Posted 9th August 2023

The Evolution of the Bitcoin Blockchain: An In-depth Analysis

Bitcoin was the first cryptocurrency to be conceived and one of the most well-known and operates on its own blockchain, the Bitcoin blockchain. As a result, some people see Bitcoin and blockchain as synonymous, but this is not the case. 

Each blockchain has a native currency that is used to power it, and this is no different for the Bitcoin blockchain, which uses Bitcoin (BTC) – each one a fungible token that is made up of 100 million Satoshis – known as BTC as its currency.

Therefore a Bitcoin, or 1 BTC, is a unit of currency that resides within the Bitcoin blockchain. These coins are generated by miners who validate blocks of transactions that take place on the network by solving complex computational challenges. Every four years, a halving event occurs that reduces the amount of Bitcoin rewards generated by miners. 

What is the Bitcoin blockchain?

The Bitcoin blockchain is a distributed ledger created by Satoshi Nakamoto, who first uploaded its source code back in 2008. As an open-source blockchain, any developer can choose to work on and help build Bitcoin. 

With the release of the Bitcoin whitepaper in October 2008, the Bitcoin blockchain began to gain in popularity and continues to do so today in 2023. The blockchain is a distributed ledger that holds a vast quantity of data related to transactions, fees and other information that can be scrutinised via a Bitcoin blockchain explorer

What blockchain does Bitcoin use?

Bitcoin uses its own blockchain, the Bitcoin blockchain. A blockchain is sometimes referred to as a protocol and consists of a network of machines that operate the distributed ledger technology and typically comprises the ledger, a currency, and a consensus mechanism such as Bitcoin’s Proof Of Work (POW).

The Bitcoin blockchain is now 14 years old and the latest update takes the chain from an initial 0.1.0 to V25.0 in late May 2023. 

Where is the Bitcoin blockchain stored?

The Bitcoin blockchain is maintained by – and therefore stored upon – a distributed network of “nodes” that use the Bitcoin software. These nodes independently verify and distribute transaction data, adding their own to cryptographic data blocks that contain information about all the previous blocks, storing the entire blockchain’s data from the latest block to the first or “Genesis” block. This helps the Bitcoin network stay decentralised. Nodes are separate from miners in that nodes store the information miners create.  

What is the size of the Bitcoin blockchain? 

As more and more data is added to the blockchain, it continues to grow in size. Today, it is close to 500gb in size.

Computers that mine Bitcoin or act as nodes need a high amount of storage, powerful CPUs or GPUs and other high specs.

For comparison, the Ethereum blockchain is over twice as large in file size as the Bitcoin blockchain, at over 1000GBs. This is in large part due to its storage of NFTs and other data assets that Bitcoin has only recently started to do. 

How are Bitcoins stored?

In order to safely store one or many Bitcoins, a person must use a digital wallet. In 2023, there are many competing wallets, some of which offer mobile apps or website browser extensions, but this was not always the case and knowing which wallets were safe to use and how easy it was to access your coins was vital.

Today, there are different types of wallets. These include:

Custodial wallets

Custodial wallets are wallets that hold crypto on your behalf. These are typically tied to, for instance, an exchange like Coinbase or Binance that can purchase and hold crypto on your behalf.

Non-custodial wallets

Non-custodial wallets such as Metamask will give you the private keys to your crypto so that only you can access them. Hardware wallets offer additional security benefits over non-custodial wallets and decrease the chances of having your keys or crypto stolen. 

How does the Bitcoin blockchain work?

Put very simply, the Bitcoin blockchain works by enabling the transfer of value – in this case, a Bitcoin – from one supported digital wallet to another. These transactions are immutable, transparent, and private, signed by a signature that is validated by miners and distributed by nodes in chronological order in blocks of transactions.

Why is the Bitcoin blockchain important? 

There are some who would argue that the Bitcoin blockchain is not important and that Bitcoins have no value. Even if this were true, advances in technology are always important, and Bitcoin is the precursor to the thousands of blockchain and web3 projects that have arisen in its wake.

It is important for a number of other reasons, too, including: 

Market Capitalisation – In mid-June 2023, the Bitcoin market cap was over 500 billion, about 10% higher than Visa. This suggests that Bitcoin is important in how it is valued in the market. At all time highs, the market cap was 1.28 trillion US dollars, around 10% that of Gold

Impact on the rest of Web3 – as Bitcoin rises in price, it tends to drag the value of other cryptocurrencies up with it, and vice versa.  

Proof of concept – every Blockchain begins with a testnet before launching its mainnet. The Bitcoin mainnet is undeniably a success, with millions of people holding coins and using the chain daily, proving both the concept of the blockchain, and the potential value of using it. 

Decentralisation – widely considered to be one of the most decentralised crypto currencies (if not the most), Bitcoin’s blockchain is maintained by over 10,000 nodes around the world. This would make a controlling interest taking over the chain and centralising it very difficult, and proponents of blockchain and web3 see decentralisation as one of its major use cases. 

Open-source – linked to the previous point, Bitcoin being open source is important because it promotes and fosters inclusion: anyone can take part in the chain and benefit from using it. 

There are many other reasons it is important, including the opportunity for any investor, miner or other person who wants to get involved to create generational wealth through the appreciation of Bitcoin’s value.

Important updates to and what you need to know about the Bitcoin blockchain

As we’ve outlined, the Bitcoin blockchain enjoys a rich history spanning over a decade, and it has not been idle in that time thanks to the continued efforts of developers. We’ll outline some of the major moments in Bitcoin’s history below.

The hard forks

You’ve likely heard of Bitcoin Cash, a major cryptocurrency in its own right, which is a fork of the Bitcoin blockchain that resulted in the issuance of a new cryptocurrency after a certain point in time on the chain. Created via fork in 2017, Bitcoin Cash aspired to be more useful for everyday payments by having faster speeds and lower fees. 

There are other forks too, such as Bitcoin SV or “Satoshi’s Vision” forked in 2018, which attempts to never deviate from Satoshi’s plans outlined in the Bitcoin whitepaper.

The soft forks

Developers who work on Bitcoin and not Bitcoin SV know that continuous updates to the Bitcoin blockchain are vital for its speed, security and functionality. Segwit and Taproot are two updates that constitute soft forks, and make changes to the way transactions are formatted on the blockchain, with beneficial results. 

The Lightning Network

Beyond a soft fork, the Lightning Network is a full Layer-2 scaling solution for the Bitcoin blockchain. Layer-2 scaling solutions are a protocol layer that sits on top of an existing protocol and aim to improve the base layer blockchain in one or several ways. 

The Lightning Network improves Bitcoin by offering granularity, privacy, speed and throughput. Rival blockchain Ethereum features several competing Layer-2s.

Recent developments

Stacks is another Layer-2 for Bitcoin that enables the development and deployment of smart contracts on the Bitcoin blockchain, enabling DeFi, NFTs, metaverse and more on the original blockchain. 

Ordinal inscriptions are digital assets that are inscribed onto single satoshis. These digital assets could take the form of a piece of art, similar to an NFT. Will Ordinals become as big as NFTs? Who knows. 

Most recently, BRC-20 tokens were released in March 2023, bringing an experimental standard much closer to Ethereum’s, to the Bitcoin blockchain. JSON data can be embedded into Ordinals as a result to create new tokens. 

In addition to Bitcoin’s exciting past, it will certainly have an interesting future with potential regulation or deregulation and mainstream adoption or rejection on the horizon.

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not digital asset or cryptocurrency trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.