2023 Bitcoin Development Report: Key Trends and Future Outlook

Introduction

2023 is one of the most important years in the history of Bitcoin. Bitcoin inscriptions have pioneered a whole new concept and sub-market. The Bitcoin layer two network, sidechains, and scaling solutions have regained market attention. Traditional finance has begun to view BTC as a serious and valid asset class, with multiple spot BTC ETF applications being approved. Most importantly, BTC seems to be recovering from the most severe bear market the crypto market has experienced and is becoming stronger. Overall, the current state of Bitcoin is exciting.

This report focuses on several key trends and important developments in the Bitcoin space in 2023. This is not an exhaustive list of all Bitcoin progress in 2023, as there are too many things to comprehensively account for and track. Thousands of people are working towards their Bitcoin visions, whether through the Lightning Network, inscription markets, small payments via Bitcoin sidechains, or efforts to bring BTC to other public chains. The development of Bitcoin in 2023 has reached a frenzy level. The rigidity of Bitcoin that we saw in 2021 and 2022 seems to have become a thing of the past.

Network Development

Hashrate hits a new high

The hash rate performance in 2023 is surprising. Despite BTC's poor price performance in 2022, the hash rate has continuously broken historical highs since the beginning of 2023. Since the beginning of 2022, Bitcoin's hash rate has doubled, which is worth noting:

1. It represents the security level of Bitcoin. Generally speaking, the higher the hash rate, the more secure Bitcoin is.
2. A higher hash rate indicates miners' confidence in the network. If mining is not profitable or the return period is too long, the hash rate will decline.

Active addresses rebound

The number of active BTC addresses significantly decreased from a peak of 1.15 million in 2021. It remained stable throughout 2022, but showed a growth trend in 2023. However, entering 2024, the growth trend seems to have stagnated, with active addresses stabilizing around 1 million.

Fee income improvement

In 2023, the fee revenue of Bitcoin has improved. The inscriptions and new demand for block space have had a significant impact on Bitcoin. Fees surged dramatically at the beginning of the year, then calmed down, but still remained significantly higher than previous levels.

Inscriptions have led to a surge in demand for block space, with the average block size nearly doubling in 2023. The memory pool is clogged with a large number of transactions trying to inscribe on Sats. This is good news for miners, but small transaction users are feeling frustrated. For some, the chain is almost unusable.

trading volume decreased

The boom in inscriptions has led to a sharp decline in small BTC transfers, which is the reason for the collapse in trading volume after the surge in inscriptions. Bitcoin trading volume has fallen to its lowest level since 2020, and the downward trend seems likely to continue.

FRM drop

The increase in inscription demand and costs has led to Bitcoin's FRM( fee ratio being at its lowest level in a period, dropping from 80 times to between 12-40 times, closer to the levels of 2020-2021. A lower FRM level is more promising; if you are optimistic about Bitcoin's long-term prospects, you would hope for this downward trend to continue.

![Delphi 2023 Bitcoin Report: Key Trends and Areas Shining Bright])https://img-cdn.gateio.im/webp-social/moments-ee9d80524dd0122d0c6b04efeee72d34.webp(

Overall, the network data paints a vivid picture that largely depends on mass adoption. Bitcoin seems to be moving beyond simple holding into actual use cases. Ordinals have created new fees and user sources for the chain. Thanks to these new revenue sources, the network is now as busy and secure as ever. Despite some skepticism, by 2023, Ordinals have undoubtedly proven to be a boon for the entire Bitcoin network.

Bitcoin Entity

) exchange

The exchange's BTC balance continues to decline, following the trend that began during the COVID-19 crash in 2020. The exchange's BTC is at its lowest level since 2018, slightly above 2 million coins. After the FTX collapse, BTC may continue to flow out of exchanges as holders become increasingly distrustful of centralized entities. The outbreak of inscriptions may also have played a role in this trend.

![Delphi 2023 Bitcoin Report: Key Trends and Areas that Shine]###https://img-cdn.gateio.im/webp-social/moments-aac51079fbba38835121a5182c572dd5.webp(

) miner

In 2023, miners usually held more BTC than they sold, although not by much. During the FTX collapse, miners sold a large amount of BTC, but starting in 2023, they began to accumulate BTC###, although they continued to sell( in the fourth quarter of 2023 and the first quarter of 2024.

![Delphi 2023 Bitcoin Report: Key Trends and Areas Shining Bright])https://img-cdn.gateio.im/webp-social/moments-c3552c9ad9855802cd24d5f475477662.webp(

Miners' income comes from block rewards and transaction fees. Since 2016, transaction fees have accounted for a very small proportion, usually less than 1%, and rarely exceeding 10%. The fees generated by inscriptions may provide some hope for miners, but whether inscriptions can fundamentally solve Bitcoin's fee problem remains questionable.

![Delphi 2023 Bitcoin Report: Key Trends and Areas Shining Bright])https://img-cdn.gateio.im/webp-social/moments-cb2c65186e2a327e19cd4d9873ea4400.webp(

) Institutions and ETFs

In 2023, traditional institutions showed significant interest in Bitcoin. Several well-known companies applied to launch spot BTC ETFs and received approval in early 2024. This marks Bitcoin's emergence as a mainstream asset class, opening the door for a large influx of capital. The launch of spot BTC ETFs could have a similar impact on BTC prices as spot gold ETFs have on gold prices.

![Delphi 2023 Bitcoin Report: Key Trends and Areas Shining Bright]###https://img-cdn.gateio.im/webp-social/moments-e5ae132cf26769a18edfa4bfea43b0f7.webp(

The Evolution of Bitcoin

) Inscription Technology

One of the most important developments in Bitcoin in 2023 is the development and release of the Ordinals technology by Casey Rodarmor. Ordinals allow users to store any data on the Bitcoin network and bind that data to specific Sats. The market quickly embraced Ordinals, and as of the report's publication, there are already over 59 million Ordinals on the Bitcoin network.

![Delphi 2023 Bitcoin Report: Key Trends and Areas of Distinction]###https://img-cdn.gateio.im/webp-social/moments-7ffe8e665a830bc24776f8b094e41c7d.webp(

) BRC-20 standard

Anonymous developer Domo introduced a simple Token standard BRC-20 using inscription technology, creating a sub-industry with a market value of over $1 billion. The trading volume of BRC-20 even surpassed that of regular BTC transactions at certain times.

![Delphi 2023 Bitcoin Report: Key Trends and Areas Shining Brightly]###https://img-cdn.gateio.im/webp-social/moments-d1b0ca67bc688976baf6d610f7780c1e.webp(

) Controversy and Cultural Conflict

Inscriptions and BRC-20 are not without controversy. Some Bitcoin believers argue that they deviate from Bitcoin's original intention as a hard currency. However, since Bitcoin is a decentralized permissionless platform, shutting down inscriptions is almost impossible. Inscriptions have reignited discussions about the development direction of Bitcoin, and this debate may continue until 2025.

![Delphi 2023 Bitcoin Report: Key Trends and Areas Shining Bright]###https://img-cdn.gateio.im/webp-social/moments-cc4b70c8991468eaf017e0e3d2b661a8.webp(

DeFi and Scalability

) Lightning Network

The adoption of the Lightning Network stagnated in 2023, but it may find new use cases in basic BTC transactions. The capacity and number of nodes of the Lightning Network remained relatively stable in 2023.

![Delphi 2023 Bitcoin Report: Key Trends and Areas Shining Bright]###https://img-cdn.gateio.im/webp-social/moments-8ae3cb6deab91649d53fe295de297793.webp(

) Rollup and other scaling solutions

The Bitcoin scaling solution of 2023 has attracted attention again, including the BitVM-based zk-rollup project Citrea, as well as the re-emergence of the Bitcoin Drivechain proposal. These projects aim to bring more functionality and lower-cost transactions to Bitcoin.

![Delphi 2023 Bitcoin Report: Key Trends and Areas Shining Brightly]###https://img-cdn.gateio.im/webp-social/moments-7537560787757c577a61c2c9af2d349d.webp(

Outlook for 2024

Bitcoin in 2024 may continue the positive trend of 2023:

1. The development of inscriptions and BRC-20, along with the controversies they have sparked, may continue.
2. The launch of the spot Bitcoin ETF provides an entry point for a large amount of new capital and market participants.
3. The Bitcoin scaling solutions and the development of second-layer networks may bring new application scenarios.
4. The acceptance of Bitcoin by institutions and traditional finance may further increase.

Overall, 2023 is an important year for the development of Bitcoin, and 2024 is expected to continue these positive trends. The Bitcoin ecosystem is becoming more diverse and vibrant, and future developments are worth looking forward to.

![Delphi 2023 Bitcoin Report: Key Trends and Areas Shining Bright])https://img-cdn.gateio.im/webp-social/moments-1b96a2d895b516f75669c8b6163da00c.webp(