Preface

The topic of Bitcoin’s next upgrade has been widely discussed, yet as of December 2024, the community has not reached a consensus on whether to upgrade, what issues the upgrade should address, or the features it should bring. The situation remains divided, resembling a political deadlock.

In this deadlock, many interesting phenomena have emerged:

1. Some community members actively push for upgrades, and due to information asymmetry or commercial interests, certain members frequently mention specific opcodes, while some projects depend on “potentially upcoming” opcodes.
2. A significant number of pragmatic ecosystem developers have done extensive cryptographic and engineering work to expand Bitcoin’s potential, based on the premise of no protocol upgrade.
3. There are also voices advocating for slow upgrades or opposing upgrades altogether.

These phenomena indicate that the topic of upgrades is highly relevant in the Bitcoin community. However, they also highlight that a considerable portion of the community lacks a full understanding of the complete process of a Bitcoin upgrade, and is unaware of the role that innovative cryptographic tools could play in unlocking Bitcoin’s potential. The core aim of this article is to break this information asymmetry, aligning everyone’s knowledge to enable deeper discussions. \
This article will define Bitcoin upgrades, summarize key patterns through historical analysis, and then analyze current upgrade proposals and potential alternatives. Finally, the author will provide several takeaways for readers. The intent is to equip readers with a better understanding of Bitcoin’s upgrades—its concept, history, and progress—laying the foundation for further discussion and helping shape the eventual consensus within the community. \
While presenting facts, the author, as a Bitcoin ecosystem developer, hopes for more possibilities for Bitcoin and will express clear views on certain topics. Readers should be aware of the distinction between facts and opinions in this article.

Introduction to Upgrades: What and Why

What is a Bitcoin Upgrade

The Bitcoin whitepaper defines a protocol that is followed by thousands of nodes that make up the Bitcoin blockchain network. \
There are multiple versions of the protocol implementation (often referred to as clients). According to data from https://bitnodes.io/nodes/, the client with the largest market share is Bitcoin Core. As a result, the developers who maintain the Bitcoin Core code (referred to as Bitcoin-Core-Devs) hold significant influence within the Bitcoin ecosystem.

what-why-1

what-why-1

Bitcoin node software is composed of multiple modules, and related upgrade proposals are defined through BIPs (Bitcoin Improvement Proposals), which are categorized into several types.

Typically, when people discuss Bitcoin upgrades, they are referring to “consensus protocol upgrades.” Since consensus protocol upgrades require the majority of the network’s nodes to reach an agreement (otherwise, a fork may occur), these upgrades must be approached with great caution. As shown in the diagram, the consensus protocol-related modules within the Bitcoin system and the BIPs concerning the consensus layer are particularly important and deserve close attention.

what-why-2

what-why-2

In fact, according to statistics from Bitcoin’s GitHub repository, changes are very active. However, since most of these changes are unrelated to the consensus protocol, they have not garnered widespread attention.

Bitcoin-core-github-stats

Bitcoin-core-github-stats

Types of Consensus Protocol Upgrades

According to the definition in [BIP-123 ]https://github.com/bitcoin/bips/blob/master/bip-0123.mediawiki), upgrades to the consensus protocol are mainly divided into two types: soft forks and hard forks.

• Additionally, there is another, less intuitive way to interpret and compare these two types of upgrades, which is quite interesting:
  Soft Fork: Adds or strengthens rules (for example, adding a new feature like support for Taproot addresses).

  Hard Fork: Removes or relaxes rules (for example, removing a restriction such as eliminating the block reward limit).

BIP and Soft Fork Process

The two successful consensus protocol upgrades (Taproot/SegWit) used the soft fork method, allowing upgrades without causing significant community splits. This article focuses on soft forks, meaning upgrades that are compatible with older versions of the software. After a BIP proposal is submitted, the process typically follows the steps outlined in the diagram below:

bip-state

bip-state

Source: https://river.com/learn/what-is-a-bitcoin-improvement-proposal-bip/

Typically, a soft fork proposal will combine multiple BIPs. For example, Taproot consists of three BIPs:

1. Schnorr Signature: BIP-340
2. Taproot: BIP-341
3. Tapscript: BIP-342

Let’s review the timeline of the Taproot upgrade:

Taproot-timeline

Taproot-timeline

Source: Kraken Intelligence, GitHub, CoinDesk, https://www.argoblockchain.com/articles/bitcoin-taproot-upgrade-explained

The milestones in the Taproot soft fork process include:

1. The corresponding BIPs are proposed, and the implementation plan undergoes review.
2. Bitcoin-Core developers initiate a GitHub pull request for the upgrade.
3. Bitcoin-Core developers review and merge the GitHub pull request, deciding on the activation method.
4. A new version of Bitcoin-Core code is released.
5. Miners vote on the blockchain to approve the activation block height for the BIP.
6. The upgrade is completed when the block height reaches the agreed-upon height.

It’s important to note that this process is a retrospective summary, and there is no formal consensus on these milestones.

Throughout the process, the Bitcoin Development Mailing List played a key role in consolidating consensus across different parties.

Why Upgrade

As mentioned at the beginning of the article, there are three main voices in the current community regarding upgrades:

1. Pro-Upgraders: They propose a large number of upgrades, which will be analyzed later in the article.
2. Pragmatic Builders: They focus on improving the existing protocol by implementing Fraud Proof (such as BitVM and its extensions), function encryption (contracts and zk proofs through Bitcoin PIPEs), and hash collisions (contracts implemented via ColliderScript), among others.
3. Status Quo Maintainers: This group believes that upgrades should be very slow and cautious (with a 10-year cycle), represented by TeamSlowAndSteady, and those who advocate for no upgrades unless quantum attacks emerge, known as Ossifiers (reference).

The author has provided an analysis of the pros and cons of updating vs. not updating:

As a pragmatic Bitcoin ecosystem developer, the author believes that it is essential to fully explore Bitcoin’s potential through cryptographic or engineering innovations within the existing protocol framework. From the perspectives of “sustainability” and “adaptability,” the author argues that, after thoroughly assessing the scope of impact and security risks, it is advisable to continue upgrading as needed.

In-Depth Look at Upgrades

Stakeholders in Upgrades

The main participants in Bitcoin’s history, particularly in the Hong Kong Consensus (signed at the Bitcoin Roundtable event in February 2016, @bitcoinroundtable/bitcoin-roundtable-consensus-266d475a61ff">reference), were:

1. Bitcoin-Core-Devs: Developers maintaining the Bitcoin Core codebase.
2. Mining Pools: Entities responsible for mining and securing the Bitcoin network.
3. Users and Ecosystem Developers: Primarily exchanges, chip manufacturers, and other key players in the Bitcoin ecosystem.

With Bitcoin’s adoption rapidly increasing, the stakeholders in Bitcoin upgrades have evolved. The early model of a simple separation of powers has gradually transformed into a more complex and competitive environment, often described as a “battle for influence.” For a detailed analysis, refer to the report Analyzing Bitcoin Consensus: Risks in Protocol Upgrades.

stakeholders

stakeholders

Several key roles in Bitcoin upgrades are worth highlighting:

1. Economic Nodes: This group mainly refers to major centralized exchanges (CEXs), payment institutions, custodians, etc. Their stance on soft forks plays a crucial role in determining which version of Bitcoin is considered “legitimate” and has a significant impact on adoption rates.
2. Investors: As Bitcoin strategies like ETFs, institutional reserves, and national reserves become more popular globally, the role of investors has become increasingly complex.
3. User & Ecosystem Developers: After the Taproot upgrade, the Bitcoin ecosystem has flourished, with new asset protocols like Ordinals emerging, along with a surge of native applications and scaling solutions.

Some interesting conclusions about these roles:

1. Different stakeholders play different roles at different stages: For example, Ecosystem Developers tend to be more proactive in proposing ideas, Protocol Developers often hold the authority to review BIPs, and mining pools and economic nodes have significant influence on activation.
2. Ecosystem Developers are more likely to propose and support upgrades related to their own commercial interests.

History and Summary of Upgrades

According to public information, there have been many soft fork upgrades since the launch of the Bitcoin network.

soft forks

soft forks

Data source:

https://blog.bitmex.com/a-complete-history-of-bitcoins-consensus-forks-2022-update/

https://www.drivechain.info/media/slides/mit-2023.pdf

From the diagram above, some interesting conclusions can be drawn:

1. The Bitcoin protocol has become somewhat rigid, and over time, the frequency of softforks has decreased.
2. It takes longer and longer to reach consensus on upgrades

Soft Fork concerns

Analyzing the BIP included in past soft forks, we can summarize the following areas of concern:

What Makes a Good Upgrade Proposal

Based on the facts and analysis presented earlier, we can attempt to define a good upgrade proposal for Bitcoin:

1. Adhering to Bitcoin’s core identity as a payment system: Bitcoin has a unique positioning.
2. Balancing application potential and risks: Making it liked by most, with no strong opposition.
3. Appropriate upgrade scale: Not too simple (not worth the effort), nor too complex (difficult to push forward).
4. Right timing: There needs to be strong demand, solving specific issues. For example, during the SegWit upgrade phase, scalability was a strong demand.

Upgrade Outlook

Proposal Classification

The author has collected most of the active proposals, labeled them according to the areas of focus, and placed them into a quadrant for easier visualization and understanding.

Important Notes for Classification:

1. The four areas of focus are not entirely independent of each other. For example, a BIP that enhances programmability may also contribute to scalability to some extent.
2. A proposal may have multiple areas of focus. For instance, OP_CAT is primarily aimed at enhancing programmability, but it is pushed more due to its potential to enable validity rollups.
3. The categorization of a proposal’s focus areas requires a certain level of “consensus” (which is inherently political). It’s important to note that there is no single definition, as different participants may have different perspectives.
4. The second diagram is not a coordinate system. Proposals are categorized based on labels, and the attributes of the circles (size, position, color, etc.) do not carry special significance.

proposal category-2

proposal category-2

proposal category-1

proposal category-1

Community Voices

From the diagram above, it can be seen that there is some consensus within the community regarding the issues that upgrades should address, primarily focusing on expanding the functionality needed for the payment system. These can be classified into the following two main categories:

1. Programmability: Enhancing the programmability of UTXOs, such as through covenant/vault/transaction introspection/conditional payments/script enhancements, etc.
2. Scalability: For L2 scalability, the overall approach is divided into on-chain validation and off-chain validation, both of which have actively promoted proposals.

The Puzzle of Consensus

The author believes that the Bitcoin community is trapped in a maze of consensus regarding the next upgrade for the following reasons:

1. Rigidity: With a software system close to a $2T FDV, a significant portion of the stakeholders tends to prefer stability, and no party is willing to bear the responsibility for potential failures.
2. Highly Fragmented Stakeholders: Different stakeholders have different demands, and they play different roles at different stages. Governments have also become key stakeholders.
3. Imperfect Governance Mechanism: As one of the earliest blockchains, Bitcoin lacks a fully developed governance mechanism. The community has been unable to reach a consensus on how to activate soft forks.
4. Dynamic Role of Protocol Developers: While they do veto some proposals, their role cannot be simply described as conservative or progressive.
5. Lack of Urgency: With blockchain infrastructure becoming increasingly mature, there is not a strong demand for upgrades to Bitcoin at the moment.

Summary&Takeaway

This article introduces the basic concepts of Bitcoin upgrades, provides an in-depth analysis of historical upgrades, and finally looks ahead to the active proposals for the next upgrade, summarizing the reasons for the current maze of consensus.

After reviewing and looking forward, it is believed that readers now have a certain understanding of the current state of upgrades. Finally, here are several key takeaways:

1. Pragmatic and cautious progress in upgrades, with soft forks being more preferable.
2. Highly fragmented stakeholders, with the community tending towards conservatism.
3. Upgrades must be discussed under the premise of adhering to Bitcoin’s core value positioning.
4. Scalability is only one aspect of the upgrade focus.
5. A better timing is needed; a good upgrade proposal will quickly gain consensus.
6. The community needs to explore better governance mechanisms.

Acknowledgments

During the research, writing, and review process of this article, I received a great deal of help from many individuals, including community members who, for various reasons, prefer not to be named. I would like to express my gratitude to all of them.

It is important to note that, given some of the viewpoints in this article reflect personal preferences, the following acknowledgment list does not imply full agreement with the content, nor does this article intend to involve these supportive community members in any disputes.

• Collaborative Editing and Review (Alphabetical Order)

Adrien Lacombe

Bob Bodily

Bitlayer Research Team

a house

Jeffrey Hu

Red

Ren Zhang

Scott Odell

Super Testnet

Will Foxley

• Provided Feedback and Assistance (Alphabetical Order)

Ajian

Andrew Fenton

Ben77

David Tse

That is, Ben-Sasson

Mi Zeng

Future Work

Throughout the process, the author identified many issues that warrant further exploration, such as solutions for certain functionalities, research on specific proposals, and data support for certain viewpoints. These topics will be elaborated upon in subsequent series of articles.

References

https://bitcoinops.org/

https://opnext.dev/

https://groups.google.com/g/bitcoindev

https://github.com/TABConf/6.tabconf.com

https://petertodd.org/2024/covenant-dependent-layer-2-review

https://blog.bitmex.com/a-complete-history-of-bitcoins-consensus-forks-2022-update/

https://blog.bitmex.com/bitcoins-consensus-forks/

https://github.com/bitcoin/bips/blob/master/bip-0123.mediawiki

https://river.com/learn/what-is-a-bitcoin-improvement-proposal-bip/

https://bitnodes.io/nodes/

https://github.com/bitcoin/bitcoin/pulse/monthly

https://river.com/learn/what-is-a-bitcoin-improvement-proposal-bip/

https://trustmachines.co/learn/bitcoin-taproot-upgrade-basic-breakdown/

https://www.argoblockchain.com/articles/bitcoin-taproot-upgrade-explained

https://medium.com/@bitcoinroundtable/bitcoin-roundtable-consensus-266d475a61ff

https://github.com/bitcoin-cap/bcap

https://newsletter.blockspacemedia.com/p/four-takeaways-from-op-next

https://blog.bitfinex.com/education/is-ossification-good-or-bad-for-bitcoin/

https://arxiv.org/abs/2305.04079

https://www.allocin.it/uploads/placeholder-bitcoin.pdf

https://eprint.iacr.org/2024/1802

https://en.bitcoin.it/wiki/Covenants_support

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