What is the Role of BIPs in the Bitcoin Ecosystem?

Change is the only constant.

This statement isn’t just relevant to our world but in the multiverse of Bitcoin, too.

To bring in any advancements or amendments in the Bitcoin ecosystem, the Bitcoin Improvement Proposal (BIP) is used.

Developers or individuals possessing advanced computing knowledge usually draft and present these highly technical documents to the Bitcoin community members. Their aim: to introduce some crafty and effective changes in the structure and functionality of the Bitcoin universe.

Bitcoin is similar to the kind of democratic world we live in today, where everyone casts a vote to elect a leader. Only in this case, the vote is cast to accept or reject a BIP.

In this article, let’s get to know the different types of Bitcoin Improvement Proposals, its entire process, and the notable BIPs that have made Bitcoin more user-friendly.

How Does the Bitcoin Improvement Proposal Work?
What are the Different Types of BIPs?
3 Notable BIPs Making Bitcoin More User-Friendly
What’s All the Ruckus About BIP 119?
In a Nutshell

How Does the Bitcoin Improvement Proposal Work?

Bitcoin operates using a consensus blockchain technology. This consensus or agreement of how Bitcoin should function is taken up by recognised Bitcoin developers, miners, nodes and other community members who govern its protocols.

What’s interesting to note – Anyone with robust computer knowledge can propose a BIP. In fact, in its latent stages, a BIP starts as an informal proposal. Interested candidates either mail their proposals on the Bitcoin email list or share on social media channels like Twitter, IRC or Slack. From this point, online discussions start and prolong for as long as refinement or consensus is achieved.

Post this, it is assigned a BIP number and is further pushed out into the Bitcoin Core GitHub Repository. Even if it is not approved, the BIPs are considered official and further assessed by both the developer community and the community associated in general.

While any code changes in the proposal are duly tested, legitimate arguments against a BIP might push it towards withdrawal or rejection. If no drawbacks are detected, the community will move to activate the BIP.

For a Better Understanding, Check out the Entire Bitcoin Improvement Proposal Lifecycle Below.

To begin with, a BIP is just drafted with some key elements. At this point, the details of the proposal demand more comprehension. In case of no development, it is postponed or deferred.
After it is proposed to the community with its explanatory components in place, a discussion on its relevance and application begins. From this point, the lifecycle of BIP can bifurcate to any of the following results:
- Rejected: Due to the absence of relevant information or the presence of non-compliant elements.
- Active: The proposal is accepted and activated in the Bitcoin ecosystem.
- Withdrawn: The author withdraws the proposal voluntarily for their own reasons.
- Replaced: When the proposed BIP is replaced by a better one, incorporating augmented solutions and improvements.
- Obsolete: If the BIP proposal is considered irrelevant or outdated.

What are the Different Types of BIPs?

Bitcoin Improvement Proposals are majorly categorised into three different types.

Standard Track BIP

Standard Track BIPs are amendment proposals directed towards the Bitcoin network protocols, transactions, validation process, blocks and the interoperability of two BIPs or Bitcoins. Aiming to bring a change in its core functions, the implementation of Standard Track BIPs has a rippling effect on the entire ecosystem. Because of this reason, it undergoes close scrutiny by the Bitcoin community before it is accepted.

Informational BIP

Informational BIPs primarily identify issues in design, general guidelines and data on other BIPs. A product of private, group or business investigations, they mostly comprise data, evidence or conceptual analysis that support the proposal and its claims. Although Informational BIPs are not as hardcore as Standard BIPs, they are necessary for regular reviewing of the utility and operability of Bitcoin, in general. They may or may not require consensus.

Process BIP

A Process BIP contains proposals to bring a change or improvement in the Bitcoin processes. These can be procedures, guidelines, decision-making protocols or tools used in Bitcoin development. Their heavy dependence on the Bitcoin community consensus for further implementation is similar to that of Standard Track BIPs. However, a major difference that sets the two apart – Process BIPs are only applicable outside the Bitcoin protocol without impacting the technology or structural code.

3 Notable BIPs Making Bitcoin More User-Friendly

Ever since the inception of the Bitcoin Improvement Proposal, multiple BIPs have been presented to evolve the decentralised platform. However, some have been revolutionary in their impact and have evolved Bitcoin as we see it today.

SegWit

SegWit or Segregated Witness (BIP 141) is a popular example of Standard Track BIP. The proposal pertains to augmented blockchain scaling solutions in Bitcoin, wherein persisting transaction issues were addressed.

SegWit elaborated on how multiple transactions can be allowed in a single block by segregating token signatures from the transaction process. Two developers presented it from the Bitcoin Core Project in 2015. It came into effect with a 95 percent vote of Bitcoin miners.

Later on, an updated version known as SegWit2X was also proposed. It comprised two scaling solutions, including SegWit, along with a 2 MB increase in the block size. It is a fine blend of both Standard Track and Process Proposal as it not only pointed to a crucial upgradation of the block sizes but also elaborated on the process.

The proposal stated that after three months of implementing SegWit, the 2 MB increase of the block size will follow. Unfortunately, due to certain technical conundrums sited within the proposal, SegWit2X was cancelled.

MAST

MAST, also known as Merkelized Abstract Syntax Trees, is a complex mishmash of two algorithms (Merkle Tree and Abstract Syntax Trees). It came into effect to ease the process of recording complex data on the BTC blockchain, skipping the step to download it for confirmation.

If we look at the two algorithms separately, Merkle Tree helps record data without any downloads, whereas Abstract Syntax Trees systematically categorises and labels data into their respective sets.

MAST was originally ideated by Blockstream developers Russell O’ Connor, Dr Pieter Wuille and Peter Todd (Bitcoin Core developer) and documented in three proposals, namely BIP 114, 116 and 117 by Bitcoin Core Developer Dr Johnson Lau.

As of now, it is still in its developing stages. However, MAST holds a strong potential to augment smart contract flexibility, scalability and user privacy upon implementation.

The Lightning Network

The Lightning Network was presented by researchers Thaddeus Dryja and Joseph Poon in 2015 in their paper “The Bitcoin Lightning Network”.

Bitcoin comprises a core blockchain network wherein all transactions take place. This is also known as the blockchain mainnet or layer one in Bitcoin.

With the growing popularity of cryptocurrency, transactions have ballooned exponentially. However, the downside is that this overburdens the core blockchain network and slows it down. In such cases, miners start charging users more to clear the traffic. This has been a recurrent problem in the Bitcoin ecosystem that the Lightning Network solves.

The proposal entails the introduction of a second layer allowing instant two-party off-chain transactions. The main advantage of this is that even though layer two transactions take place outside the mainnet, it still extracts the benefits of the latter’s decentralised security systems.

Note: Any other payment channel other than the mainnet in the Bitcoin world is considered a second layer.

Implemented in May 2017, the Lightning Network hones the potential to augment Bitcoin transactions per second (TPS). Initially, Bitcoin could only facilitate seven transactions per second – a number that was too low compared to what any card transaction could handle.

But by enabling users to create secondary payment channels (via smart contracts), the Lightning Network opens doors to instant micropayments, which, in turn, augments Bitcoin’s scalability. All a user has to do is pay a small fee to create the channel and use it as a wallet, ledger and payment gateway to make their payments.

So, can you buy a coffee with Bitcoin? The Lightning Network says you can!

Once it is exhausted, the user can either close or renew their Bitcoin funds. All transactions are recorded in the mainnet once the channel is closed.

What’s All the Ruckus About BIP 119?

BIP 119 is quite a radical proposal put forth by Bitcoin Core developer Jeremy Rubin. The proposal talks about the implementation of an operation code OP_CHECKTEMPLATEVERIFY (CTV) to integrate covenants in Bitcoin transactions.

Now, what are covenants you think?

Covenants in the Bitcoin world are restrictions. They are specifically directed towards how the cryptocurrency is spent beyond key ownership. It lays down protocols on where you can actually transfer coins after acquiring them and helps structure smart contracts more effectively. Its other use cases include network scalability via Congestion Controlled Transactions and robust security against prospective hackers.

If Lightning Network helps you create secondary wallets, CTV helps you construct wallet vaults facilitating secured cold storage solutions. Additionally, its default transactional paths ease the movement of your coins from cold storage to hot wallets. This ensures complete security of your funds even when your wallet is stolen, hacked or lost.

Then What’s with the Apprehension Around CTV?

Even though BIP 119 or CTV makes complete sense of how it can better the Bitcoin environment, its application may prove to be a big blow to one of Bitcoin’s biggest USPs: fungibility.

Every bitcoin serves the same purpose when it comes to functionality and quality. However, if covenants under the CTV are introduced, they would no longer be so. This will segregate the coins into various types based on their usability and spending specifications, culminating in limited usage. All of this will further hamper not only Bitcoin’s utility but also its exchange value.

Considering this disadvantage of the proposal, multiple community members are against the Speedy Trials, as demanded by Rubin to activate it. Even those who are in favour are also cautious.

In a Nutshell

While Bitcoin’s popularity is sky-high today, it would not have been so if it still were operating in its initial phases. Bitcoin Improvement Proposals or BIPs, therefore, play a crucial role in the evolution of Bitcoin and how people use it.

Augmenting its transaction process, security, scalability and facilitating user-friendly paradigms, BIPs not only help the Bitcoin community manifest progress but ensure its growing popularity stays intact.

Additionally, the flexibility of anybody (with advanced computing knowledge) drafting a proposal or even igniting an idea on social media platforms, makes BIPs an attractive mode of sharing ideas for budding developers.

Radical or controversial, BIPs offer an avenue for Bitcoin connoisseurs to express their ideas in detail, even though its acceptance or rejection still falls on the community members.