Re: The Cat, BIP draft discussion.

Greg Maxwell contributes to the ongoing discussion regarding the management of unspendable outputs within Bitcoin's UTXO (Unspent Transaction Output) set, specifically addressing Bitcoin Stamps and Ordinal inscriptions. He points out that since Bitcoin Stamps outputs are already unspendable, it is logical to mark them as such and remove them from the UTXO set to maintain its efficiency. However, he raises concerns about how to handle outputs marked by Ord as containing sats (satoshis) associated with a witness Inscription. Unlike Stamp outputs, these are spendable, and freezing them would contradict Bitcoin's foundational principles, essentially amounting to confiscation.

Maxwell proposes a nuanced approach to mitigate the potential issues caused by Ordinal inscriptions without resorting to outright confiscation. He suggests implementing a transaction validation rule whereby the number of outputs in a transaction containing sats tied to an Ordinal inscription must be fewer than the number of inputs. This strategy aims to reduce the utility of Ordinals in a manner that does not confiscate bitcoins but still addresses the need for UTXO set size reduction. To streamline this process, he offers a simplified criterion: any transaction with an input of less than 1,000 sats should have fewer outputs than inputs. This proposal outlines a method for distinguishing between genuinely unspendable Stamp outputs and potentially spammy Ordinal outputs, suggesting a path forward that balances technical necessity with the ideological ethos of Bitcoin.