What Are BIPs And How Do They Affect Bitcoin?

- BIP is the standardized procedure through which upgrades to the Bitcoin blockchain are proposed, discussed by the community and adopted or rejected.

- BIPs bridge the gap in the decentralized system of Bitcoin to allow for an improvement of the network and keep it relevant.

- Anyone can propose an improvement to the Bitcoin core, but in doing so, it is expected that the proposed upgrade does not reinvent the wheel, follows the laid down format, is technically sound and not overly broad.

- BIPs are either meant to serve an informational purpose, review the consensus rules, or effect a change in the Bitcoin software.

- Since the introduction of the first BIP in 2011, many BIPs have been proposed and debated, keeping the Bitcoin community active and progressive.

Keywords: improvement, proposal, upgrades, consensus, soft fork, hard fork, champion, Taproot, Segwit.

Every product, process or system needs to be updated at intervals to remain relevant and not atrophy. You must have had to update the software you used before with the new version adding some features or functionality to the old one. In the web2, where the creator or managers act as the central authority, the decision to update or improve the product is planned and executed from the top. In the case of Bitcoin, the system is highly decentralized without a governance structure to take that decision. Bitcoin and other blockchain-powered digital currencies also operate much like software. There is a constant need to change their workings which could be a far-reaching or slight yet significant modification. BIP is, therefore, a mechanism through which changes are proposed to the workings of Bitcoin, which could be aimed at the community standards, the consensus layer or the development process. As the acronym reads, BIP means Bitcoin Improvement Proposal.

BIPs are initiated and discussed on the open-source developers' platform, GitHub. Amir Taaki created the First BIP on October 19, 2011, where he defined BIP, the type, workflow, formats and templates. Five years later, Luke Dashjr submitted the Second BIP in 2016, which revised the process contained in the first and therefore replaced it. Since then, there have been more than 300 BIPs, with some adopted and active while some were rejected. Some BIPs have been a watershed event and marked a milestone in the history of Bitcoin, and some others have made little and incremental changes. Essentially, there are three types of BIP identified by Amir Taaki.


Types of BIPs

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1. Standards Track BIPs: these are BIPs that propose a change to the consensus layer of Bitcoin. The transformation described by these BIPs affects most Bitcoin operations, such as a change to the network procedure, a change in transaction validity rule or any change that affects the interoperability of applications using Bitcoin.

2. Informational BIPs: these are proposals that provide information or guidelines to the Bitcoin community and do not necessarily come up with a suggestion for new features. They border on design issues and do not require Bitcoin community consensus; hence the advice can be ignored or followed by users and implementers.

3. Process BIPs: These proposals affect a process surrounding Bitcoin but do not apply to the network protocol. These BIPs could propose changes in the decision-making process and change the tools or environment used in Bitcoin development.


Life Cycle of a BIP

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Anyone can propose BIPs, and the process begins with a new idea for Bitcoin. The person submitting the concept is known as the author or the BIP champion. Not all ideas are worth developing a BIP for. One way to ascertain if an idea is BIP-able is to ask the Bitcoin community on GitHub if the idea has any chance of acceptance. If the proposed modification is just a small patch to a particular piece of software which do not require standardization across multiple projects, such is to be directed to the project-specific development workflow. As a rule of thumb, the person who wants to propose a new idea is expected to go through past discussions and see if the idea had been treated and done with. After this preliminary step, the author posts the new opinion to the Bitcoin development mailing list.

BIPs have a three-phase life cycle. The phases of a BIP include:

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1. Draft: The new idea submitted to the mailing list, the draft editor, and the Bitcoin community's repository on GitHub becomes a draft BIP. At this stage, the author has the chance to flesh out the draft and is responsible for building consensus on the topic within the community and documenting dissenting opinions. The author could create a Special Interest Group (SIG) mailing list for the discussions and set up a git repository for receiving comments in the early design phase. If the author or editor observes no significant progress is made on the draft, he can defer the BIP and reintroduce it later. The editor also has the right to reject a draft if it fails to meet the set criteria of formatting rule, technical soundness, non-duplication of effort, and focus.

2. Proposed: after building community consensus for the draft, the draft changes to proposed when the author considers it complete, has a working implementation in the case of Standards track BIPs and has the community plan to progress it to final status.

3. Final: A BIP moves from proposed to final when criteria reflecting real-world adoption have occurred. The requirements depend on the proposed changes, which could be a soft fork or a hard fork.

The final status does not mean the proposed change has been activated. The activation may take some time. The new upgrade is first integrated into Bitcoin core, the blockchain's software code, until the nodes running the Bitcoin blockchain agree to activate it, i.e. run the version that contains the new upgrade. If the new upgrade is compatible with an older version of the software, that is considered a soft fork which requires a supermajority "miners vote of 90%. A hard fork is a BIP that introduces new software and a fundamental change in the code and therefore requires a universal adoption from the Bitcoin economy.


How BIPs affect Bitcoin

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1. The significant effect of BIP is that it creates a window of improvement to the Bitcoin core, the process of making rules and keeping the entire Bitcoin community informed on the status of the blockchain.

2. The debate and discussions generated by BIPs keep the Bitcoin community vibrant and viable. Some BIPs have had far-reaching effects on the Bitcoin core in areas such as privacy and security.

3. The effects are better appreciated by looking at some critical BIPs that have been adopted and are active. These BIPs apart from the 001 and 002 discussed earlier, include:

BIP 008 and BIP 009 established the rules for implementing soft fork upgrades on the Bitcoin blockchain.

BIP 141, known as segregated Witness (Segwit), introduced the separation of the witness signature from the transaction to increase the network's capacity. It was a soft fork that addressed the scalability of Bitcoin software.

BIP 340, 341 and 342: These BIPs remain one of the most radical upgrades to the Bitcoin blockchain. These three BIPs are codified in Taproot, which improves the privacy and efficiency of the Bitcoin blockchain by minimizing how much information about transaction output is revealed on creation or spending time. It was built on Segwit, merging the Schnorr signature scheme into Bitcoin to improve privacy and reduce transaction fees.






Author: Gate.io Observer: M. Olatunji
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