Bitcoin doesn’t need to change, but…

The idea that there is only one path forward is simply too restrictive of a view for something as important as Bitcoin


Midjourney modified by Blockworks


Bitcoin is over ten years old, but you wouldn’t know it. Almost all of the changes to its inner workings over the years have been quite conservative, leaving us a Bitcoin that Satoshi would easily recognize.

Proposed changes sometimes ignite a debate within the community centered around what Bitcoin truly “is” or “needs.” While there are strong opinions and arguments on both sides, the protocol ultimately requires fundamental but careful updates, alongside meaningful but functional second-layer applications. 

When thinking about Bitcoin’s future, it’s essential to consider the repercussions of ossification. I’ve touched on this topic several times — but in a nutshell, ossification is the process whereby so many applications get built on top of a protocol and adopted by the masses that it becomes exceedingly difficult, if not impossible, to alter the underlying protocol without breaking almost everything. 

With thousands or tens of thousands of third-party services relying on the base network, it’s infeasible to coordinate upgrades across every provider simultaneously. We’ve already seen this occur with protocols like TCP, one of the primary mechanisms used to handle internet traffic, and it will inevitably happen with Bitcoin. 

I bring this up because we don’t know when Bitcoin will become too ossified to change — and there’s a small chance it’s already too late. This adds pressure to the entire debate because, at some point, updating through BIPs will become impossible, so solving problems at that level will be a moot point. 

That being said, Bitcoin represents an uncontrollable technology that all are free to build on top of. 

Considering that many, including myself, believe that there is still some important work to be done on the protocol level, we need to act swiftly to ensure the Bitcoin network is developed enough to work as the digital currency system it intended to be. 

Updating Bitcoin’s code is nothing new

Because the network operates around consensus, any new changes submitted via Bitcoin Improvement Proposals (BIPs) need to be agreed upon (or at least not objected to) by an overwhelming portion of ecosystem participants. 

This is understandably a slow and onerous process. Unsurprisingly, as a result, there have only been a handful of major upgrades in the history of the protocol. 

One of these upgrades, known as Segregated Witness, or Segwit for short, represented a change in the fundamental transaction format to protect against transaction malleability: the ability to change small bits of information in an unconfirmed transaction in such a way that makes child transactions invalid.

More recently, we implemented the Taproot upgrade, enabling more scalable and private complex spending conditions for Bitcoin as well as signature aggregation. This, however, was likely not the last upgrade Bitcoin will see, and many proposals are already in the works that may eventually become a part of the core protocol. 

SIGHASH_ANYPREVOUT would allow a transaction to spend from any unspent transaction output that is encumbered by a given set of spending conditions. This enables greater flexibility, unlocking complex transaction constructions, such as creating atomic swaps and shared lightning network channels. 

There are also covenants — a topic I’ve spoken about at length — that would restrict where a given address could send Bitcoin, which holds significant security implications. 

Drivechains also stand to bring permissionless pegging of bitcoin to and from sidechains, which could both aid in scalability as well as experimentation. 

Of course, there’s one major change that is pushed by ESG proponents, and that’s a claim that the network should change from one secured by proof-of-work to one powered by proof-of-stake. This is being suggested because proof-of-work takes a significantly greater amount of energy to perform than proof-of-stake. 

Ethereum recently switched to proof-of-stake, ushering in a ~99.5% reduction in energy usage. However, there are trade-offs in switching from one type of consensus mechanism to another that are more complicated than just power consumption. This article isn’t going to wade through that debate, but it is one of the best examples of a controversial change that is unlikely to occur, even though it has its proponents. 

The case for building on bitcoin instead

The Bitcoin ecosystem is free to update the protocol in any way it can collectively agree upon. However, further upgrades to the core code aren’t the only way forward. 

Users are exploring a myriad of ways that Bitcoin can be developed on top of, without changing anything within the core protocol. 

There are already some well-known examples. They include the Lightning Network, a second-layer solution utilizing off-chain micropayment channels, scaling the blockchain’s capacity and speed, and lowering fees. There’s also been the recent addition of inscriptions, which amount to Bitcoin’s own version of NFTs by embedding image data in the blockchain.

A brief internet search will reveal many more such projects, and admittedly, the previous upgrades to the Bitcoin protocol made these technical achievements possible. Nonetheless, this highlights that Bitcoin, as it is now, is fully capable of being built on to enable innovative improvements.

The debate rages on

Some Bitcoin proponents don’t want to see the protocol change at all. Remember, there are as many opinions about these additions to the network as there are projects and proposals. Still, some purists are quite vocal about what they see as the failures of some of these endeavors. 

Popular Bitcoin commentator Shinobi wrote an essay outlining multiple existing shortcomings of the lightning network, explaining at length that it’s unlikely to become a globally scalable, secure payment system without additional upgrades.

Lightning may be spurring some debates, but the recent addition of Ordinals is stirring the pot further. 

The argument is largely between those who feel that Bitcoin should be strictly about financial transactions, and others who believe that the network is robust enough to host any type of data, secured by the fees required to transact them. This disagreement showcases another inherent tension between the philosophy of changing Bitcoin, against the philosophy of building on top of it. 

Ultimately, there’s no one clear path forward for Bitcoin. The protocol will continue to reflect the desires of its users as it was intended. Bitcoin is designed to exist for hundreds of years to come, but that doesn’t mean it is already in its final form.

Moving forward, I’d like to see a combination of thoughtful, community-driven updates to the core protocol that enable and enhance innovative new protocols built on top of the base layer. 

The idea that there is only one path forward is simply too restrictive of a view for something as important as Bitcoin. 

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. What you can expect: And more! Don’t miss out on the opportunity to be in the room when the future of crypto is decided. Join us and help shape the future of our […]

recent research

Research report - cover graphics-2.jpg


Base has doubled-down on its commitment to the Superchain vision, has shown early signs of success with nearly $400M in TVL, and has become home to novel dapps such as which has seen significant traction.


The bitcoin halving slated for April 2024 — an event expected to spur upward price action for BTC — could be a boon for Block’s stock price, analysts say


Seed Club founder Jess Sloss is excited to “open the doors and let other people see what we’ve been seeing for the last few months”


Blockchain is a “natural fit” in games based on open economies and user-generated content, says Wyatt


Their current stance is a half-baked attempt that could stifle innovation and burden an emerging industry


Maker’s DeFi-focused “subDAO” passed a proposal activating a lending market for DAI on the Gnosis Chain


Certain creditors could be repaid sooner, with one hedge fund exec telling Blockworks it expects a payout by the end of the year