Bitcoin, the world's oldest and largest blockchain, has been around since 2011, but despite being around for more than a decade, it hasn't changed much.
That's because Bitcoin is truly decentralized, and the network's community values the security and predictability of the blockchain above all else.
Still, from time to time there are upgrades to the way Bitcoin works - sometimes just a small change, sometimes one as big as Taproot, which took three years and allowed developers to incorporate new features to improve the privacy, scalability and security of the blockchain.
And behind every upgrade implementation is a successful "BIP."
So, what is a BIP?
Bitcoin Improvement Proposal (BIP) is a standardized way to propose any change to the way the Bitcoin blockchain works.
Since the blockchain is software, BIPs can be thought of as software updates. Their goal is to improve the Bitcoin blockchain, and they must include all the technical details of the change in the blockchain's code in order to implement it.
Since Bitcoin has no centralized governance, BIPs allow the community to communicate ideas, design and propose technical changes, and finally vote on whether to accept or reject the proposal.
The proposals and discussions are available for anyone to view on GitHub, an open source platform popular among software developers.
Who can propose a BIP?
In theory, anyone can propose an upgrade and work it out as a BIP, since Bitcoin is a decentralized open-source network.
However, it is highly recommended to submit an idea to community forums and email lists to discuss whether the proposal has enough backing among Bitcoin network participants.
How a BIP is approved
First, the idea needs a BIP champion, who will be the author of the proposal. The champions transform the idea into a detailed technical documentation according to the BIP standards.
Then, the BIP Champion submits the proposal to the BIP Editor, who acts as a reviewer of the proposal and is responsible for its management.
The editor's responsibilities include revising the language and form of the proposal according to the standards, verifying the technical feasibility of the proposal, and ensuring that the proposal is well prepared to proceed to a vote. The editor can request revisions from the author or even reject the proposal. When the editor deems the proposal ready for use, it is given an official number (e.g., BIP 119), and the champion presents the BIP to the community.
The BIP must go through several stages before it can be implemented.
The implementation consists of two steps. First, the upgrade must be integrated into the software code of the blockchain (Bitcoin Core) and then activated. For example, the Taproot upgrade was integrated in October 2020 and activated in November 2021. (Note: not all BIPs that are integrated into the code will eventually be accepted and activated.)
It can take years for a proposal to be implemented as the community discusses the idea, makes changes, and eventually reaches consensus. To minimize controversy and lengthy discussions, a BIP should focus on a single, important change.
Because Bitcoin has no central authority, nodes - those that run the Bitcoin blockchain and ensure its security - must agree on the rules and reach consensus on how to run the network. Nodes decide whether to activate the proposals by agreeing to run the version of the Bitcoin code that includes any new changes.
A soft fork introduces a change to the blockchain that is compatible with the older version, allowing nodes to run the "old version of the software" without interruption. A BIP proposing an implementation with a soft fork requires a "clear miner majority," meaning that over 90% of nodes must agree to the upgrade. These are referred to as "consensus BIPs."
Hard fork BIPs - a radical upgrade that essentially creates a new blockchain and invalidates the old one - can hardly ever get general community approval, as they would require the consent of everyone participating in the Bitcoin economy, including nodes, exchanges, wallet providers, and so on.
Not all BIPs directly propose changes to the code. Standard BIPs establish a new standard for services that use the Bitcoin software, such as exchanges. They could require general approval to ensure interoperability among those using the blockchain.
Some proposals, called process GDPs, introduce new processes and decision making to the network - they propose rules on how to make rules.
Notable BIPs
BIP 001 and BIP 002
The very first proposal, BIP 001, was submitted by Indian-British programmer Amir Taaki in September 2011 and described what a Bitcoin Improvement Proposal is. BIP-002 then revised the guidelines for BIPs and replaced BIP-001. Both are examples of process BIPs.
BIP 008 and BIP 009
These are two process BIPs that introduced a standard framework for enabling soft fork upgrades in the Bitcoin blockchain.
BIP 141
This was a standard BIP that introduced the standardized format for SegWit addresses in the broader SegWit (Segmented Witness) upgrade, which consisted of different BIPs and changed how Bitcoin stores data.
Taproot
Taproot, the largest upgrade to the Bitcoin blockchain in recent times, was actually a melting pot of three BIPs (BIP 340, BIP 341, and BIP 342). It stemmed from a proposal by software developer Greg Maxwell in January 2018. After that, three BIPs codified the upgrade, which was pushed by Bitcoin developers Pieter Wuille, Tim Ruffing, A.J. Townes, and Jonas Nick.
The long-awaited upgrade went live in November 2021 - nearly four years after the original proposal - and gave Bitcoin developers an expanded toolbox with which to build on the blockchain.