Jeremy Rubin, a Bitcoin Core developer, is championing a quick trial of his BIP-119 Miner Activated Soft Fork. Rubin’s BIP-119 attempts to use a new opcode.
The new opcode allows for the implementation of covenants, which have several useful applications and could help scale Bitcoin.
However, there are some in the bitcoin community who are critical of the proposal, fearing that BIP-119 will hamper bitcoin’s fungibility, one of bitcoin’s core characteristics, while other concerns pertain to the speed at which it is being pushed forward.
What is Bitcoin BIP-119?
Bitcoin Improvement Proposal 119 is a Bitcoin improvement proposal championed by Jeremy Rubin that attempts to implement the OP_CHECKTEMPLATEVERIFY opcode. This new opcode enables the integration of covenants.
What are alliances?
Covenants are restrictions on how bitcoin can be spent beyond key ownership. In bitcoin transactions, covenants mainly refer to restrictions on where coins can be transferred after acquisition.
For example, wallet A places an agreement on bitcoins it owns and adds a whitelist of related addresses. Wallet A sends bitcoins to wallet B. Wallet B can only send those bitcoins to other wallets on the whitelist.
The OP_CHECKTEMPLATEVERIFY (CTV) proposed by BIP-119 allows the implementation of covenants. Covenants are useful to create smart contracts with several useful use cases such as: B. to prevent your funds from being stolen in case of hacking and to scale the network.
By using CTV you can create a wallet vault. These can be a useful tool to increase the security of cold storage solutions; They come equipped with standard transaction paths that move your funds from your cold storage to a hot wallet. This way, if your wallet is hacked, stolen or lost, they cannot steal your funds.
CTV can also help scale Bitcoin by implementing Congestion Controlled Transactions. When network demand is high, transactions become very expensive. With CTV, large payment processors can consolidate all their payments into a single transaction commitment for verification purposes.
Why is BIP-119 so controversial?
The BIP-119 controversy mainly revolves around two main concerns in the Bitcoin community.
The first is the negative effect that the introduction of covenants could have on the fungibility of Bitcoin, one of the key features of crypto. The fungibility of bitcoin is based on the fact that every bitcoin is identical in functionality and quality.
Introducing agreements that change the properties of specific bitcoin units would effectively create different types of bitcoins in terms of how they can be spent or where they can be sent. Limiting how you can spend your bitcoins also limits bitcoin’s usefulness and ultimately hurts its exchange value.
Second, some members of the community feel compelled to implement a proposal that could have serious implications for Bitcoin’s interchangeability.
Speedy Trials have historically been used to activate upgrades; Bitcoin’s Taproot upgrade was activated by one. This time around, however, some believe the proposal should be further reviewed and alternatives explored given the serious impact this upgrade could have on Bitcoin.
The interchangeability of Bitcoin is at stake
Although Rubin’s BIP-119 proposal promises to resolve some of Bitcoin’s current security and scaling concerns, covenants could also place damaging limits on the crypto’s usefulness. Unintentionally or not, this would definitely damage the exchange value of Bitcoin in the long run.
The proposed changes in BIP-119 could have such major consequences for Bitcoin’s interchangeability that even those who don’t directly oppose its implementation are wary of them.
At least so far that one would like to examine more closely what effects such an upgrade could have on the cryptocurrency.
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