Community-Driven Proposals Shape the Future of Digital Finance

Ethereum and Bitcoin's evolution is driven by community-led proposals: EIPs and BIPs. They're the heartbeat of these platforms, shaping the future of decentralized finance.

Ethereum Improvement Proposals (EIPs) are the lifeblood of Ethereum's evolution, driving network upgrades and advancements. These proposals outline potential new features, improvements, or processes for the Ethereum blockchain. Each EIP contains detailed technical specifications for the suggested changes and serves as a reference point for the community.

The concept of EIPs wasn't born in a vacuum. It was inspired by the Bitcoin Improvement Proposals (BIPs), adopting the concept to fit the specific needs and challenges of the Ethereum network. However, there are key differences between the two processes. EIPs, unlike BIPs, are open to anyone in the community to propose, fostering a more inclusive and decentralized development process. In contrast, BIPs are primarily submitted by Bitcoin Core developers. This difference in participation and authority reflects the distinct philosophies and governance structures of the two blockchains.

Throughout its history, several EIPs have played pivotal roles in shaping the Ethereum ecosystem. EIP-20, for instance, introduced the ERC-20 token standard, enabling the creation of interchangeable tokens for various use cases. EIP-721, on the other hand, paved the way for non-fungible tokens (NFTs), revolutionizing digital ownership and collectibles. EIP-1559, a more recent and significant proposal, brought about a major overhaul of Ethereum's fee market mechanism. It introduced a base fee that is burned, aiming to make transaction fees more predictable and reduce overall Ether supply.

Similarly, BIPs have played a crucial role in Bitcoin's evolution. BIP-32, for example, introduced hierarchical deterministic wallets, which have greatly improved wallet security and usability. BIP-39 standardized mnemonic phrases, making wallet recovery much easier. BIP-141 (Segregated Witness, or SegWit) was a major upgrade that increased Bitcoin's block capacity and fixed transaction malleability.

Filing an EIP or BIP is a structured process. It begins with drafting a proposal that outlines the problem, the proposed solution, and its technical specifications. This proposal is then submitted for review, where it undergoes scrutiny from the community and developers. The EIP repository on GitHub and the Bitcoin Core developer mailing list are the primary channels for this process. A successful proposal needs to garner consensus among the community and developers, demonstrating its value and feasibility.

Network upgrades on Ethereum are proposed, discussed, and developed through the EIP process. While anyone in the community can create an EIP, it's usually the developers who author them, facilitating changes to the Ethereum network. Major network upgrades, like the recent Dencun and the upcoming Pectra, comprise sets of EIPs that, once finalized, must be implemented by each Ethereum client on the blockchain network.

Pectra, scheduled for release in late 2024 or early 2025, is the next major upgrade after Dencun. It combines two previously planned upgrades, Prague and Electra, aiming to enhance both the execution and consensus layers of Ethereum. Pectra is expected to introduce various improvements, including changes to the EVM (Ethereum Virtual Machine) object format, a new type of smart contract, and a limit increase for validator withdrawals.

Following Ethereum's transition to a proof-of-stake (PoS) consensus mechanism in September 2022, co-founder Vitalik Buterin laid out a five-step roadmap to enhance the smart contract blockchain. In line with this roadmap, developers have opted to postpone the release of Pectra to allow for thorough monitoring and learning from past upgrade experiences.

Beyond Pectra, the next upgrade aims to introduce "Verkle trees," a new data structure designed to enable Ethereum nodes to store large data volumes more efficiently. Verkle trees are a type of commitment scheme that allows for the verification of large amounts of data with a much smaller proof than traditional Merkle trees. They achieve this by using algebraic structures called vector commitments, which enable the creation of a single proof for multiple values. This not only reduces the size of proofs but also makes them easier to verify. The introduction of Verkle trees is expected to significantly reduce the storage requirements for Ethereum nodes, making it easier for users to run nodes and contribute to the decentralization of the network.

Ethereum and Bitcoin, two giants in the crypto world, are constantly evolving. Their transformations are not haphazard, but rather guided by meticulously crafted proposals known as EIPs (Ethereum Improvement Proposals) and BIPs (Bitcoin Improvement Proposals). But why do these proposals matter, and how do they shape the future of crypto?

EIP-1559, for instance, revolutionized Ethereum's transaction fees, while BIP-39 made Bitcoin wallets more user-friendly. These are just a few examples of how these proposals directly impact the user experience and functionality of the blockchain. But their significance goes beyond mere upgrades. They symbolize the decentralized ethos of the crypto world, where anyone can propose changes, fostering an environment of continuous innovation and improvement.

Imagine a world where financial systems are no longer controlled by a select few, but instead, are shaped by a global community of innovators. This is the promise of decentralized finance, and EIPs and BIPs are the tools that bring this vision closer to reality. By empowering the community to directly influence the development of the blockchain, they ensure that these cryptocurrencies remain adaptable, relevant, and aligned with the needs of their users.