The recent debate over the development roadmap of Bitcoin has resurfaced, sparking the question of who is right. Whether Bitcoin should serve as a settlement layer or digital gold still remains unanswered, but this question has been accompanying Bitcoin’s 15-year history. The comprehensive data on Bitcoin’s scalability provides users with a deeper understanding of its past and present.
Bitcoin’s Role: An Operating System or Digital Gold?
Satoshi Nakamoto, the creator of Bitcoin, leaned towards the idea of Bitcoin serving as digital gold, but he maintained some reservations. In June 2010, Nakamoto wrote on the Bitcoin forum that the design of Bitcoin supports various types of transactions, including escrow transactions, tax contracts, third-party arbitration, and multi-signature transactions. These were all things they wanted to explore in the future if Bitcoin gained widespread acceptance. Nakamoto made multiple modifications to the BTC code between July and September 2010, including removing two opcodes and disabling certain features of Bitcoin’s scripting language, Script, to accommodate larger-scale applications and transactions.
Nakamoto’s Decision: Imposing the 1MB Limit
At the inception of BTC, there were no restrictions on block size to ensure that transactions could be processed within a certain timeframe. However, with the lower price of BTC at that time, it was susceptible to malicious transactions with low costs. To address this issue, Nakamoto led a soft fork on September 12, 2010, to confirm the limitation of block space to 1MB. On October 4, 2010, developer Jeff Garzik attempted to remove this limit in his own client, but he faced opposition from the community and Nakamoto himself. Nakamoto stated that the block space limit was temporary and could gradually be increased to meet the needs of scalability.
Nakamoto’s Future Vision for Bitcoin
In December 2010, for unknown reasons, Nakamoto issued his final public message and disappeared from the public eye. However, the question of Bitcoin’s network scalability was not definitively settled at that time, and the 1MB limit laid the foundation for subsequent debates. During this period, discussions about Bitcoin’s applications beyond payments emerged on the Bitcointalk forum. For example, in November 2010, appamatto proposed a decentralized domain name service on the Bitcoin network, but the proposal did not gain recognition from early members, including Nakamoto. The proposed BitX became a core component of Ethereum and other projects, while BitDNS eventually evolved into the first altcoin, Namecoin.
The Forks Caused by the Scalability Debate
With the increasing popularity of Bitcoin, the problem of network congestion in transactions became more severe. In 2015, Gavin Andresen and Mike Hearn announced the implementation of BIP-101 in the new version of BitcoinXT, aiming to increase the block space limit to 8MB. However, core developers such as Greg Maxwell, Luke Jr, and Pieter Wuille opposed this approach, believing that it would raise the threshold for running full nodes and bring uncontrollable consequences. This debate eventually led to a heated discussion and division. Both routes, advocating for small blocks and large blocks, have their pros and cons. The small block route fails to answer the core question of how to maintain sufficient node incentives for network security after the block reward reduction and low transaction volume. On the other hand, choosing large blocks is not the ultimate solution either, as continuous expansion would likely be needed, and unlimited expansion would lead to a stack of technical risks. The essence of this debate is still about the vision of Bitcoin. It ultimately led to community division and the hard forks that began in 2017. Apart from Bitcoin Cash (BCH) and Bitcoin SV (BSV), many other BTC forks emerged during this period, with at least 50 new forks within a year after the BCH fork, according to BitMEX Research.
Scalability Solutions: SegWit, Taproot, and Bitcoin Layer2
After the hard fork war, the community gradually introduced a series of new technical solutions to improve scalability while maintaining the block size limit. The most important ones are Segregated Witness (SegWit) and Taproot. SegWit, introduced as an alternative solution to directly increase the block size, was implemented during the BCH fork. SegWit divides transactions into two parts: the first part contains sending and receiving addresses, and the second part stores transaction signatures or witness data, which are moved out of the main blocks but retain their verification function. This separation allows more transactions to fit in the same block size, achieving increased throughput in a different way. SegWit was introduced through a soft fork and its adoption rate has been continuously increasing, reaching over 60% of node adoption by 2020 and 95% by December 2023.
Taproot, another significant upgrade, was activated in November 2021 through a soft fork. This upgrade combines BIP340, BIP341, and BIP342. BIP340 introduces Schnorr signatures, which can verify multiple transactions simultaneously, replacing the elliptic curve digital signature algorithm (ECDSA). This further expands network capacity and speeds up the processing of batch transactions, enabling the deployment of complex smart contracts. BIP341 implements the Merkelized Abstract Syntax Tree (MAST) to optimize transaction data storage on the blockchain. BIP342 (Tapscript) adopts Bitcoin’s script coding language to accommodate Schnorr signatures and Taproot implementation. The Taproot upgrade allows for further scalability of the Bitcoin network and enables the execution of smart contracts.
Bitcoin Layer2 solutions, such as the Lightning Network and sidechains, have gained significant attention in the community after the dust settled on the block size debate. The Lightning Network, proposed by Joseph Poon and Thaddeus Dryja in 2015, aims to establish a separate channel protocol within multi-signature addresses, locking a portion of Bitcoin and 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, leading to applications like Strike, Taro, and Lightspark. Sidechain solutions were explored earlier, with Blockstream publishing the first technical paper on Bitcoin sidechains in 2014. RSK released a whitepaper in 2015 and launched its mainnet with full functionality in January 2018. In September 2018, Blockstream also launched the Liquid Network sidechain. Other Bitcoin network sidechain solutions include Stacks, Rootstocks, and Drivechain. Additionally, Bitcoin developers have been exploring and experimenting with solutions such as state channels and roll-ups.
Conclusion
In the early days of Bitcoin, the opinions of Satoshi Nakamoto had a significant influence, and the community and developers mostly followed the path of digital gold rather than scalability. With Nakamoto’s disappearance and the increasing popularity of Bitcoin, the scalability debate resurfaced, leading to network hard forks. Various improvement solutions have emerged recently, including SegWit, Taproot, the Lightning Network, and sidechains. The updates in the past 15 years have all been driven by the challenge of capacity, and Bitcoin’s block space remains the most important issue for developers, guiding the development of Bitcoin. However, the emergence of the Mingwen controversy has disrupted the progress of developers and caused serious network congestion, leading to the dissatisfaction of some developers. Understanding the history and background allows for independent and objective thinking rather than following the crowd. Looking ahead, the development of the Bitcoin network is a current and future concern for all participants in the cryptocurrency space.