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The biggest crypto in the world, Bitcoin, is autonomous and decentralized. Computers that execute Bitcoin software and maintain network security are known as miners and nodes, which power the entire network.
Without the involvement of any outside parties, these miners and nodes vote on any network upgrades. These upgrades can include hard forks, in which the entire network separates, bug fixes, and feature modifications.
However, it requires effort to coordinate upgrades and reach community consensus across a huge blockchain network like Bitcoin. In such situations, Bitcoin Improvement Proposals (BIPs) are used.
In this blog, let’s explore Bitcoin Improvement Proposals (BIPs) and see some notable BIPs in the crypto space.
What are Bitcoin Improvement Proposals (BIPs)?
A BIP is a formal document that introduces new features or procedures to the network. It is the accepted means for promoting ideas, updates, and improvements to the Bitcoin protocol. BIPs can alter any part of the protocol, including consensus rules, community standards, and development procedures. A BIP seeks to coordinate upgrades and development within the decentralized Bitcoin community.
Two years after the creation of Bitcoin, in 2011, British-Iranian programmer Amir Taaki created the first BIP (BIP 0001) to define what a BIP is. However, only developers and programmers had the right to alter the protocol.
For detailed information about BIPs, read here.
The question is – why do BIPs exist in the first place, anyway?
Why do the BIPs exist?
The foundation of Bitcoin’s evolution is BIPs. They are systems that enable structured problem-solving in a decentralized, open network. BIPs are the main mechanisms for gathering feedback and documenting community choices.
Every upgrade to the Bitcoin network during the past ten years began as a BIP. While certain upgrades attempted to reduce gas fees on the Bitcoin network, others aimed to increase the size of the Bitcoin block. To give the Bitcoin community guidelines, informational BIPs have also been released.
BIPs bring forth fresh features that can improve user experience, boost transaction throughput, and strengthen security measures. Bitcoin’s constant evolution ensures it can adapt to shifting technology environments and user needs.
Before checking out the popular BIPs, let’s have a quick look at the pros and cons of BIPs.
Pros of BIPs
- BIPs can make Bitcoin better by increasing its scalability and efficiency.
- Second, BIPs can contribute to making Bitcoin more user-friendly.
- Finally, BIPs can boost trust in Bitcoin by making it more dependable and secure.
Cons of BIPs
- Before the BIP is implemented, bugs in the code might be simple to find. Therefore, if a BIP is incorrectly evaluated, investors could suffer financial losses in the worst situation.
- The requirement for BIP compatibility could result in a fragmented Bitcoin network.
- BIPs might require more thorough testing, which could result in instability and security flaws.
- BIPs might require greater communication, which might cause user confusion and discord.
Popular Bitcoin Improvement Proposals (BIPs)
BIP 141, or Segregated Witness, which proposed a new transaction structure to enhance scalability and eliminate some vulnerabilities, is one of the most notable Bitcoin Improvement Proposals (BIPs).
BIP 340 (Taproot), another key BIP, calls for an upgrade to Bitcoin’s scripting capability, boosting privacy and enabling more intricate smart contracts. A signaling method for triggering soft forks in the Bitcoin network was added by BIP 9 (Versionbits).
These BIPs serve as an example of the Bitcoin community’s ongoing innovation and growth.
Let’s have a basic overview of these notable BIPs.
BIP 141 (Segregated Witness)
BIP 141, also known as Segregated Witness, is a significant Bitcoin Improvement Proposal (BIP) introduced in 2015. It aimed to address transaction malleability and increase the block size limit without requiring a hard fork.
This proposal introduced a novel method of storing signature information separately from transaction data, optimizing block space usage.
The implementation of BIP 141 had multiple advantages for the Bitcoin network. It boosted transaction capacity, reducing congestion and fees. It also improved security and privacy by segregating signatures from transaction data.
Successfully activated in August 2017, BIP 141 demonstrated the strength of decentralized decision-making in the Bitcoin community, showcasing how proposals can enhance functionality while maintaining consensus.
For detailed information, read here.
BIP 340 (Taproot)
BIP 340, commonly called Taproot, is a proposed Bitcoin protocol upgrade designed to enhance privacy, scalability, and flexibility. It introduces Schnorr signatures, a new smart contract mechanism, enabling collaborative, complex transactions while minimizing blockchain exposure.
This bolsters privacy, making it challenging for observers to distinguish standard transactions from advanced smart contracts. Beyond privacy, Taproot enhances scalability by reducing transaction sizes, optimizing block space, potentially lowering fees, and increasing network transaction capacity.
Taproot also elevates flexibility by simplifying the development of sophisticated scripts, allowing for more efficient smart contract creation while upholding security and decentralization principles.
For detailed information, read here.
BIP 9 (Versionbits)
BIP 9, also known as Versionbits, is a significant Bitcoin Improvement Proposal, revolutionizing the activation of soft forks within the Bitcoin protocol. It presents a more streamlined and decentralized approach to evaluating proposed protocol alterations.
Instead of relying solely on miner signaling, BIP 9 introduces “version bits,” which are bit fields enabling all network nodes to express their support or dissent regarding specific updates or changes. This inclusive approach ensures broader participation and consensus among community members before adjustments are applied to the Bitcoin network.
BIP 9 has played a pivotal role in advancing governance within the Bitcoin ecosystem by providing transparent guidelines and refining decision-making processes for the implementation of protocol upgrades and enhancements.
BIPs are essential for encouraging debate, spurring innovation, and fostering agreement on network upgrades.
BIPs help the ongoing improvement of Bitcoin’s functionality and the expansion of its ecosystem by facilitating collaboration and offering rules for evolution. BIPs are essential tools that enable people to influence the future of digital currency through their creative ideas and proposals in a decentralized community where decision-making is distributed.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.