Tracing Bitcoin evolution: 14 years of an improving code, increasing use, stronger security, new functionalities, and more…
Happy Bitcoin pizza day! 🍕
On this day 13 years ago, a Florida-based developer Laszlo Hanyecz created history by making the first-ever real-world purchase with Bitcoin – two pizzas for 10,000 BTC.
Now worth $270 million, we could now consider those pizzas the most expensive ever, but showing Bitcoin’s potential as a currency is definitely worth much more.
In 14 years of its existence, Bitcoin has come a long way from a 9-page white paper distributed within an obscure cypherpunks’ mail list to a global currency, embraced by millions.
This transformative odyssey has touched almost every aspect of Bitcoin:
📍 the code was updated to improve the existing functionalities and even create the conditions for new ones,
📍 mining has become an industry,
📍 infrastructure has grown tremendously, from exchanges to institutional-grade custody,
📍 regulators around the world were obliged to take Bitcoin into consideration,
📍 the adoption and use have been growing constantly…
However, one core aspect hasn’t changed: Bitcoin is still a decentralized and independent currency, available to anyone, anywhere.
On the occasion of Pizza Day, let’s delve into the current state of Bitcoin.
One of Bitcoin’s strengths is the (deceptive) simplicity and robustness of its code, written in script, a language with very limited possibilities. That was by design: the simpler the code, the less room for error.
However, Bitcoin code is still software, and software needs updating. Since the beginning, core developers team has been continually enhancing the code to improve security and performance, and even encourage new functionalities.
⚙️ The SegWit upgrade (segregating signature, or isolating witness data to the end of the transaction) of 2017 paved the way for Lightning Network, a scalability layer-2 solution dramatically increasing transaction throughput. Lightning Network is widely used for microtransactions today, with the capacity exceeding 5,000 BTC.
⚙️ The Taproot upgrade of 2021 (allowing more complicated scripts in the witness section) created conditions for the Ordinals, Bitcoin’s new – and already very popular – trend.
The Ordinals protocol allows for each individual satoshi (1/100,000,000 of BTC) to be identified and transacted with extra data attached, through a process known as an inscription.
The Ordinals mania started in February, when people began creating Bitcoin NFTs, attaching to the satoshis strings of data pointing to an image or a program.
The trend really took off in April, with the emergence of fungible Ordinals (the so-called BRC-20 standard), akin to Ethereum tokens. Since the beginning of May, transactions with Ordinals inscriptions represent over 50% of the overall Bitcoin traffic.
So far, most of the BRC-20 tokens are hype-induced memecoins, but the technology is promising. Some Bitcoin OGs, like Microstrategy’s Michael Saylor, have already declared they were looking into Ordinals, assessing potential application developments.
It is difficult to estimate the number of Bitcoin owners.
As per Glassnode’s chart, the number of addresses with any BTC reached an all-time high of almost 47 million. However, this number can be deceptive, because users can have several addresses, and most importantly, a big share of users still keep their coins on exchanges, which can use one address for millions of users. According to CoinGlass, of the roughly 16 million of BTC in circulation (19 million of mined BTC – an approximate 3 million BTC that are believed to be lost forever), 1.9 million is kept on major exchanges.
Other methods include looking at the number of exchange users (Coinbase: 110 million, Binance: 130 million) or wallet providers’ users (Blockchain.com: 85 million), but this doesn’t give a clear picture either, as users can have accounts on several exchanges, and/or hold other cryptocurrencies than Bitcoin. TripleA estimates worldwide crypto users’ number at over 400 million.
All things considered, we could imagine the number of Bitcoin owners somewhere north of 100-200 million, most of them keeping Bitcoin as an investment or a store of value according to the famous HODL narrative – keeping the coins throughout market downsides, believing that its price will still be rising over time.
However, HODling is not enough to make a currency live, and a new narrative encouraging BTC use in everyday life has emerged – spend and replace.
For Laszlo Hanyecz, buying his famous pizzas was not a straightforward transaction. He had to post a message on BitcoinTalk forum, find a person willing to order him the pizzas, and then send them the bitcoins.
Suffice it to say, we’ve come a long way since then. Not only buying and selling Bitcoin was made easy by the exchanges, but a big number of commerce are also now accepting BTC directly, helped by BTC payment solutions, both custodial (BitPay) and not (BTCPay).
If we stick to Laszlo’s culinary preferences, PizzaHut is accepting Bitcoin since 2020. If you’re looking for more, several websites, like btcmap.org or coinmap.org keep track of BTC-friendly businesses. This is, for example, Coinmap’s visualization of our Alpine region across 6 countries:
Using BTC as payment for products and services is an integral part of building the Bitcoin economy, and spend-and-replace narrative is getting stronger, helped by the rising number of Bitcoin ATMs (now over 34k spread across 75 countries).
Bitcoin is secured by electricity and hardware, needed to generate an astronomical number of hashes, until finding the right one allowing to mine a block.
The hashrate, i.e. the number of hashes all the network’s miners produce in a second, measures how vast and powerful the Bitcoin blockchain is. Surprise, surprise, it is constantly growing. Even the ban on mining in China in 2021 and the ensuing relocation of 65% of Bitcoin miners did not disturb the hashrate for long: it took it only 4 months to recover. With 364 million TeraHash/second, we are now witnessing yet another all-time high of Bitcoin hashrate 🦾
Of course, such progression couldn’t be possible without hardware updates. From simple computers’ CPUs to specialized ASIC equipment, and an array of machinery allowing miners to capture flared gas, heat greenhouses, heat water for production… etc
More technically subtle machines, like the one announced by Jack Dorsey’s Block, are in the works, to allow Bitcoin mining from our homes, using excess electricity during low hours.
The ecologic concerns 🌱, once vociferated on every Bitcoin-sceptic media, are being slowly allayed, notably thanks to better communication. As per Bitcoin Mining Council’s latest report (Q4 2022), Bitcoin mining’s sustainable electricity mix has marginally improved to 58.9%, and remains one of the most sustainable industries globally. Read more on Bitcoin and ecology.
It took regulators time to understand that Bitcoin is here to stay, and it needs to be inscribed into legislation.
Most countries had their regulators explain how Bitcoin falls into the existing laws, and some, like France or recently – the EU, have even adopted a crypto-specific set of laws allowing for the industry to move forward.
The US is moving in the opposite direction now, but even there, Bitcoin seems to be in a relatively safe place (for now): SEC’s Gary Gensler has stated on a number of occasions that Bitcoin is not a security because of its decentralization.
If you read this far, chances are you don’t need to be persuaded that Bitcoin is not a mere digital curiosity, but a force capable of reshaping our economies, and even societies. Free markets outlive any regime’s central planning, and free money will outlive government-controlled monetary systems 🌞
What a great occasion to go and et a pizza today! 😊