In one sentence
Bitcoin was the first blockchain and is still the largest crypto asset by market cap. Its design is very conservative: it does one thing, keeping the ledger; its scripting is deliberately limited, and changing even a small rule takes years of network-wide debate.
So the “Bitcoin ecosystem” looks very different from Ethereum’s: most new things do not run on Bitcoin directly but hang off the side of it, or take BTC to other chains to be used there.
Data as of 16 Oct 2026, 01:45 UK time · source CoinGecko, mempool.space, DefiLlama
How blocks are produced: mining
Bitcoin uses Proof of Work (PoW). Miners run specialised machines that compute hashes nonstop; whoever first finds a result that meets the difficulty target wins the right to record the block and its reward.
- Difficulty adjusts automatically every 2,016 blocks (about two weeks) to keep the average block time around 10 minutes. The latest period averaged 9.4 min.
- The reward halves every 210,000 blocks (about four years). After the fourth halving in April 2024 it is 3.125 BTC per block.
- After 6 blocks (about an hour) a transaction is generally considered very hard to reverse.
- 01Signed and broadcast
The wallet signs and broadcasts to the network, where it enters each node's mempool. Fees are based on the transaction's data size.
Instant - 02Miners choose
Miners include transactions with the highest fee rates first.
- 03A new block is found
One miner finds a hash meeting the difficulty first and broadcasts the new block.
About 9.4 min on average - 04Other nodes verify
Nodes across the network check the transactions and the work, accept the block and mine on top of it.
- 05Deep enough is safe
Each further block makes reversing it more expensive.
6 blocks, about 1 hour
What has grown up beside Bitcoin
The Lightning Network: two people lock some money on-chain to open a “channel”, then send payments back and forth inside it without touching the chain, settling once when the channel closes. Channels link into a network, so you can pay people you are not directly connected to. Suited to small, frequent payments.
Inscriptions and runes: after the 2021 Taproot upgrade, people found they could “engrave” images and text into Bitcoin transactions (Ordinals inscriptions, which appeared in early 2023). BRC-20, which issues tokens via inscriptions, followed, and then the Runes protocol, launched on the day of the 2024 halving. They brought a wave of new transactions and fees to Bitcoin, and a token-launch frenzy along with them.
Wrapped BTC: hand BTC to a custodian and receive an equal amount of WBTC, cbBTC or similar tokens on Ethereum and other chains to use in DeFi. Whether it is worth one BTC depends on whether the custodian still holds the BTC.
BTC staking and “Bitcoin Layer 2s”: protocols such as Babylon let BTC holders lock their coins to help secure other PoS chains and earn a return; there are also sidechains and self-described “Bitcoin Layer 2s” such as Stacks and Rootstock. Note: many “Bitcoin Layer 2s” connect to Bitcoin through a multisig bridge, and are far less secure than Ethereum’s rollups.
- WBTCBridge$9.6B
- Coinbase BridgeBridge$7.78B
- Binance BitcoinBridge$5.6B
- Babylon ProtocolRestaking$3.35B
- Kraken BitcoinBridge$777.7M
- Function FBTCBridge$681.4M
Data as of 16 Oct 2026, 01:45 UK time · source DefiLlama
Strengths and trade-offs
- Bitcoin itself is the longest-running blockchain, with the most hash power, and the hardest to attack.
- Its rules rarely change and supply is capped at 21 million, so it is highly predictable.
- Financial products built around BTC (spot ETFs, wrapped BTC, staking) keep multiplying.
- Limited on-chain capability: complex applications have to sit beside it or on other chains, often bringing in a custodian or a multisig bridge.
- Slow blocks, and fees get expensive when congested; during the inscription craze even ordinary transfers became costly.
- "Bitcoin Layer 2" is a loose label covering very different levels of security, and many do not inherit Bitcoin's security at all.
- 01
Wrapped BTC: who is the custodian, is there public proof of reserves, and can you redeem for real BTC at any time?
- 02
"Bitcoin Layer 2s": how is BTC locked in? How many multisig signers? Who can move that BTC?
- 03
BRC-20 / rune tokens: total supply, how they are minted, the top ten holders. Liquidity is mostly on a few marketplaces, so they are easy to pump and dump.
- 04
BTC staking products: how long the lock-up is, when you can be slashed, and which token the rewards are paid in.
- 05
Treat any project that says "send your BTC to this address to earn a return" as a scam until proven otherwise.
Data and sources
- Live figures: CoinGecko (market cap, circulating supply), mempool.space (block time, hashrate, fees, Lightning) and DefiLlama (ecosystem locked value).
- Mechanisms are based on bitcoin.org developer documentation and each protocol’s official documentation.
- This guide is educational and is not investment advice.
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