What it really is is basically a consensus between participants. Once the consensus about a change gains critical mass, that change just happens, by someone coding it into the software and people updating to it. The change (fork) becomes mainstream and the old version becomes fringe. And vice versa, if consensus never achieved. There will be people who stay on old version anyway. It’s up to who believes in what, based on available software based on ideas that are worth new code.

But you can change the protocol – you just need to convince people to use your version, i.e. make a softfork. https://en.bitcoin.it/wiki/Softfork

(Or a hardfork, if your changes have to apply to all transactions, though this would be extremely tricky.)

and update the hardware wallets if needed

Of course the protocol can change if a large majority of miners agree to the change.

It's just a question about updating the source code.

The fundamental appeal of bitcoin is the lack of ability to change the protocol without buy-in from a sufficient fraction of the community.