The Witness Discount: Why Some Bytes Are Cheaper Than Others

This year has seen a massive upswing in demand for the limited space available within bitcoin blocks, leading to higher fees for on chain transactions. Much of the demand is for transactions revealing inscriptions. The contents of these inscriptions are revealed as part of the witness data1 of a bitcoin transaction. This witness data1 is discounted to one quarter the cost of other transaction data. Why are we giving these inscriptions a discount? Should we soft-fork out the witness discount?

Why are some bytes cheaper than other bytes?

Money in general and bitcoin in particular operate on the back of human incentives. Bitcoin aligns the incentives of miners and transactors through the use…

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