A controversy has emerged in the Bitcoin community related to both the implications of BIP119, a Bitcoin improvement proposal, and the manner in which the update would be activated if adopted.
What is BIP119?
First things first. What exactly is BIP119 - also known as CTV (short for CheckTempateVerify)? In its simplest form, BIP119 is a mechanism that does the same thing presigned transactions can do. It’s like deciding ahead of time what you want to do with your coins. It allows you to do that in a way where the consensus rules of the network enforce it.
The alternative might be having to get involved in a multisig with everybody that you’re trying to do something with. That makes it a simple optimization of a myriad of things you can do with pre-signed transactions.
Fundamentally new capability
A primary use case for BIP119 is to utilize the update to provide for cold storage vaults.
This would lead to vastly improved security as you could set restrictions such that you are only allowed to remove a portion of your coins at a time, with a timelock set on when more could be removed. It reduces your potential loss to the portion that can be removed. Think of the amount of bitcoin in Bitcoin wallets that has been compromised in recent years and it becomes evident just how useful this feature would be to custodians and ordinary users alike.
According to BIP119 proposer, Jeremy Rubin, it would also bring further functionality with implications for decentralization, scalability and privacy. He also suggests that it could facilitate Bitcoin payments to be scheduled on specific dates or multiple dates.
Such a covenant could bring smart contracts to Bitcoin and so, the outcome in terms of future use cases is limited only by what developers decide to build on top of it.
Controversy and tension
The improvement proposal has recently proven to be contentious.
Bitcoin educator and author Andreas Antonopoulos claims that a covenant like BIP119 has the potential to be manipulated by a government such that it could “kill Bitcoin”. His view is that it could facilitate a large whitelist of approved addresses that a government would dictate to exchanges to direct their customers to use. Others in the community are pushing back on this with the counterclaim that the pre-computation to achieve this is not technically possible.
Interestingly, the controversy and tension surrounding BIP119 has as much to do with the activation procedure as the actual implications of the proposed change itself. Achieving decentralized consensus is an incredibly difficult thing to get right.
Blockstream CEO, Adam Back, tweeted his disapproval: “Concretely proposing to activate anything on Bitcoin without technical and ecosystem consensus is defacto an attack on Bitcoin’s change process, that protects immutability and security. The anti-fragility is people who defend those principles.”
Taproot - Bitcoin’s last major upgrade - proved to be less contentious but was under public scrutiny for three years.
Bitcoin development and its improvement processes are deliberately conservative as it’s understood that the network holds $600 billion in value and that this needs to be safeguarded at all costs. However, the bigger Bitcoin gets, the more difficult it is going to be to add new features that improve scalability. With that, the manner in which consensus is achieved is likely to remain a bone of contention for some time to come.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.