How Bitcoin Updates: Ultimate Guide to BIPs, Forks, Lightning Network

By Alex Assoune Nov 28, 2025

Bitcoin is often described as “digital gold,” but unlike a physical rock, Bitcoin is software. Like any software—from the apps on your phone to the operating system on your computer—it needs updates to fix bugs, improve security, and add new features.

But here lies the central paradox of Bitcoin: how do you update a global financial network with no CEO, headquarters, or central server? Unlike Microsoft pushing updates to Windows, Bitcoin developers must convince a global network of independent miners, nodes, and users to voluntarily agree to changes. It is less like a simple software update and more like a rigorous political election.

In this guide, we explore the mechanics of Bitcoin governance, decoding BIPs, Soft Forks vs. Hard Forks, the historic SegWit and Bitcoin Cash events, the Lightning Network, and the future of Bitcoin updates.

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The Mechanism of Consensus: How Bitcoin Evolves

Bitcoin updates are governed by community consensus, rather than a central authority. This ensures that changes are secure, stable, and decentralized.

Bitcoin Improvement Proposals (BIPs)

Anyone can propose a change to Bitcoin via a Bitcoin Improvement Proposal (BIP). This is the formal document that outlines a technical improvement.

The BIP Process:

Drafting: Developers write the code and technical specifications for a proposed feature.
Vetting: The proposal undergoes intense peer review on developer mailing lists, scrutinizing bugs, security risks, and potential centralization threats.
Standardization: Approved proposals are assigned a number (e.g., BIP 341 for Taproot) and become part of the reference software, Bitcoin Core.

Implementation

Once vetted, the code is merged into Bitcoin Core but remains inactive until activated. Think of it like installing a lightbulb but not flipping the switch.

Activation Through Consensus

Activation is unique: the network must signal readiness for the update, usually via miner signaling. Miners include a small flag in mined blocks indicating they’ve upgraded their software.

Activation Thresholds: Typically, 90-95% of mined blocks in a two-week period must signal support. Once achieved, the feature activates after a waiting period, ensuring a slow, deliberate, and secure rollout.

Soft Forks vs. Hard Forks: The Rules of the Game

When Bitcoin updates, the network rules change. The type of update determines how nodes handle these changes.

Soft Forks: The Gentle Upgrade

A Soft Fork is backward-compatible, meaning older nodes still process transactions even if they don’t fully understand the new features.

Example Analogy: If traffic rules change from “40–100 km/h” to “40–80 km/h,” old drivers still comply if they drive 60 km/h—they are unaware but still part of the system.

Notable Soft Forks:

SegWit (2017): Fixed transaction malleability and increased block capacity.
Taproot (2021): Introduced Schnorr signatures and enhanced privacy for complex transactions.

Hard Forks: The Divorce

A Hard Fork is not backward-compatible. Nodes that don’t upgrade reject new transactions, potentially splitting the blockchain into two separate currencies.

Example Analogy: Switching from driving on the right to driving on the left—old rules no longer apply; a choice must be made.

Notable Hard Forks:

Bitcoin Cash (BCH): Created in 2017 to increase block size to 8MB for cheaper on-chain payments.
Bitcoin SV (BSV): Another controversial hard fork emphasizing massive block sizes.

Historic Bitcoin Upgrades

Bitcoin’s evolution has been shaped by several key events that define the network today.

The Block Size War and SegWit (2017)

In 2017, rising popularity led to full blocks and skyrocketing fees. The community split:

Big Blockers: Wanted larger blocks for more transactions.
Small Blockers: Favored SegWit to increase efficiency without centralization.

Outcome: SegWit, a soft fork, increased effective block size and paved the way for the Lightning Network, enabling faster, cheaper transactions.

The Birth of Bitcoin Cash (BCH)

Frustrated Big Blockers executed a hard fork, creating Bitcoin Cash with 8MB blocks for cheap payments. BTC, meanwhile, prioritized decentralization and Layer 2 scaling, retaining most of the market share.

Taproot (2021)

Taproot was a soft fork enabling:

Schnorr signatures: Aggregated multiple signatures into one.
Improved privacy: Complex transactions look identical to simple ones.
Efficiency: Smaller transaction sizes reduce fees.

The Lightning Network: Layer 2 Scaling

The Lightning Network solves Bitcoin’s slow transaction speed and high fees on Layer 1.

How It Works: The Bar Tab Analogy

Opening a Channel: Lock funds in a payment channel on the blockchain.
Instant Transactions: Update balances off-chain, like a bar tab.
Closing the Channel: Only the final balance is recorded on-chain.

Benefits

Speed: Millions of transactions per second (TPS).
Low Cost: Fractions of a cent per transaction.
Privacy: Payments aren’t publicly recorded on the main chain.

Network Routing

The Lightning Network allows payments through multiple channels. Example: You can pay Bob via Alice even without a direct channel.

The Future of Bitcoin Updates

No More Hard Forks

The Bitcoin community recognizes hard forks as risky. Any “new Bitcoin fork” is often a scam or marketing stunt.

Upcoming Soft Forks

Covenants (BIP 119 - CTV): Enforces spending conditions for security vaults.
OP_CAT (BIP 347): Enables ZK-Rollups, bringing Ethereum-like smart contracts to Bitcoin’s Layer 2.

Bitcoin: From Digital Gold to Programmable Money

SegWit fixed the plumbing.
Bitcoin Cash emphasized cheap payments.
Taproot enhanced privacy.
Lightning Network solved scaling.
Future upgrades bring programmability and advanced security, shaping Bitcoin as a foundation for decentralized finance.

Frequently Asked Questions (FAQ)

Q: Who controls Bitcoin updates?
A: No single person. Updates require consensus among developers, miners, and node operators.

Q: Do I need to do anything for updates?
A: Typically, exchanges and wallets handle updates. Node operators must manually upgrade.

Q: Can Bitcoin be hacked during an update?
A: Updates are tested for months on testnets to mitigate risk.

Q: Is Bitcoin Cash the same as Bitcoin?
A: No. BCH is a separate cryptocurrency created via a hard fork.

Q: Will Bitcoin switch to Proof of Stake like Ethereum?
A: Extremely unlikely. Proof of Work is considered essential for security and decentralization.

Conclusion

Bitcoin updates are a testament to decentralized governance in action. From BIPs and forks to Taproot and the Lightning Network, the system evolves slowly but securely, balancing innovation with stability. Understanding these updates empowers you to securely hold, transact, and invest in Bitcoin in the future.

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About the Author: Alex Assoune

Alex Assoune (MS) is a global health and environmental advocate. He founded Panaprium to inspire others with conscious living, ethical, and sustainable fashion. Alex has worked in many countries to address social and environmental issues. He speaks three languages and holds two Master of Science degrees in Engineering from SIGMA and IFPEN schools.

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