoin’s UTXO Bloat Crisis Ignites Heated Debate Over ’The Cat’ Proposal
Bitcoin's blockchain is getting fat—and a quirky fix called 'The Cat' has the community in a full-blown shouting match.
The UTXO Problem: A Ticking Time Bomb?
Every Bitcoin transaction leaves behind digital crumbs—unspent transaction outputs, or UTXOs. The network now carries over 200 million of them. That's a massive, growing ledger that slows down nodes, hikes fees, and threatens the very scalability Bitcoin needs for its next act. Core developers have been sweating this for years, but consensus on a fix? Elusive.
Enter 'The Cat': Elegant Solution or Dangerous Hack?
'The Cat' isn't a meme coin; it's a technical proposal with a mischievous name. The idea? Use a clever cryptographic trick to bundle thousands of tiny, dusty UTXOs into a single, neat output. Think of it as a blockchain compression tool. Proponents argue it's a surgical strike on bloat—no hard fork needed, just a smart upgrade that could slash node storage needs and future-proof the network.
But the critics are roaring louder. They see a potential attack vector—a backdoor that could, in theory, be exploited to spam the network or create unpredictable fee markets. The debate cuts to Bitcoin's core identity: Is it a pristine, immutable protocol where every change is a risk, or a living network that must adapt to survive? Trust in code is one thing; trusting other users not to abuse new features is another. (A lesson Wall Street never quite learned, but that's a different cynicism.)
The Verdict Hangs in the Balance
Right now, 'The Cat' is just a proposal—a spark in a powder keg of technical and ideological tension. It highlights a brutal truth: Bitcoin's success is creating its own biggest challenges. The community must decide if the elegance of the fix outweighs the perceived peril. One thing's certain: in the high-stakes world of digital gold, even the smallest change is a battle for the soul of the network.
What is a UTXO and why does it matter
In Bitcoin, every transaction creates outputs. If an output hasn’t been used yet, it is called a UTXO. Full nodes track all UTXOs to verify transactions and keep the network in sync.
UTXOs are kept in a database called the chainstate. Unlike old block data that pruned nodes can delete, UTXOs stay in the chainstate until they are spent or removed by a change in Bitcoin’s rules.
For almost all of Bitcoin’s history, the UTXO set grew slowly. By early 2023, it contained around 80 to 90 million entries.
That trend however, shifted rapidly with the rise of new data-embedding methods.
Ordinals and Bitcoin stamps explained
Ordinals are a technique that allows data such as images, text, or tokens to be associated with individual satoshis. This data is usually stored in the Taproot witness area of a transaction, which benefits from reduced fee weight.
Bitcoin Stamps takes a different approach by encoding data into outputs that are effectively unspendable, often using nonstandard transaction formats.
These systems generate large numbers of tiny outputs, many of them worth only a few hundred satoshis. Most are never used for payments and sit unspent after they are created.
Bitcoin developer Mark “Murch” Erhardt has been openly critical of bitcoin Stamps, describing them as “probably, from a technical perspective, one of the more egregious uses of blockchain.”
Rapid growth raises concerns
Once Ordinals and Stamps took off, the size of the UTXO set climbed quickly. By the end of 2023, the total count had more than doubled, pushing past 160 million.
By mid-2025, estimates suggested that more than 30% of all UTXOs were linked to Ordinal inscriptions. Nearly 49% of all UTXOs held less than 1,000 satoshis, strongly indicating non-economic usage.
The chainstate database expanded just as fast. Before 2023, it sat at around 4 to 5 GB. By early 2024, the chainstate had gone over 11 GB, which got node operators worried.
Developers warned that if it keeps growing like this, running a full node will need more storage and better hardware. That could push smaller participants out and slowly hurt Bitcoin’s decentralization.
What “The Cat” proposal suggests
The Cat proposal, put forward by developer Claire Ostrom, takes a different route. Instead of trying to stop these outputs from being created, it focuses on stripping away their economic usefulness after the fact.
At the center of the idea is a new category called Non-Monetary UTXOs (NMUs). These refer to very small outputs, under 1,000 satoshis, that contain Ordinal or Bitcoin Stamp data and were created during a defined period in the past.
If the proposal were activated, these NMUs WOULD no longer be spendable. Any transaction attempting to use them would be rejected under Bitcoin’s consensus rules.
Because these outputs could never be spent, nodes would be allowed to remove them from the UTXO set. Supporters estimate this could reduce the UTXO database by 30% to 50%.
How NMUs would be identified
Rather than adding new logic directly into Bitcoin’s software, The Cat relies on existing external tools already used by the Ordinals and Bitcoin Stamps communities.
Specific versions of these indexers are pinned to ensure the classification is reproducible. A fixed blockchain snapshot is used, and its block hash is committed to as part of the proposal.
The rule only applies to a specific set of outputs from a defined point in history. Any inscriptions made after that snapshot would not be affected.
Censorship concerns and pushback
Some community members are worried that permanently making UTXOs unspendable, even very small ones, could set a dangerous precedent.
Supporters argue that Bitcoin has always guided behavior using incentives. They mention OP_RETURN, which was added to let small amounts of non-financial data be included without bloating the UTXO set.
Bitcoin developer Gregory Maxwell previously summarized this approach by stating, “Part of the idea here is shaping behavior towards conservative needs.”
The authors of The Cat argue that the proposal preserves Bitcoin’s role as a monetary network while still leaving inscription data accessible in the blockchain’s historical record.
The alternative: Lynx
Alongside The Cat, developers have also been talking about a separate idea known as Lynx. Instead of looking at inscriptions or the type of data stored, Lynx focuses only on time and size. Under this proposal, dust-sized Unspent Transaction Outputs (UTXOs) that have not moved for four years would automatically become invalid.
Under Lynx, very small UTXOs that have not been spent for four years would automatically become invalid. Supporters say this avoids the need for external indexers and removes any judgment about how the outputs were created. Critics say the rule could also affect genuine coins that are rarely moved and were never intended to be spent in the short term.
What comes next
The Cat remains an early discussion draft and has not entered the formal Bitcoin Improvement Proposal (BIP) process. No decision has been made, and no activation path exists at this stage. Any change to Bitcoin’s consensus rules would require broad agreement across developers, miners, node operators, and other network participants.
The debate shows a wider tension inside Bitcoin. As new uses continue to push the network in different directions, developers are being forced to weigh long-term sustainability against open access, while trying to keep Bitcoin focused on its role as a monetary system.
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