What is BIP – Bitcoin Improvement Proposal

A Bitcoin Improvement Proposal (BIP) is the formal document format for proposing changes to the Bitcoin protocol, wallet standards, or development processes. BIPs serve the same function for Bitcoin that EIPs serve for Ethereum — providing a structured, transparent process for discussing and implementing protocol evolution. Introduced by Amir Taaki in 2011 (modelled on Python PEPs), BIPs are the foundation of Bitcoin's deliberately conservative governance. BIP CATEGORIES Standards Track BIPs: Propose changes to the Bitcoin network protocol, transaction validation rules, or interoperability standards. These are the most impactful and require broad consensus. Subcategories: Consensus (hard/soft fork changes), Peer Services, API/RPC, Applications (wallet formats, address formats). Informational BIPs: Describe design issues or guidelines without proposing changes — no required consensus. Process BIPs: Describe changes to BIP process itself or Bitcoin development processes. BIP ACTIVATION MECHANISMS Soft fork activation (most common since 2017): Version bits signalling (BIP 9): Miners signal readiness in block headers. When 95% threshold is reached over 2,016 block period, soft fork activates. Speedy Trial (BIP 8): Used for Taproot — shorter signalling window with mandatory activation if threshold met. UASF (User Activated Soft Fork, BIP 148): Nodes enforce new rules regardless of miner signalling — used controversially to force SegWit activation against mining pool resistance in 2017. LANDMARK BITCOIN BIPS BIP 32 (HD Wallets): Hierarchical deterministic wallet structure — all modern wallets derive from a seed phrase using BIP 32. BIP 39: The 12/24 word mnemonic seed phrase standard — universal across hardware wallets, MetaMask, and all wallet software. BIP 141 (SegWit): Separated signature data from transaction data. Increased effective block size, fixed transaction malleability, enabled Lightning Network. BIP 340-342 (Taproot): Schnorr signatures, MAST, and Tapscript — privacy and smart contract improvements. BITCOIN'S CONSERVATIVE GOVERNANCE Bitcoin governance is intentionally slow and resistant to change — reflecting its store-of-value design philosophy. No single entity controls Bitcoin: changes require rough consensus among developers, miners, businesses, and users. Major changes take years of discussion. This conservatism is considered a security feature: Bitcoin's predictable monetary policy requires confidence that the rules won't change arbitrarily.

Terms in addition to the BIP – Bitcoin Improvement Proposal

Blockchain

A blockchain is a subset of a distributed database. The Bitcoin inventors originally prototyped the system in 2008. This modern database is made up of separate blocks that are connected together in a chronological chain. Blockchains may be used to store a wide range of data types. It has mostly been utilized as a public ledger for bitcoin transactions to date. A peer-to-peer network comprised of independent nodes uses a consensus process to ensure the blockchain's security and legitimacy. Each node in the network keeps a public and immutable copy of the data.

2 Factor Authentication (2FA)

2 Factor Authentication is a security measure with two layers. It is used by the majority of cryptocurrency exchanges. To log in, you must provide not only a password, but also a code obtained, for example, from the Google authenticator.

Airdrop

An airdrop is a method of distributing coins. End users can typically obtain coins for free or in exchange for doing a small task, such as subscribing to a newsletter, sending a tweet, or inviting others via a personal affiliate link. Cryptocurrency airdrops — the act of depositing cryptocurrency into public crypto wallets — are utilized as a marketing, liquidity creation, and network bootstrapping technique for many different types of blockchain initiatives.

Altcoin

Altcoin - "alternative coin" - is any kind of digital currency other than Bitcoin. Since the launch of Bitcoin, the world's first digital currency, many altcoins (as well as supporting blockchains) have been created. Altcoin digital currencies share many similarities to Bitcoin, but consistently and have significant differences. There are about 20,000 altcoins, and this number is expected to grow significantly in the coming years. Altcoins often develop Bitcoin features. Ethereum, currently the most widely used blockchain, supports digital contracts and separate applications where Bitcoin does not. Altcoins are also often created to cater to the needs of different users. The Litecoin blockchain, for example, can process payments quarterly for the duration of Bitcoin.

Cold Storage

Cold storage is the way to store cryptocurrency offline. The word refers to the use of offline wallets that are not connected to the internet. Cold storage is the most secure way to keep cryptocurrencies since an offline currency becomes less likely to be hacked and stolen. Paper wallets, printed renditions of private keys, and offline hardware and software wallets are all examples of cold storage.