Although Segregated Witness (SegWit), which is a change in the way Bitcoin transactions are handled, was originally activated on the network back in August, user adoption of the new feature has been relatively low. According to segwit.party, the percentage of transactions on the network that use SegWit inputs stalled between 10% and 15% over the past few months.
Over the past couple of weeks, a few key entities in the Bitcoin ecosystem have rolled out enhanced support for SegWit, which has led to greater capacity for transactions in each new block. More specifically, the percentage of transactions on the network that use SegWit inputs recently grew from 15% to 30% over the course of less than two days.
As more exchanges, wallet providers, and other entities involved with the creation of Bitcoin transactions adopt SegWit, the total capacity of the network will continue to rise.
Although the congestion on the network has calmed over the past month or two, the historically-high fees and unreliable confirmation times were a key point of contention in the community over the past couple of years.
What is SegWit and Why is It Important?
SegWit is an improved method of handling Bitcoin transactions that has a number of effects on the network as a whole. The two ways that SegWit impacts Bitcoin that are most relevant today are an increased block size limit and a fix for the transaction malleability bug.
What is SegWit and Why is It Important?
SegWit is an improved method of handling Bitcoin transactions that has a number of effects on the network as a whole. The two ways that SegWit impacts Bitcoin that are most relevant today are an increased block size limit and a fix for the transaction malleability bug.
What is SegWit and Why is It Important?
SegWit is an improved method of handling Bitcoin transactions that has a number of effects on the network as a whole. The two ways that SegWit impacts Bitcoin that are most relevant today are an increased block size limit and a fix for the transaction malleability bug.
The upside of an increased block size limit is obviously the increased capacity made available on the network as a result (more transactions can be processed per second). On the other hand, larger blocks means the cost of operating a full node is also increased, which could harm the level of decentralization found on the network. Having said that, academic research has indicated that the increased capacity enabled by SegWit should not be too problematic in terms of continuing to allow everyone to run their own full nodes.
It should be noted that the increased capacity offered by SegWit will likely only help with congestion on the network over the short term, as blocks are likely to become full again as user adoption of Bitcoin continues to rise.
The more important aspect of SegWit over the long term is the fix for transaction malleability, which enables a more efficient version of the Lightning Network. This layer-two payments protocol for Bitcoin is expected to help Bitcoin achieve massive scale as it is rolled out over the course of this year. With a working Lightning Network, Bitcoin payments are limited more by the number of users on the network rather than how often they wish to transact (see my previous article on the Lightning Network for more details on its importance).
Why is SegWit Adoption Increasing Now?
After stalling for a few months, SegWit adoption has seen an effective doubling in a matter of days thanks to a number of large companies built on top of the Bitcoin network, such as Bitfinex and Coinbase, implementing the improvement on their own platforms.
The most recent version of Bitcoin Core, which is the reference implementation of the Bitcoin protocol, also included further support for SegWit in its most recent release.
The nature of the Bitcoin network means it’s difficult to see which companies or software clients are having the biggest impact on SegWit adoption, but the massive size of Coinbase, which claims to hold roughly 10% of all bitcoin in existence and was the most popular app on the Apple app store at one point last year, indicates that the company may be having the largest impact on SegWit adoption up to this point by far.
Blockchain, which claims to account for around 40% of all transactions on the Bitcoin network, is also expected to integrate SegWit by the end of March.
While major Bitcoin companies like Blockchain and Coinbase failed in their attempt to push Bitcoin users over to a new cryptocurrency network with a larger block size limit via SegWit2x (see the full details on this here), it’s clear they are still extremely influential when it comes to guiding user activity.
Read more at:
https://www.forbes.com/sites/ktorpey/2018/02/28/the-number-of-bitcoin-transactions-using-segwit-doubled-in-2-days-heres-why-that-matters/2/#71bda02b574e
