What Is a Bitcoin Improvement Proposal (BIP)?

By Lipsa Das

Bitcoin — the world’s largest cryptocurrency — is entirely decentralized and autonomous. The entire network runs on miners and nodes: computers that run Bitcoin software and work to keep the network secure. 

These miners and nodes decide on any upgrades to the network by a vote, completely free of any third party. These upgrades can range from bug fixes or feature changes to even hard forks, where the entire network splits! 

However, coordinating upgrades and achieving community consensus across a big blockchain network like Bitcoin takes work. That’s where Bitcoin improvement proposals or BIPs come in.

Bitcoin Improvement Proposal (BIPs) allow community members to vote on protocol decisions in an organized way, even without centralized leadership.

But what are Bitcoin improvement proposals, and how do they work? If you want to understand the Bitcoin protocol, understanding the role of BIPs in the Bitcoin community is crucial. Let’s dive in!

What Is a Bitcoin Improvement Proposal (BIP)?

A Bitcoin Improvement Proposal, or BIP, is a technical document that proposes changes, ideas, or enhancements to the core Bitcoin blockchain. These BIPs can range from general community guidelines to major changes to the protocol. However, each BIP usually focuses on making one key change to the blockchain. If you want to know how Ethereum processes similar changes, check out our article on what an EIP is.

How Do Bitcoin Improvement Proposals (BIPs) Work?

BIPs are the driving force behind the continuous evolution of the Bitcoin protocol, shaping the chain’s future. Let’s look at the creation and approval process.

How are Bitcoin Improvement Proposals Created?

Since Bitcoin is an open-source protocol, anyone can propose a BIP by submitting an informal proposal to the Bitcoin developers’ mailing list. 

So how does that work?

Well, firstly, Bitcoin Improvement Proposal (BIP) authors collect initial community feedback and vet the idea. Then, once the author has reasonable confidence in the idea’s potential, they send a draft BIP to the mailing list. 

Here, the community discusses the idea and fleshes out the core points for and against the proposal. Proposal rejections are common at this stage, especially if there are obvious conflicts or duplicate BIPs. However, some proposals can also stay in the discussion stage for years if there is no consensus, for example, the Block size debate. 

If the community agrees that the idea holds merit, the proposal gets a BIP number and becomes a BIP document. Then, BIP editors take up the task of making sure everything is accurate. The BIP moves from the “informal” stage to the “official” proposal at this stage. 

It’s important to note that the BIP is not yet approved for development.  Think of this as the filing and pre-trial stage of a lawsuit in court, when all of the details are written up, and the community feels the idea needs to be discussed more.

The community also publishes it to the Bitcoin Core Github repository of BIPs — a collection of all Bitcoin Proposals proposed so far.

How Are BIPs Approved?

To become part of the Bitcoin protocol, the Bitcoin Improvement Proposal (BIP) must achieve consensus among the community.  To do that, it undergoes thorough review and analysis by the developers and the broader Bitcoin community. This includes the potential benefits and drawbacks, pros and cons, and the overall time investment.

If there are any necessary code changes, developers also start testing and implementing the code. This process can be long and complicated.

The community rejects the BIP if the developers find the code is bad or introduces challenges that can’t be resolved. Or, if everything looks okay, the community will begin implementing and activating it.

Types of Bitcoin Improvement Proposals (BIPs)

BIP approval process depends majorly on its type. There are three types of BIPs: Standards Track, Informational, or Process BIPs. Let’s look at each of them and what they entail.

Standards Track BIPs

Standards Track BIPs are proposals that change the aspects of the protocol — transaction or block validation or encoding schemes. In the case of hard forks when the chain splits into two, Standard BIPs ensure interoperability between the legacy Bitcoin chains and the new ones. Since these BIPs involve significant code changes, they require community consensus.

Informational BIPs

Informational BIPs share knowledge and insight into Bitcoin’s upcoming plans. These documents provide general guidelines, design issues, or information relevant to the Bitcoin community. Since they are more informational, they do not require community consensus.

Process BIPs

Process BIPs, or consensus BIPs, outline procedural aspects, guidelines, or changes to the decision-making process of Bitcoin or consensus mechanism. While they are similar to informational BIPs, they require consensus (a clear miner majority of 90%). 

Consensus BIPs are for changes outside the Bitcoin protocol, meaning they don’t affect Bitcoin’s codebase. For example, implementing a soft fork and updating old miner software across the network requires a Process BIP.

Famous Bitcoin Improvement Proposals You Should Know About

Bitcoin Improvement Proposals (BIPs) are key to the advancement of Bitcoin. In the last decade, BIPs have shaped the Bitcoin network, addressing critical issues and enhancing block capabilities. 

Let’s look at some historic BIPs, their significance in Bitcoin development, and their ripple effect on the community.

BIP 001 and 002

The first-ever BIP created by Amir Taaki, BIP 001 was essentially a proposal on what a BIP should be. In other words, it explains the process of submitting and discussing a BIP, going into detail about the types of BIPs, workflow, submission formats, and more.

BIP 002, on the other hand, amends some of these guidelines, elaborates on key approval processes, and answers common questions about BIPs. It also adds BIP licensing, comments, and formatting guidelines. 

Both of these BIPs were Process BIPs, which required the community to agree on them. Together, these two BIPs set the stage for the ongoing evolution of Bitcoin.

BIP 8 & 9

BIP 8 and BIP 9 are both consensus (process) BIPs that enable soft forks, backward-compatible changes to the Bitcoin protocol. Every soft fork is a major protocol change that the majority of the network participants agree with, so miners can just upgrade their software to remain in sync with the network.

BIP 8 and 9 provide mechanisms for signaling and activating these soft fork changes.

SegWit

One of the most popular Bitcoin upgrades, Segwit, was the result of a series of BIPs, namely BIP-91, BIP-141, and BIP-148.  BIP-141 introduced the SegWit upgrade, while BIP-148 activated the soft fork to implement it. BIP-91, on the other hand, reduced the consensus threshold to 80%, for Segwit to pass successfully.

Segwit made the Bitcoin network scalable by reducing the size of transaction data. With less metadata, Bitcoin blocks can fit more transactions, increasing overall speed after the Segwit upgrade. Segwit was also key for developing popular Bitcoin Layer 2 networks, such as Lightning.

Taproot

Taproot, the most recent upgrade to the Bitcoin protocol, consisting of three BIPs: BIP 340 (Schnorr signatures), BIP 341 (Taproot), and BIP 342 (Tapscript). With Taproot, the Bitcoin protocol is more privacy-friendly and can also support innovations like Ordinals. 

Taproot’s initial idea proposal was in January 2018 by software developer Greg Maxwell. Post that, Bitcoin developers Pieter Wuille, Tim Ruffing, A.J. Townes, and Jonas Nick worked on implementing it. Almost four years after the initial proposal, Taproot was finally integrated in November 2021.

Navigating The Bitcoin Network

While the Bitcoin network evolves and changes with BIPs, Ledger has your back. Ledger Live adapts to all major Bitcoin changes quickly. For instance, Ledger Live supports both Segwit and Native Segwit accounts, ensuring inter-compatibility across the ecosystem.

Plus, the Ledger ecosystem also allows you to run a full Bitcoin node yourself. As an advanced crypto user, you can take full advantage of Ledger Live while running your own Bitcoin node via Ledger SatStack. In short, you can become a part of the consensus process, and earn rewards for doing so. To learn more, make sure to check out the support article on how to run a bitcoin node.

Interacting with the Bitcoin network safely is easy, if you take the right precautions that is. To stay safe while exploring the Bitcoin Ecosystem, consider protecting your assets with a hardware wallet. After all, not your keys, not your coins. Ledger devices offer you asset protection, but they also allow you full control over your assets and how you manage them.