Bitcoin Basics
Nov 21, 2023

Decentralized Consensus: The importance of Open-Source development to Bitcoin & lightning

A dynamic system of checks and balances between developers and users

Decentralized Consensus: The importance of Open-Source development to Bitcoin & lightning

A pithy but accurate way of summarizing Bitcoin is to say it’s everything you don’t know about money combined with everything you don’t know about open-source software development. 

This article aims to shed light on the latter part of this statement, elucidating the crucial role of open-source in Bitcoin and the Lightning Network. Additionally, we will explore how these decentralized networks can self-update, even when no single entity governs them.

The importance of open-source development

Transparency

Open-source software ensures the highest level of transparency which is critical for a decentralized financial system like Bitcoin, where users rely on a secure and tamper-proof network. By making the source code publicly available, the Bitcoin community can scrutinize and analyze it, ensuring that the system operates as intended without hidden backdoors or vulnerabilities.

Decentralization and Collaborative Development:

Open-source development principles promote decentralization by allowing developers from around the world to contribute to the project. This diverse pool of contributors helps to prevent a single entity or group from controlling the development process or the future of the project. This layer of decentralization increases the network's resilience to potential attacks or regulatory pressures. There is no key man risk in Bitcoin.

Innovation and Evolution:

Open-source initiatives flourish through constant innovation and enhancement. By promoting a cooperative atmosphere, developers exchange thoughts, discuss potential fixes, and collaborate on developing new functionalities and refinements. In the case of Bitcoin and the Lightning Network, this guarantees that if a fundamental issue arises within the Bitcoin network, such as a compromised SHA-256 encryption, a network fork could be implemented to update the encryption technique.

The Update Process for Bitcoin and the Lightning Network:

The update process for Bitcoin and the Lightning Network is decentralized and community-driven, in line with their open-source principles. Proposed updates are typically submitted as BIPs or Lightning Network-related proposals (e.g., BOLTs - Basis of Lightning Technology). These proposals are then thoroughly reviewed and discussed by the community, with developers providing feedback and suggestions for improvement.

Once a proposal has gained sufficient support and undergone necessary modifications, it can be implemented in the codebase. However, for changes affecting consensus rules, a more extensive process is required, involving signaling from miners and, sometimes, user-activated soft forks (UASF). This ensures that any changes to the protocol have broad consensus and support from the community.

Bitcoin Improvement Proposals (BIPs):

BIPs are an essential component of the Bitcoin development process, as they provide a formalized way to propose, discuss, and implement changes to the Bitcoin protocol, software, and ecosystem. BIPs can cover a wide range of topics, including consensus changes, new features, and informational documents. Anyone in the community can submit a BIP, which then undergoes a rigorous review process involving feedback, discussion, and, ultimately, acceptance or rejection by the community. BIPs help ensure that updates are well-vetted and align with the broader goals of the project, maintaining the open-source ethos.

Consensus Changes and Soft Forks:

Consensus changes, which affect the underlying rules governing the Bitcoin network, require a more delicate approach to ensure network stability and prevent unintentional forks. Typically, these changes are implemented through soft forks, which are backwards-compatible updates that tighten the rules without causing a permanent split in the network.

Soft forks require a majority of miners to signal their support for the update before it can be activated. This process involves miners including a specific piece of data in the blocks they mine, indicating their agreement with the proposed change. Once a predefined threshold of support is reached (usually 95% of mined blocks within a specified time period), the soft fork is activated, and nodes can begin enforcing the new rules.

User-Activated Soft Forks (UASF):

In some cases, if miners are slow to adopt a proposed soft fork, the community may opt for a user-activated soft fork (UASF). A UASF bypasses miner signaling and relies on users running full nodes to enforce the new rules. By upgrading their software to a version supporting the soft fork, these users effectively impose the updated rules on the network.

While UASFs can be an effective way to push through important changes, they carry a higher risk of causing a network split if not enough users participate. The SegWit (Segregated Witness) update, which improved Bitcoin's scalability, was activated through a UASF combined with miner signaling, demonstrating the power of community-driven action in open-source projects.

Conclusion:

Open-source principles are fundamental to the success and resilience of Bitcoin and the Lightning Network. By embracing transparency, decentralization, and community involvement, the networks can continuously innovate and adapt when needed. The Bitcoin Improvement Proposal (BIP) system and the update process are crucial components of this open-source ecosystem, ensuring that all changes are carefully considered, discussed, and implemented with broad consensus.