Since its launch in 2009, Bitcoin has not only inspired thousands of other digital tokens, it has in fact become largely synonymous with the cryptocurrency industry as a whole. But that is not to say that Satoshi Nakamoto’s initial software protocol did not leave room for adaptations and adjustments in the years after its release. To be sure, Bitcoin has undergone numerous improvements and tweaks since 2009, both in an effort by developers and users to improve Bitcoin’s functionality and in order to keep up (and remain competitive) with technological developments of later cryptocurrencies. We look at some of the most significant of these improvements below.
It’s worth noting that Bitcoin’s open source code allows anyone to make changes. However, the key factor is that network consensus is required to implement any of these changes, and network consensus for Bitcoin is notoriously difficult to achieve.
The first improvement to note was actually not an update to the Bitcoin protocol whatsoever, but rather a public relations, branding, and development adjustment. In 2012, after early associations with black market websites like Silk Road, the Bitcoin Foundation launched. The Foundation’s mission includes advocating on behalf of Bitcoin to legislators and governments around the world. It has played a crucial role in expanding and improving Bitcoin’s reputation as well as general awareness of the cryptocurrency space. It also provided key funding to developers early in Bitcoin’s history.
As Bitcoin’s popularity grew into the mid-2010s, the network ran up against the issue of scalability. The fact that the Bitcoin network validated a new block of transactions only every 10 minutes meant that the Bitcoin blockchain was severely constrained in the speed at which it could process transactions. Especially as newer altcoins emerged with dramatically faster transaction processing times, the Bitcoin network saw an urgent need to scale Bitcoin’s processing.
The issue was how to do this, and it became a matter of hotly-contested debate for years. Ultimately, after about two years of debates, the Segregated Witness (SegWit) protocol was adopted in August 2017. SegWit reorganized the data in a block to separate out the signatures from the transaction data, leaving space for more transactions per block. SegWit roughly quadrupled the effective size of each block. It also aimed to increase blockchain security by preventing transaction malleability, or the altering of bits of information within a block. SegWit also served as a foundation for the Lightning Network, discussed below.
SegWit’s adoption was highly controversial, with many developers rebelling against the new protocol. The implementation of SegWit in fact led to a splitting of the Bitcoin network and the launch of the Bitcoin Cash token.
In 2016, shortly after SegWit was first proposed, another potential solution to Bitcoin’s scalability problem emerged. The Lightning Network attempts to bypass the problem of block limitations in the Bitcoin blockchain by using smart contracts and channels between individual participants off the blockchain using microtransactions. The idea is that multiple transactions can be completed between participants in these channels before the aggregated transactions are sent back to the main network for processing together. The Lightning Network is a second layer protocol added to Bitcoin’s existing protocol.
The Lightning Network is not without its controversies. Some have pointed to routing fee concerns, malicious attacks, the potential for fraud, and other concerns.
Taproot is the latest major upgrade to the Bitcoin network, activated as a soft fork in November 2021. Like SegWit and Lightning Network, Taproot’s primary concerns are upgrading the efficiency and the privacy or security of the Bitcoin network. Taproot allows for multiple transactions and signatures to be grouped together in batches, thereby reducing verification time on the network.
Did you know?
In order for the Taproot upgrade to go through, 90% of mined blocks during that period needed to include data from the miners known as a "signal bit."
In the process of batching together transactions, supporters of Taproot argue that it will improve security of the blockchain while also significantly increasing efficiency. Collaborators can create a single signature—called a Schnorr signature, which is valid for an entire block of transactions, rather than having to have the transactions verified individually. By removing the distinction between single-signature and multi-signature transactions, identification of a participant’s transaction inputs becomes more difficult, and thus more secure. Finally, advocates of Taproot point to its integration of smart contracts as a key development for the Bitcoin network and its scalability going forward.
- Since Bitcoin's inception in 2009, Bitcoin has undergone numerous improvements and tweaks, both to improve Bitcoin’s functionality and to remain competitive with later cryptocurrencies.
- The Bitcoin Foundation is an advocacy group that arose after the Silk Road fiasco in 2012.
- SegWit arose to address a scalability problem, meaning that the standard block didn't have the capacity to contain a large number of transactions.
- Collaborators can create a single signature—called a Schnorr signature, which is valid for an entire block of transactions, rather than having to have the transactions verified individually.