The Mechanics of Bitcoin’s Op_return

OP_RETURN is still used in some over-the-top protocols on Bitcoin however, using Pay-to-script-hash (P2SH) after Taproot has much better economics and a larger per-transaction payload limit. The downside is that they are two-phase.

A user sends a minimal amount of bitcoin to a P2SH address which commits to the hash of a future bitcoin script used to "claim" the bitcoin. That script is "revealed" in a subsequent transaction. The contents of the "script" include dead code that carries content. A recent popular example is the inscriptions[0] that carry NFT data for ordinals. The revealed script is part of the witness data it is carried in a different part of the bitcoin blockchain data structure which makes it prunable in a running node. As a result, the limits are around 500bytes instead of (80+80)bytes per transaction-pair.

[0] https://docs.ordinals.com/inscriptions.html