The recent debate over the development path of the Bitcoin network, sparked by the Ming Wen incident, has once again surfaced. Who is right? There is still no answer as to whether Bitcoin should be a settlement layer or digital gold, but in fact, this question has been accompanying Bitcoin’s 15-year history.
This article provides comprehensive information on Bitcoin’s scalability to provide users with a better understanding of its evolution.
Bitcoin Should Become an Operating System or Digital Gold?
Satoshi Nakamoto’s inclination is towards digital gold, but the language used suggests reservation. Satoshi Nakamoto made the decision to impose a 1MB limit.
Other Bitcoin Applications Disappeared
The scalability dispute resulted in Bitcoin forks. The dispute intensified as Satoshi Nakamoto disappeared. Multiple Bitcoin forks emerged as a result of the scalability dispute.
Other Scalability Methods Emerged: SegWit, Taproot, Bitcoin Layer2
The scalability issue has driven Bitcoin’s development over the past ten years. The question of whether Bitcoin should be a payment system or digital gold has been a topic of debate for a long time.
In June 2010, Satoshi Nakamoto wrote on the Bitcoin forum:
“The design (Bitcoin) supports various possible transaction types that I had designed years ago, including escrow transactions, taxable contracts, third-party arbitration, multi-signature, etc. If Bitcoin can be widely accepted, these are the things we want to explore in the future, but they must be designed from the beginning to ensure that they can be implemented later.”
As Bitcoin gained popularity, the problem of network congestion became more serious. In 2015, Gavin Andresen and Mike Hearn announced the implementation of BIP-101 in the new version of BitcoinXT, hoping to increase the block space limit to 8MB. However, core developers including Greg Maxwell, Luke Jr, and Pieter Wuille opposed this approach, believing that it would increase the threshold for running full nodes and bring uncontrollable consequences.
The debate eventually led to a split, and there is no absolute superiority or inferiority between the two paths:
The small-block path cannot answer the core question of how to maintain sufficient node rewards to ensure network security after the block reward is reduced.
An 8MB block is not the ultimate solution either. Once the large-block path is chosen, continuous scalability may be required, and unlimited scalability will lead to a stack of technical risks.
The essence of this debate is still “what is the vision of Bitcoin?” This debate ultimately led to community divisions and the hard fork starting in 2017. In addition to BCH and BSV, there have been many other Bitcoin forks during this period, with at least 50 new forks appearing within a year after the BCH fork, according to a report by BitMEX Research.
After the dust settled on the block size debate, the community gradually introduced a series of new technical solutions to improve scalability, the most important of which are SegWit and Taproot.
SegWit was introduced as an alternative solution to directly increase the block size at the same time as the BCH fork. SegWit divides transactions into two parts, with the first part containing sending and receiving addresses, and the second part storing transaction signatures or witness data, removing them from the main block but retaining the verification function.
The removal of witness data allows for more transactions to be accommodated under the same block size, achieving increased throughput in a different way.
SegWit was introduced as a soft fork and its adoption rate has steadily increased, reaching over 60% of node adoption by 2020 and 95% by December 2023.
In November 2021, another important upgrade, Taproot, was officially activated as a soft fork. This upgrade combines BIP340, BIP341, and BIP342:
BIP340 introduces Schnorr signatures that can verify multiple transactions at the same time, replacing the Elliptic Curve Digital Signature Algorithm (ECDSA), further expanding network capacity and speeding up the processing speed of batch transactions, providing possibilities for deploying complex smart contracts.
BIP341 implements Merkelized Abstract Syntax Trees (MAST) to optimize transaction data storage on the blockchain.
BIP342 (Tapscript) adopts the Bitcoin scripting language to accommodate Schnorr signatures and Taproot implementation.
The Taproot upgrade further expands the capacity of the Bitcoin network and provides the possibility of executing smart contracts.
Following the resolution of the block size debate, Bitcoin Layer2 solutions, such as the Lightning Network and sidechains, began to gain mainstream attention.
The Lightning Network, proposed by Joseph Poon and Thaddeus Dryja in 2015, locks a portion of Bitcoin in multi-signature addresses to establish a separate channel protocol, enabling off-chain transactions that are ultimately confirmed by the Bitcoin network. Lightning Labs announced the official launch of the Lightning Network on the Bitcoin mainnet in March 2018, with applications such as Strike, Taro, and Lightspark.
Sidechain solutions were attempted earlier, with Blockstream publishing the first technical paper on Bitcoin sidechains in 2014, but the solution was not implemented. RSK published a whitepaper in 2015 and launched its full-featured mainnet in January 2018. In September of the same year, Blockstream also launched the Liquid Network sidechain.
In addition to RSK and the Liquid Network, other Bitcoin network sidechain solutions include Stacks, RootStocks, and Drivechain.
Furthermore, Bitcoin community developers are also exploring and experimenting with state channels, roll-ups, and other directions.
In the early days of Bitcoin, projects were more influenced by Satoshi Nakamoto’s opinions, and the community and developers tended to follow the path of digital gold rather than scalability. With Satoshi Nakamoto’s disappearance and the popularity of Bitcoin, the scalability dispute has resurfaced, leading to network hard forks. Many improvement solutions have emerged recently, including SegWit, Taproot, the Lightning Network, and sidechains.
It can be said that the updates to the Bitcoin network over the past fifteen years have been driven by the capacity problem and the need for improvement.
Block space is the most important issue for Bitcoin network developers, leading the development of Bitcoin. However, the recent appearance of Ming Wen has disrupted the developers’ progress and caused serious network congestion. It is not difficult to understand why some developers are so dissatisfied. Understanding the history and background can help us think independently and objectively rather than following the crowd.
Luke Dashjr’s opposition to increasing the block space limit in the past due to concerns about potential uncontrollable consequences, and his current dislike and disgust towards Ming Wen, is somewhat poignant. However, it also demonstrates the weight of decentralization in the Bitcoin network, unaffected by any individual’s influence.
After understanding the history, the question of how the Bitcoin network should develop is now and is a topic that all participants in the crypto community need to deeply consider.