What Is BIP, and How Does Bitcoin Evolve?

Bitcoin became the first cryptocurrency, drastically changing how people perceive virtual money. Despite its relatively slow pace of development compared to some other cryptocurrencies, Bitcoin is a project under constant improvement. The driving force behind Bitcoin’s evolution is its active community, always searching for ways to technically enhance the project.

To enable decentralized decision-making, the Bitcoin Improvement Proposal (BIP) system was introduced. This unified standard allows the community to propose changes to Bitcoin’s protocol.

Main Stages of BIP Implementation

The process of developing and adopting a Bitcoin Improvement Proposal involves the following steps:

1. Idea and concept. A developer or a group of developers formulates an idea to improve Bitcoin. This idea could address technical, economic, or administrative changes to the protocol.
2. Drafting a BIP. The draft version (BIP Draft) outlines the problem that needs solving and the proposed changes. The draft must meet the format requirements for such proposals.
3. Assigning an editor. The initiator of the proposal contacts an editor, who reviews whether a BIP meets the set standards and ensures it doesn’t duplicate existing proposals. The current list of editors is available here.
4. Discussion and refinement. The draft is published within the developer and user community for discussion. Feedback is gathered, and potential risks, technical aspects, challenges of implementation, and alternative solutions are explored. Discussion platforms include mailing lists (like Bitcoin-dev), GitHub, the Bitcoin Core developer IRC channel, and the BitcoinTalk forum.

5. Official publication (BIP Accepted). Once discussions are completed and the details agreed upon, the proposal, after gaining community approval, is officially accepted and published as a BIP.
6. Implementation and testing. After the BIP concept is finalized, developers can start creating prototypes to test the changes in controlled environments. These tests are crucial for ensuring the security and stability of new features before rolling them out to the main network.
7. Activation. Changes affecting Bitcoin’s code require coordinated activation by network users, usually through a soft fork or hard fork. This is typically done via signaling mechanisms, such as specific block heights or signaling blocks from miners.

After a BIP is implemented, the community monitors its performance on the main network, making adjustments or updates if needed.

Types of BIPs

There are three main types of BIPs:

1. Standards Track. These BIPs are designed to modify the core code of the cryptocurrency, including block formation, consensus algorithms, transaction processing, and other critical functions. They may also involve changes in interoperability between different BIPs. Implementing these changes requires broad consensus from developers, miners, and node operators.
2. Process. These proposals focus on community governance and organizational changes rather than technical modifications to the project. They might outline decision-making processes, standard implementations, or ways to improve organizational procedures. While they also need community approval, the consensus is more of a formal agreement.
3. Informational. These BIPs provide information or recommendations on various aspects of the Bitcoin community or technical issues but don’t aim to change the protocol and don’t require community consensus.

Key BIPs

More than a thousand ideas and proposals have been submitted and implemented using the BIP standard, each contributing to the project in varying degrees. Some of these played pivotal roles in improving Bitcoin and influencing other cryptocurrencies.

HD Wallets (BIP 32)

In February 2012, Bitcoin Core developer Pieter Wuille introduced the concept of Hierarchical Deterministic Wallets (HD Wallets), which allow for generating an unlimited number of related private and public keys from a single master key (or seed phrase).

This concept was accepted as a standard in June of that year, but it wasn’t implemented in Bitcoin Core until August 23, 2016. However, independent crypto wallets began using the standard as early as 2013. BIP 32 also laid the groundwork for subsequent standards like BIP 39 (mnemonic phrases) and BIP 44 (multi-currency HD wallets).

Lightning Network (BIP 68, BIP 112)

In 2016, Bitcoin Core developer Mark Friedenbach proposed two key updates that paved the way for the Lightning Network, significantly expanding Bitcoin’s functionality. BIP 68 and BIP 112 were published in early 2015 and officially adopted on May 10, 2016, through a soft fork. These two proposals work in tandem — BIP 68 introduces relative time locks, while BIP 112 enables the use of this mechanism within transaction scripts.

It’s important to note that while these proposals were critical to the development of the Lightning Network, several other Bitcoin updates, including the implementation of SegWit, also played a significant role in enhancing the protocol’s functionality.

Segregated Witness (BIP 141)

Segregated Witness (SegWit) was conceptualized by Pieter Wuille in 2015 to improve the scalability of Bitcoin by increasing its transaction capacity. This proposal was implemented as a soft fork on August 24, 2017, via BIP 141, and received over 95% network consensus in just 14 days.

In total, more than 350 BIPs have been proposed, most of which fall under the Standards Track category, directly affecting Bitcoin’s core code. Out of these, about 80 have been accepted and are either already implemented or in the process of being rolled out. While it can be challenging for non-technical individuals to evaluate the significance of each BIP, every single one represents dozens, if not hundreds, of hours of work from the blockchain dev community, ensuring Bitcoin continues to evolve and remain a leader in the crypto space.