Jeremy Rubin, a Bitcoin Core developer, is lobbying for a Speedy Trial of his BIP-119 Miner Activated Soft Fork. Rubin’s BIP-119 seeks to make use of a new operation code.The new opcode allows for the implementation of covenants, which have several useful applications and could help scale Bitcoin.However, there are some among the Bitcoin community who are critical of the proposal and worry that BIP-119 will hinder Bitcoin’s fungibility, one of Bitcoin’s core characteristics, while other concerns relate to the speed at which it’s being pushed.
What Is Bitcoin BIP-119?
Bitcoin Improvement Proposal 119 is an improvement proposal to Bitcoin, championed by Jeremy Rubin, seeking to implement the OP_CHECKTEMPLATEVERIFY opcode. This new opcode allows for the integration of covenants.
What Are Covenants?
Covenants are restrictions on how bitcoin can be spent beyond key ownership. In bitcoin transactions, covenants refer mainly to restrictions on where coins can be transferred after acquisition.
For example, wallet A places a covenant on bitcoins it holds, adding a whitelist of related addresses. Wallet A sends bitcoin to wallet B. Wallet B can only send those bitcoins to other wallets on the whitelist.
Why BIP-119?
BIP-119’s proposed OP_CHECKTEMPLATEVERIFY (CTV) allows for the implementation of covenants. Covenants are useful for constructing smart contracts with several useful use cases, such as preventing your funds from being stolen in case of hacking and helping scale the network.
Through the use of CTV, you can create a wallet vault. These can be a useful tool for increasing security for cold storage solutions; they are provided with default transactional paths that move your funds from your cold storage to a hot wallet. This way, if your wallet is hacked, stolen, or lost, they won’t be able to steal your funds.
CTV can also help scale Bitcoin through the implementation of Congestion Controlled Transactions. When network demand is high, making transactions becomes very expensive. Using CTV, large payment processors can include all their payments in a single transaction commitment for confirmation purposes.
Why Is BIP-119 So Controversial?
The controversy surrounding BIP-119 revolves mainly around two key concerns among the Bitcoin community.
First is the negative effect that the introduction of covenants could have on Bitcoin’s fungibility, one of the crypto’s main characteristics. Bitcoin’s fungibility rests on the fact that each bitcoin is identical in functionality and quality.
The introduction of covenants 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 utility, ultimately harming its exchange value.
Second, some within the community feel they are being rushed to implement a proposal that could have serious repercussions on bitcoin’s exchangeability.
Speedy Trials have been used in the past to activate upgrades; Bitcoin’s Taproot upgrade was activated through one. This time, however, some feel that given the serious impact this upgrade could have on Bitcoin, the proposal should be further reviewed and alternatives examined.
Bitcoin’s Exchangeability Is at Stake
Although Rubin’s BIP-119 proposal promises to solve some of Bitcoin’s current security and scaling concerns, covenants could also place harmful limits on the crypto’s utility. Unintentionally or not, this would definitely harm Bitcoin’s exchange value in the long run.
The proposed changes in BIP-119 could have such grand consequences for Bitcoin's exchangeability that even those who don’t outright oppose its implementation are cautious about it.
At least to the point of wanting to more carefully study the effects such an upgrade could have on the cryptocurrency.