Bitcoin Governance and Forks

Bitcoin Governance

Bitcoin is governed by the users, developers, and miners in the ecosystem. Bitcoin’s code is upgraded using Bitcoin Improvement Proposals (BIPs). These proposals are created by individuals in the ecosystem, publicly debated, and tested with the aim of having a majority approval for the proposal from the community. 

After a majority decision is reached, the BIP is integrated into the Bitcoin Core client software (the most widely used implementation of the Bitcoin software). This is the role of one of a few “Core developers” who have the ability to upload the updated code to the publicly recognized code repository. At this point, network participants have the option to install this new version of the node software.

Hard and Soft Forks

If node operators fail to update to the newest version of the Bitcoin software, the blockchain can split or “hard fork”. This split leaves the original blockchain intact, while also creating an alternative version of the original Bitcoin blockchain under new consensus rules. This new blockchain is run by the node operators that updated their software to the newest version. This chain separation causes security issues for the network, as miners and node validators split due to not being able to come to consensus. One of the most controversial forks in Bitcoin’s history created the Bitcoin Cash cryptocurrency

Alternatively, node software can be updated via soft forks. Soft forks are a way to add new functionality and features to a blockchain, without changing the fundamental consensus rules. The difference between hard forks and soft forks is comparable to a computer’s operating system being upgraded from Windows Vista to Windows 11, versus Windows 11 having a routine system update. 

  • Bitcoin Improvement Proposals (BIPs)governance process for updating the Bitcoin codebase
  • Cryptocurrencyany digital or virtual form of currency using cryptography to secure transactions
  • Hard Fork – a dramatic change to the underlying consensus rules of Bitcoin’s blockchain that results in a blockchain split, one that follows the previous consensus rules and one that follows the new version
  • Soft Forka method to add new functionality and features to the Bitcoin blockchain, without changing the fundamental consensus rules

Next Steps

If you feel prepared, take our Introduction to Bitcoin and Blockchain quiz:

  1. Bitcoin/bips: Bitcoin improvement proposals. GitHub. (n.d.). Retrieved March 22, 2022, from https://github.com/bitcoin/bips

  2. Cointelegraph. (2021, November 11). Soft Fork vs. hard fork: Differences explained. Cointelegraph. Retrieved March 22, 2022, from https://cointelegraph.com/blockchain-for-beginners/soft-fork-vs-hard-fork-differences-explained

     
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