Bitcoin is the biggest and oldest blockchain. The technology dates back to 2009 but has been in widespread usage since 2011. Despite this, Bitcoin has undergone very little change during this time. This is because the Bitcoin blockchain is decentralised. This means that there is no single entity that controls it. All the events that occur are put forward by the community.
The decentralised nature of Bitcoin is what makes it different. Along with this, the community behind Bitcoin puts a focus on predictability as well as security. The blockchain is the most secure means of making transactions. And while Bitcoin will not be around forever, for now, it’s the best example of a decentralised system.
The stability of Bitcoin is another reason so many traders love it. But every so often, the coin undergoes changes. These changes are always in the form of upgrades. And these upgrades are both major and minor. A minor example includes a tweak that improves security.
But larger upgrades do take place. An example of this is Taproot.
Taproot is one example, but it’s also the most significant. It shows that the community is working hard on Bitcoin. More people than ever before are focussing on making Bitcoin better for everyone.
Integrating new features and upgrades into Bitcoin is a process. And it’s a process that requires the whole community. As a collective, the community needs to focus on what features to implement to improve the blockchain. These improvements include security, privacy, and the ability to scale.
The implementation of an upgrade is done with a “BIP.” This is an important part of the Bitcoin ecosystem. Here we will take a closer look at a BIP and what it means for this famous coin. BIPs can radically change how Bitcoin works. This is apparent not just technically, but also in terms of the market. In fact, a successful BIP can make a difference to the price of the coin. This is also why it’s important to keep track of BIPs. Additionally, traders use this information for Bitcoin futures trades. Knowing the newest BIP is a good idea.
A Bitcoin Improvement Proposal or BIP represents a way for the community to make changes. These changes affect how the whole blockchain functions. Because of this, a proposal must first be put forward. Thereafter, the community decides whether they agree to it.
Many see a BIP as a special kind of software upgrade. The idea is to improve the blockchain entirely. And to give the users more accessibility and security. Deciding on the details of the upgrade is a vital part of the process. Before any additions to the code, the proposal will need granting.
This is easy in most types of software. But when it comes to blockchain technology. It is more complex than that. A part of this is because there is no central entity. In other words, no company or government runs Bitcoin. In fact, the entire project is community run. But this is where a BIP comes in.
A BIP makes it easy for the community to make proposals. These proposals can include a number of ideas. And can include:
Once a BIP is put out, a vote must take place. Only once a vote occurs will any changes come into effect. One of the main advantages of this system is that it allows anyone to see what is going on.
The open source nature of blockchain technology is positive to the community. Many proposals are viewable by the public. In fact, these discussions are easy to find on GitHub.
GitHub is a powerful resource in the cryptocurrency community. It is able to host open source software, including source code. This platform is in extensive use by developers from across the world. Not only does it host software, but it also allows discussions. And these are the discussions where the community as well as developers can add their opinions on a BIP.
The submission of a BIP needs to go through the community. And due to its open nature, everyone can make a submission. This ties in well with the decentralised aspect of Bitcoin and similar technologies.
Well-known developers are more likely to find success on GitHub. This is because they have spent time earning their reputation. And it’s these developers that are the ones to make changes. But it doesn’t stop anyone from making a submission.
We advise that anyone making a submission first take certain steps. One of the first of these is to submit an idea to a community forum. This will allow other people to look and have a say. Keeping things open to discussion is an important part of the community.
Let’s review a breakdown of how a BIP works:
Before we continue, let’s look at the editors. The editor will need to edit for format and language. These are done against BIP standards. Not only this, but they also explore the overall feasibility of the proposal. By the time a vote is done, the proposal will be ready to go. The editor also requests revisions from the author. These editors also have the power to reject a proposal.
Always keep in mind that this entire process is open. The idea behind this is to give everyone an idea of what is happening. With a clear vision, it is easier to implement new features.
Succeeding on a voting level is one step. Once successful, the BIP must be implemented. This implementation process is broken into two steps.
Some proposals take years before implementation occurs. There are many reasons for this. For instance, the community might deliberate for a long time on a proposal. This idea will circulate numerous times in the community and new ideas may get put forward for proposal. On top of this, changes will get implemented along the way. Eventually, the community will agree on the final proposal. This also streamlines the process a lot. Another way of streamlining the process is by focussing on a single change.
Bitcoin nodes must agree on the rules and regulations of the blockchain. Without this agreement, the network won’t function correctly. Notes must decide whether they wish to activate a proposal or not. These proposals enter the system all the time. They are constantly subject to discussion. The same nodes will keep track of these discussions and make decisions as necessary. This is why it’s important to keep up to date with the Bitcoin blockchain in real-time.
Another way that a change happens is through a fork. This is most commonly a soft fork. This introduces some kind of change, but in a way that leaves it compatible with older versions. This means that a node can run an older version without problems. Over 90% of nodes need to approve of an upgrade before it takes place. This type of agreement among the nodes is a “Consensus BIP.”
On the other hand, we have hard forks. This is a much more fundamental change. It essentially creates a new blockchain. Once this is done, the old blockchain no longer runs. This type of change is extremely difficult to implement. The main reason for this is because reaching a consensus is rarer. It means that everyone who is a part of Bitcoin’s ecosystem would need to agree. Including nodes, wallet providers, exchanges, and more.
Now that we know what BIPs are, let’s look at how they affect Bitcoin futures. Most traders know that a Bitcoin futures is an agreement to buy or sell BTC at a specific date. And to buy or sell at a certain price. These types of contracts occur all the time.
A BIP can have a large impact on a Bitcoin Futures contract. For example, a large change like Taproot will change the value of the coin. However, the drawing up of the contract may precede the change. This means that the contract holder needs to ensure their agreement remains in place. Taking on this type of contract is a responsibility that both parties must uphold. And it means that both parties need to keep up to date with the Bitcoin ecosystem and the blockchain as it improves and evolves. And watching BIPs makes it easier to set up Bitcoin futures contracts.
This is especially important when we consider that all futures deal in cash. Because the futures market operates on cash, it’s imperative to watch the discussion forums and Bitcoin Improvement Proposals as they are occurring.
BIP consists of a robust system. But many feel that it is far from perfect. Let’s explore some of the pros and cons of this specific system.
There you have it. Everything you need to know about BIPs and why they matter. How you use this information is up to you but investing in crypto is certainly a good idea.