What is a BIP (Bitcoin Improvement Proposal)?

Bitcoin doesn’t have a CEO, board of directors, or central authority deciding its future. Instead, its development follows a collaborative, decentralized process, with changes proposed, reviewed, and adopted (or rejected) by the community.

Bitcoin Improvement Proposals (BIPs) are formal documents that propose changes to Bitcoin’s software, consensus rules, or standards. Introduced in BIP 0001, the BIP framework ensures that Bitcoin’s evolution is transparent and resistant to centralized control.

This system makes Bitcoin fundamentally different from corporate software projects, where updates are dictated from the top down. With Bitcoin, anyone can propose a change, but no one can force others to accept it.

How are BIPs created?

Bitcoin is an open-source system, meaning anyone can submit a BIP - whether they are a developer, a researcher, or simply a user with an idea. However, before a proposal becomes an official BIP, it must pass through several stages:

1. Discussion & Refinement

   • Proposals start informally—on mailing lists, forums, or developer meetings.
   • If an idea gains traction, developers refine it, addressing potential security or scalability concerns.

2. Formal Submission

   • Once refined, the proposal is assigned a BIP number and published in Bitcoin’s GitHub repository.
   • At this stage, it is now a formal Bitcoin Improvement Proposal, though it is not yet approved.

3. Review & Testing

   • The wider Bitcoin community (developers, node operators, businesses, miners) test the BIP.
   • If code changes are involved, extensive peer review and testing take place.

4. Community Consensus & Activation

   • If the proposal is widely supported and no critical flaws are found, the community decides how to activate it.
   • Some changes require nodes and miners to actively signal approval before they go live.

Unlike centralized networks, Bitcoin’s upgrades only happen when a majority of the network voluntarily accepts them.

Approval

Approval depends on the type of BIP. Some proposals require broad consensus, while others are optional standards that developers may or may not choose to adopt.

Consensus BIPs (Protocol Rule Changes)

• These BIPs modify Bitcoin’s core rules, like how transactions are verified or blocks are processed.
• Example: The SegWit upgrade (BIP 141) changed how transactions were structured, requiring network-wide adoption.
• If a significant portion of the community disagrees, a contentious fork could occur.

Standards BIPs (Community-Wide Guidelines)

• These do not alter Bitcoin’s consensus rules but establish best practices to improve interoperability between wallets, exchanges, and other Bitcoin software.
• Example: BIP 39 introduced mnemonic seed phrases, allowing users to recover funds with 12- or 24-word backups.
• Adoption is optional, but widespread use improves compatibility.

Process BIPs (Governance & Activation Rules)

• These define how Bitcoin proposals are structured, reviewed, and implemented.
• Example: BIP 8 and BIP 9 specify methods for activating soft forks without causing network disruption. While developers write most of Bitcoin’s code, nodes running the Bitcoin network decide which changes to accept. No one, not even a group of developers, can force an upgrade without community approval.

BIPs and Bitcoin’s Consensus Rules

Because Bitcoin is a monetary system, upgrades must be slow, careful, and widely accepted. Changes to the consensus rules cannot be reversed, so the BIP process is intentionally time-consuming.

Bitcoin’s governance follows rough consensus, meaning an overwhelming majority must agree before a change is activated. If a proposal fails to gain adoption, it does not move forward.

One of Bitcoin’s strengths is that it does not change frequently, nor does it need to - unlike other blockchains that rush to implement unproven ideas-

Notable BIPs

Segregated Witness (SegWit) – BIP 141

• Introduced witness data, improving Bitcoin’s scalability + security.
• Activated through user-activated soft fork (UASF) after a heated community debate in 2017 (The Blocksize Wars).

Taproot – BIP 340, 341, 342

• Integrated Schnorr signatures and MAST, improving privacy and efficiency.
• Adopted through miner signaling with 90% support in 2021.

BIP 39 – Mnemonic Seed Phrases

• Created the 12- or 24-word backup system now standard in most wallets.
• Made wallet recovery more user-friendly and secure. Bitcoin evolves carefully and deliberately—every improvement must align with its principles.

Final Thoughts

• A BIP is a formal proposal to improve Bitcoin’s protocol, software, or standards
• Anyone can propose a BIP, but only widely supported changes are adopted
• Bitcoin upgrades are voluntary