What Are Bitcoin Improvement Proposals (BIPs)?

Bitcoin operates on a decentralized network where the community collaborates to propose, discuss, and implement changes to improve the protocol. This collaborative effort is facilitated through Bitcoin Improvement Proposals, commonly known as BIPs. 

Read on to learn about BIPs, how they work, and some notable examples.

What Are Bitcoin Improvement Proposals (BIPs)?

Bitcoin Improvement Proposals (BIPs) outline proposed changes or enhancements to the Bitcoin protocol. They serve as a formalized way for Bitcoin developers and the community to propose new features, protocol upgrades, or other improvements. 

BIPs ensure that changes are transparent, thoroughly reviewed, and discussed before implementation. The concept of BIPs is similar to Request for Comments (RFCs) in other technical fields, such as the development of the Internet. 

Why Are BIPs Important?

BIPs play a crucial role in the evolution of Bitcoin as they provide a range of benefits to the improvement process of Bitcoin’s code. Here’s how: 

• Standardization: BIPs provide a standardized process for proposing, discussing, and implementing changes. This ensures that all changes are well-documented and can be reviewed by anyone in the community.
• Transparency: Since BIPs are public documents, they promote transparency in the development process. Anyone can read, review, and provide feedback on proposed changes.
• Collaboration: BIPs encourage collaboration among developers, miners, businesses, and users. By facilitating open discussions, BIPs help build consensus on important changes.
• Documentation: BIPs serve as a historical record of changes to the Bitcoin protocol. They provide valuable documentation for developers and researchers studying Bitcoin’s evolution.

Without BIPs, Bitcoin would arguably not be where it is today. They pave the way for new innovations on the Bitcoin network, such as Ordinals and Runes tokens. 

Types of BIPs

BIPs are categorized into three main types, each serving a different purpose. Let’s examine each one. 

Standards Track BIPs

These proposals affect the Bitcoin protocol, network, or related standards. They include changes to consensus rules, transaction formats, or network protocols. 

Standards Track BIPs are further divided into:

• Consensus BIPs: Changes to the rules that all nodes must follow for the network to remain in consensus.
• Non-Consensus BIPs: Changes that do not affect the consensus rules but impact other protocol aspects.

Informational BIPs

These BIPs provide the Bitcoin community with general guidelines, recommendations, or other information. They don’t propose changes to the protocol but offer insights or best practices.

Process BIPs

Process BIPs describe a process surrounding Bitcoin or propose changes to the decision-making process itself. Process BIPs can include improvements to the BIP process or other governance-related procedures.

How Are BIPs Created and Implemented?

The process of creating and implementing a BIP involves several stages. Let’s take a look at each stage from ideation to activation. 

1. Idea: A developer or community member develops an idea for improving Bitcoin. This idea can stem from a need for new features, addressing existing issues, or optimizing the protocol.
2. Draft: The proposer writes a draft BIP outlining the proposed change, its rationale, technical details, and potential impact. The draft follows a specific format, including sections like Abstract, Motivation, Specification, and Rationale.
3. Discussion: The draft BIP is submitted to the Bitcoin development community, typically through the Bitcoin-dev mailing list or other forums. The community reviews the proposal, provides feedback, and engages in discussions. This stage is crucial for identifying potential issues, refining the proposal, and building consensus.
4. Formal Submission: Once the draft has undergone sufficient review and revision, the proposer submits the BIP to the BIP repository on GitHub. The BIP is assigned a unique number and status, such as Draft, Proposed, or Active.
5. Implementation: If the BIP is accepted, developers work on implementing the changes in the Bitcoin codebase. This stage may involve extensive testing, peer review, and coordination with miners, nodes, and other stakeholders.
6. Activation: Once implemented, the changes are activated on the Bitcoin network. This typically involves a signaling process for consensus changes, where miners and nodes indicate their support for the upgrade. If sufficient support is achieved, the new rules are activated.

Notable Examples of BIPs

Several BIPs have played significant roles in Bitcoin’s development. Here are a few notable examples.

BIP 32

BIP 32 introduced Hierarchical Deterministic (HD) wallets, revolutionizing Bitcoin wallet management. HD wallets use a single seed to generate a tree of keys, simplifying backup and recovery while improving security.

BIP 141

This BIP proposed Segregated Witness (SegWit), a significant upgrade to the Bitcoin protocol. SegWit addressed transaction malleability, improved scalability, and enabled the development of second-layer solutions like the Lightning Network.

BIP 174

BIP 174 defined the Partially Signed Bitcoin Transaction (PSBT) format. PSBTs enable complex multi-party transaction workflows and enhance interoperability between different wallet implementations.

Conclusion

Bitcoin Improvement Proposals (BIPs) are the backbone of Bitcoin’s collaborative development process. They provide a structured and transparent way for the community to propose, discuss, and implement changes to the protocol. 

Through BIPs, Bitcoin has evolved and adapted to meet the needs of its growing user base while maintaining its core principles of decentralization and security that has shaped the crypto world.