The implementation of Segregated Witness (SegWit), one of the most important updates on the BTC network, will be five years old in August. Seen as fundamental to increase the scalability of the network, SegWit was the result of a huge debate.
In fact, the discussion surrounding the then-new technology nearly destroyed the BTC network. Even so, the consensus won and BIP 141 – which featured SegWit – was successfully implemented.
But almost five years later, a new update causes controversy and divisions in the community again. This time it’s BIP 119, which can provide new use cases for BTC, including support for smart contracts on the blockchain.
What are the controversies behind the new update and what do supporters and opponents of BIP 119 think? And what risks can it bring to the functioning of the BTC network?
BIPs and improvements
First, an explanation of how BTC updates work is in order. Anyone who wants to release some improvement in the code can’t just do it from scratch. First, you need to submit a BTC Improvement Proposal – or BIP, for short. Each BIP has its own code, such as the aforementioned BIP 141 (SegWit).
Any member of the community can submit a BIP through BTC Core’s GitHub, but proposals must be reviewed by the developers. Briefly, the BIPs go to votes between nodes and miners and, if approved, it is implemented on the blockchain.
SegWit followed this same path until its approval, and BIP 119 is at the beginning of that journey. The proposal was suggested by developer Jeremy Rubin in 2020, but began to gain visibility from the end of 2021.
That’s because in November of that year, BTC received one more update, titled Taproot, which brought new updates. One such improvement was the enhancement of BTC’s ability to support smart contracts – and this is where BIP 119 comes in.
Since its inception, BTC has been criticized for an alleged “over-simplicity” in its operation. According to this stream, BTC is revolutionary as it was the first use case for a functional cryptocurrency, but it is losing ground to other competitors.
This loss of space is caused by the limitations of BTC, which in essence has only one function: moving value. On the other hand, the network would be extremely limited in the development of other functionalities, such as the creation and execution of smart contracts.
Currently, the function of enforcing these “smart contracts” on BTC exists – it was implemented after the “taproot” update. But it is limited to the basic level of transactions and is not suitable for more complex operations.
To expand the functionality of BTC, Rubin introduced the BIP 119. The main novelty of the update is the concept of Covenant. Overall, the update would allow programmers to control how BTC can be spent in the future. That is, it will make BTC easier money to be programmable.
For example, the Covenant will allow you to whitelist or blacklist certain addresses, restricting where BTC can be spent. That way, the addresses in question could not send or receive BTC even to the person who has the key to these wallets.
Since Covenant makes cryptocurrency programmable, this functionality would have ample wiggle room. A user could use it not just for the next transaction, but future transactions.
Therefore, the update could cause some addresses to be sanctioned and prevented from sending or receiving funds. BIP 119 could also associate wallets with users, which would end some of the anonymity that exists in BTC today.
The way in which the update can be implemented has also generated doubts and criticism in the community. Implementation via a quick test (Speedy Trial) was suggested, in which if 90% of the blocks during a difficulty adjustment period signaled approval, BIP 119 would be implemented. However, the difficulty adjustment period is only 2016 (approximately two weeks).
To give you an idea, the decision regarding SegWit took several weeks. Most critics questioned the rush and said it could pose a risk to the network. The way of activation also puts the decision directly in the hands of the miners, completely ignoring the nodes.
Reviews the new update
Once BIP 119 became known, several famous names criticized the update in various ways. Some pointed out problems with the BIP itself, while others questioned the way in which it would be implemented.
For Andreas Antonopoulos, the result is definitive: if implemented in the current model, BIP 119 can “kill BTC”. Antonopoulos fears that the update will turn the network into “a big PayPal, only more inefficient”, and said that BIP 119 could create two classes of the cryptocurrency.
“This means BTC is no longer fungible. You created two categories of BTC, one that can be sent to anyone, another that can only be sent to a specific list of addresses.”
For Marco Jardim, blockchain technology director at Investtools, the risk of damage to the main blockchain must be considered. Jardim argues that the update should be implemented in secondary test layers, and only then work on the main blockchain.
“This upgrade would break some address construction rules, forcing all network developers to create extra code, a kind of patch, to interpret the new rules, which in the long run would not be sustainable,” he said.
However, the executive highlighted that Rubin is open to criticism and was willing to discuss BIP 119 more openly. The developer even suggested a debate with Antonopoulos to discuss any changes brought about by BIP 119.