The Development of the Bitcoin Network throughout its History Revolves around the Issue of Scalability
The recent debate over the development roadmap of Bitcoin has resurfaced, sparking discussions on whether Bitcoin should function as a settlement layer or digital gold. However, this question has been present throughout Bitcoin’s 15-year history. In this article, we will provide comprehensive information on Bitcoin’s scalability to provide users with a better understanding of its past and present.
Bitcoin’s Scalability Debate: Should it be an Operating System or Digital Gold?
Satoshi Nakamoto, the creator of Bitcoin, expressed his vision for the cryptocurrency on the Bitcoin forum on June 17, 2010. He stated that Bitcoin supports various transaction types, including escrow transactions, smart contracts, third-party arbitration, and multi-signature, among others. These possibilities were all intended to be explored in the future, but they needed to be designed and implemented from the beginning to ensure their realization if Bitcoin gained widespread acceptance.
As the adoption and transaction volume of Bitcoin grew, Satoshi Nakamoto made several modifications to the BTC code between July and September 2010 to accommodate larger-scale applications and transactions. However, Bitcoin did not have a block size limit at its inception, which created the potential for malicious transactions due to the low cost. To address this issue, Satoshi Nakamoto introduced a temporary solution on September 12, 2010, by setting a block size limit of 1 MB. Despite attempts to remove this limit, such as the development of a new client by Jeff Garzik on October 4, 2010, the community and Satoshi Nakamoto opposed these efforts.
Satoshi Nakamoto emphasized that the block size limit was temporary and could be gradually increased in the future to meet the scalability needs.
Satoshi Nakamoto’s Disappearance and the Emergence of Bitcoin Forks
In December 2010, Satoshi Nakamoto disappeared from the public eye, leaving the question of Bitcoin’s scalability unresolved. The 1 MB block size limit laid the foundation for subsequent debates and ultimately led to the hard fork in 2017.
During this period, discussions on Bitcoin’s potential applications beyond payments emerged on the Bitcointalk forum. For example, in November 2010, appamatto proposed the construction of a decentralized domain name service on the Bitcoin network. However, this proposal did not receive recognition from early members, including Satoshi Nakamoto. The BitX and BitDNS concepts in the proposal later became integral parts of Ethereum and Namecoin, respectively.
The Intensification of the Scalability Debate
In 2015, Gavin Andresen and Mike Hearn announced plans to increase the block size limit to 8 MB in the new BitcoinXT version. This proposal faced opposition from core developers, including Greg Maxwell, Luke Jr, and Pieter Wuille, who argued that it would raise the threshold for operating full nodes and introduce uncontrollable consequences.
This debate eventually escalated and led to a split in the community, with no absolute superiority between the small-block and large-block approaches. The small-block approach failed to address the core issue of maintaining sufficient node rewards for network security once the block reward decreased. On the other hand, the large-block approach would require continuous scalability, as unlimited scaling would lead to technical risks.
The essence of this debate revolved around the question of Bitcoin’s vision. It eventually resulted in community splits and the emergence of numerous Bitcoin forks, including BCH and BSV. According to BitMEX Research, at least 50 new forked coins appeared within a year after the BCH fork.
Introduction of Scalability Solutions: SegWit, Taproot, and Bitcoin Layer 2
Following the contentious hard fork battles, the Bitcoin community gradually introduced a series of new technical solutions to improve scalability while maintaining the block size limit. The most significant solutions include Segregated Witness (SegWit) and Taproot.
SegWit, introduced during the BCH fork, serves as an alternative solution to directly increase the block size. It segregates transactions into two parts: one containing sending and receiving addresses and the other storing transaction signatures or witness data. This segregation allows for more transactions to be accommodated within the same block size, increasing throughput in a different way. SegWit was introduced through a soft fork and has seen increasing adoption, with over 60% node adoption by 2020 and reaching 95% by December 2023.
Taproot, another important upgrade, was activated in November 2021 through a soft fork. This upgrade combines BIP340, BIP341, and BIP342:
– BIP340 introduces Schnorr signatures, which allow for simultaneous verification of multiple transactions. It replaces the ECDSA algorithm and further expands network capacity while increasing the speed of batch transactions, making complex smart contract deployments possible.
– BIP341 implements Merkelized Abstract Syntax Trees (MAST) to optimize transaction data storage on the blockchain.
– BIP342 (Tapscript) adopts Bitcoin’s script encoding language to accommodate Schnorr signatures and Taproot implementation.
The Taproot upgrade further enhances Bitcoin’s scalability and enables the execution of smart contracts.
Bitcoin Layer 2 solutions, such as the Lightning Network and sidechains, have gained mainstream attention in recent years. The Lightning Network, proposed by Joseph Poon and Thaddeus Dryja in 2015, operates by locking a portion of Bitcoin in multi-signature addresses to establish separate channel protocols for off-chain transactions. The final settlement is confirmed by the Bitcoin network. Lightning Labs announced the official launch of the Lightning Network on the Bitcoin mainnet in March 2018, leading to the development of applications like Strike, Taro, and Lightspark.
Sidechain solutions, including RSK and Liquid Network, have also been explored. RSK released a whitepaper in 2015 and launched its mainnet with full functionality in January 2018. Blockstream launched the Liquid Network sidechain in September 2018. Other Bitcoin network sidechain solutions include Stacks, RootStocks, and Drivechain. Additionally, developers in the Bitcoin community are exploring and experimenting with state channels, Roll-ups, and other directions.
In conclusion, Bitcoin’s development over the past 15 years has been driven by the capacity issue, which has led to debates and subsequent improvements. The block size remains a crucial concern for Bitcoin developers and influences its development. The recent emergence of the Mingwen proposal has disrupted the developers’ progress and caused serious network congestion. Understanding the history and background of Bitcoin’s development can encourage independent and objective thinking rather than following the crowd.
It is now up to the Bitcoin network and its participants to determine the future development of Bitcoin, taking into account its history and the current challenges it faces.
