Backed by prominent Bitcoin developers and firms, the long-dormant Bitcoin Improvement Proposal OP_CHECKTEMPLATEVERIFY, known as CTV or BIP-119, is now gathering steam.
If finally approved, it could boost Bitcoin’s scalability, security and usability — particularly through the introduction of covenants and vaults that could improve self-custody and enable safer, smarter layer-2 applications such as Lightning and Ark.
Bitcoin protocol upgrades are few and far between. They typically require years to activate thanks to Bitcoin’s decentralized governance structure. The last was Taproot in 2021.
But BIP-119, proposed by Jeremy Rubin in 2019, is getting closer. In fact, some developers believe it could find consensus by the end of the year.
BIP-119: An open letter to BTC’s tech community
On June 9, a group of 66 Bitcoin application and protocol developers signed an open letter to the technical Bitcoin community urging adoption of BIP-119, as well as another proposal (CSFS, BIP-348). The signatories noted the “significant benefits that these changes would bring to end-users of bitcoin,” including boosts to Bitcoin layer-1 security and Bitcoin layer-2 scaling solutions.
Among the signatories were influential developers such as Jameson Lopp and Andrew Poelstra, as well as developers from Bitcoin-focused firms like Anchorage, Luxor Mining and Alpen Labs.
“Significant progress is being made towards such consensus,” Steven Roose, CEO of Second, told Cointelegraph this week while cautioning that activation isn’t yet a done deal.
Still, Roose said approval could happen by the end of the year.
If so, would that be an important development for the Bitcoin community? Roose answered:
“I believe it would be a big deal for Bitcoin, certainly in the near-term. This protocol upgrade would enable implementation of Eltoo-style channels — also called Lightning Symmetry — which makes Lightning channels more practical and safer for end users.”
“Any Bitcoin upgrades, including BIP-119, are going to be significant because of how distributed the network’s consensus rules have become,” Daniel Gray, senior research analyst at Fidelity Digital Assets, told Cointelegraph.
One of the most exciting aspects of BIP-119 is the introduction of covenants and, through that, vaults, continued Gray. Users today have many options when it comes to securing their Bitcoin (BTC), “but vaults add an additional level that could potentially bring more comfort to self-custody users, as well as more security options with other custody solutions.”
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According to the developers’ letter, the upgrade would allow better scaling solutions, vaults and congestion control, as well as enable discreet log contracts, where two or more parties agree to exchange money depending on the outcome of a certain event, which would offer more privacy for some Bitcoin transactions.
Galaxy Digital’s Alex Thorn wrote in a June 13 blog that BIP-119, were it activated, would “greatly enhance the ability to build better, safer methods of custody, create new forms of layer-2 bridges, and much more.” It could serve to integrate Bitcoin with platforms that execute smart contracts on the Ethereum blockchain, like Avalanche, Polygon, Arbitrum and others.
Why do soft forks take so long?
Bitcoin draws security from its decentralized structure, but it also makes important changes, sometimes called soft forks, very difficult. The network has no board of directors to ratify decisions. It operates in an open-source manner, and for that reason, a meaningful change often requires years of painstaking consensus-building.
This isn’t all bad. The cryptocurrency is designed to be a long-term store of value, and so it should be resistant to short-term pressures and incentives, continued Thorn, “but that doesn’t mean Bitcoin should never be upgraded.”
The last upgrade, Taproot, activated in November 2021, led to some unforeseen use cases (e.g., ordinals’ controversy), and that, too, could be making more developers hesitant this time around. According to Gray:
“The discussions happening around OP_CTV showcase the complexity behind implementing any upgrade for Bitcoin on both a technical and social level.”
What are covenants?
It’s difficult to determine the unexpected secondary effects that an upgrade like BIP-119 could bring, but it could draw in new users and innovative businesses, according to Gray. The introduction of covenants and, through those, vaults, which are cold storage repositories for long-term BTC holdings, are particularly interesting.
“Smart vaults” could allow a user to determine beforehand how much BTC could be moved within a given time frame and where it should be sent. For example, a user could determine that no more than 0.1 BTC can flow out of their vault and into their hot wallet per week, as explained in a recent blog.
This setup, where a user restricts where and to whom they can send some of their Bitcoin, is known as a covenant. As Gray wrote in a recent Fidelity Digital Assets research report, covenants could be useful for creating smart contracts “previously thought to be too complex and too risky to implement on Bitcoin’s Layer-1.”
BIP-119 author Rubin offers another example: A cold wallet could be set up “where one customer support desk can, without further authorization, move a portion of the funds (using multiple pre-set amounts) into a lukewarm wallet operated by an isolated support desk.”
The support desk could then issue some funds to a hot wallet and send the remainder back to cold storage with a similar withdrawal mechanism in place.
Why are Bitcoin upgrades so difficult?
Bitcoin upgrades are difficult for several reasons, but an important one is that there is no established protocol for making major changes like the Segwit and Taproot upgrades. Rubin proposed a Speedy Trial consensus mechanism for BIP-119, where activation would require 90% Bitcoin miner approval.
But back in 2022, he encountered robust community criticism for ceding too much power to Bitcoin miners.
One alternative is a User Activated Soft Fork (UASF), which requires node approval. Nodes are the individual computers that run the Bitcoin protocol. There are tens of thousands of these. By comparison, only two BTC mining pools — Foundry USA and AntPool — control 47% of the total Bitcoin hashrate.
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Developer Luke Dashjr, for one, opined in 2023 that Bitcoin protocol improvement proposals should be activated using the more decentralized UASF process, which is more democratic and secure.
In any event, momentum for BIP-119 seems to be building now as earlier critics have vanished, changed their minds or simply don’t care as much anymore. “I believe it would be a big deal for Bitcoin, certainly in the near term,” Roose told Cointelegraph regarding the proposed upgrade.
Take the Lightning Network, a payment scaling layer on the Bitcoin network that has experienced significant growth since its 2018 launch. Whereas ordinary layer-1 Bitcoin transactions might take an average of 10 minutes to settle, Lightning transactions occur at something approaching the speed of light — and at a negligible cost. “This combination enables bitcoin payments to be used for day-to-day purchases such as a cup of coffee,” Gray noted in a recent blog.
But this new type of digital commerce has to work virtually 100% of the time to be effective, and the technology isn’t quite there yet, Gray suggested. BIP-119 could help make it really scalable.
“By improving Lightning and enabling scalable L2s, it addresses key barriers like high fees and slow confirmations, which have limited mass use,” Naseem Naqvi, founder and president of the British Blockchain Association, told Cointelegraph, explaining how BIP-199 could make the Bitcoin network more efficient for real-world applications like payments and DeFi.
But BIP-119 can do even more than this, others believe. “The real improvements will be seen in the new protocols, primarily Ark and Bitcoin Virtual Machine-based bridges,” Roose told Cointelegraph. Ark, like Lightning, is a Bitcoin layer-2 protocol that works entirely through Bitcoin transactions and makes use of smart contracts. (Roose’s company, Second, is working with the Ark Protocol).
Bitcoin Virtual Machines can be used to build bridges between Bitcoin and non-Bitcoin crypto platforms. “I think it would be very hard to predict what direction the Bitcoin ecosystem would take if both were fully deployed on Bitcoin’s mainnet,” commented Roose.
The upgrade could boost Bitcoin adoption, though, Roose believes, opening the door to new protocols that would significantly improve the user experience. In addition, bridging Bitcoin with an Ethereum Virtual Machine (EVM)-based system — platforms like Polygon, Avalanche, Arbitrum, etc. — “can bring in the big ecosystem of EVM-based builders and apps,” said Roose.
BIP-119 could move ahead by year’s end
The developers’ June 9 letter to the technical community urged Bitcoin Core’s contributors to “prioritize” the review and integration of BIP-119 and BIP-348 over the next six months. The signatories insisted that they weren’t trying to dictate the consensus process.
“Rather it is an acknowledgement that before these opcodes can be activated, they must be implemented in the most widely used bitcoin client.”
Could something happen by year’s end with regard to BIP-119, then? “I think end of year would be a fair target to have formed consensus on what direction the technical community will want to take,” Roose answered. Even if consensus is reached, however, actual implementation could still take one to two years.
All in all, while reaching consensus in Bitcoin’s decentralized ecosystem is notoriously slow and complex, there is cautious optimism today that community agreement could be achieved for CTV/BIP-119 by the end of 2025, potentially paving the way for a transformative period in Bitcoin development.
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