Seeing a few comments asking what can be done about data embedding with unspendable UTXOs (an issue which has been around for a long time).

This is a bit long, but hopefully it will be useful as a reference to the more general question of whether you can address protocol level “problems” at the miner / policy level.

Does anyone have any suggestions or corrections?

Realistically, short of a soft fork there is very little that can be done technically, and even that would have serious limitations & fallout (that’s the whole point of this gross protocol design).

The obvious first reaction is ask miners to stop mining things like this. There are a few ways, but one would be to increase their -dustrelayfee

By default it’s 0.00003 BTC/kB (3 sat/vB) resulting in a dust output limit of 330 sats for P2WSH.

For this transaction with 1859 such outputs the total locked in unspendable outputs is 1859*330‎ = 613,470 sats ($736 @$120k/BTC)

Lets say you successfully lobby the vast majority (95%) of miners to 10x this config value, the sender would have to choose between paying 6.1M sats ($7k) or sending as is and waiting until the small proportion of miners (5%) using the old default. They would probably do the latter because that’s enough hashrate to find 7 blocks/day on average, and what’s the rush?

Having failed to stop this at the miner level you may now be tempted to lobby node runners to change their default and/or change the default in core v31.

Say you were successful, and core v31 contains a higher default. The sender can just preferentially peer to try and reach miners in protocol.

So you double down and you spoof preferential peering such that it’s not sufficiently reliable.

The sender now has no choice but to pay a miner OOB - if they are to do this they might as well make each output be 0 sats. This could actually be mutually financially beneficial for the sender and miner, because instead of sats being burned as fees they would flow to the miner / be saved by the sender.

Now to be fair it would take effort to establish these direct rails to miners who are exclusively financially motivated, but this is a fixed cost, and I have no doubt it would be done, and then integrated via API to centralized minting services.

Thus, the problem would likely end up being worse than the situation we have today.