2023 Bitcoin Development Report: Key Trends and Sector Analysis

Introduction

2023 is one of the most important years in Bitcoin's history. Bitcoin inscriptions have pioneered a whole new concept and sub-market. Bitcoin's layer two networks, sidechains, and scaling solutions have regained market attention. Traditional financial markets are beginning to see BTC as a serious asset class, with multiple spot BTC ETF applications being approved. Most importantly, BTC is recovering from a severe bear market, becoming stronger than ever. Overall, the current state of Bitcoin is exciting.

This report will focus on several key trends and areas of Bitcoin in 2023, including network data, major participating entities, technological evolution, DeFi, and scalability, among others. It is important to note that this is not an exhaustive list of Bitcoin developments in 2023, as there are too many noteworthy advancements within the ecosystem. Whether it is the Lightning Network, inscription market, sidechains, or cross-chain applications, the development of Bitcoin in 2023 has reached a fever pitch. The stagnation we witnessed in 2021-2022 seems to have become a thing of the past.

Network Data

In 2023, most indicators of the Bitcoin network are showing a good trend:

• Hashrate continues to reach new highs, doubling since the beginning of 2022, indicating improved network security and enhanced miner confidence.
• The number of active addresses shows an upward trend, stabilizing around 1 million.
• Revenue from fees has significantly increased, especially due to the new demand brought by inscriptions.
• The average block size has nearly doubled.
• The trading volume has decreased, which may be related to inscriptions crowding out regular transactions.
• The FRM( fee ratio multiplier ) has significantly decreased, from 80x to between 12-40x.

Overall, the network shows that Bitcoin is surpassing pure HODL and entering more practical use cases. Inscriptions bring new fees and user sources to the network, making it busier and more secure.

Main Participating Entities

exchange

The exchange's BTC balance continues to decline, reaching its lowest level since 2018, slightly above 2 million BTC. This may be related to users' declining trust in centralized platforms and new applications such as inscriptions.

miner

In 2023, miners overall hold more BTC than they sell. Miner revenue mainly comes from block rewards, while fee income still accounts for a relatively low proportion. The upcoming halving may pose challenges for miners, and new fee sources brought by inscriptions will become increasingly important.

institutions and ETFs

2023 is an important year for Bitcoin to gain recognition from traditional institutions. Several well-known companies have applied for and received approval for spot BTC ETFs, opening channels for a large influx of new capital. This marks BTC's establishment as a mainstream asset class.

Technological Evolution

Inscriptions and BRC-20

The inscription technology developed by Casey Rodarmor is the biggest technological breakthrough in Bitcoin in 2023. It allows for the storage of arbitrary data on the Bitcoin network and has spawned the BRC-20 token standard. As of the release of this report, over 59 million inscriptions have been created.

The BRC-20 market is rapidly developing, creating billions of dollars in market value. $ORDI has become the first BRC-20 token listed on centralized exchanges, showing strong momentum.

Lightning Network

The Lightning Network has developed relatively steadily in 2023. The network capacity and the number of nodes have remained stable, without significant growth. As on-chain fees rise, the Lightning Network may find new application scenarios in small BTC transactions.

Rollup and other scaling solutions

In 2023, interest in Bitcoin's ecosystem for scaling solutions has revived. zk-rollup based solutions such as Citrea have started to emerge. The Bitcoin Drivechain proposal has garnered renewed attention, and some experimental projects have already been launched.

Outlook for 2024

• The debate surrounding the inscriptions may continue, as the community is still working to resolve the differences.
• Institutional ETFs bring new capital and participants to Bitcoin.
• The scaling solutions will further develop, and more innovations may emerge.
• The halving will pose challenges for miners, making new sources of fees increasingly important.

Overall, 2023 is an important year for the development of Bitcoin, and 2024 is expected to continue these positive trends. We look forward to seeing further evolution of the Bitcoin ecosystem.