On Monday the 5th of Feb a tweet was sent out by Coinbase, one of the leading cryptocurrency exchanges, announcing some long awaited news that they will be implementing the SegWit (Segregated Witness) upgrade on the bitcoin blockchain. This upgrade will help reduce both transaction times and the high fees associated with bitcoin. This scalability upgrade will bring bitcoin in line to work with second-layer solutions like the lightning network.
Although this was initially announced in Dec 2017, they have only now confirmed that they are close to the upgrade, as they are in the final stages of testing. This upgrade is a much desired one with Coinbase receiving numerous criticisms regarding the inefficient process of how they handle bitcoin transactions. A month ago, Coinbase customers started a petition, requesting the exchange to make the SegWit upgrade a priority for upcoming projects. They eventually reached over 12,000 signatures, which could have added pressure to Coinbase to push through the testing phase.
The poor performance from the transactions has resulted in many large organisations moving away from the bitcoin blockchain. Ironically, even the North American Bitcoin Conference had to stop accepting bitcoin as a payment form as they could not process them in time for the conference.
This upgrade will separate the witness signature from the main block of data and move it to the end of the transaction, allowing for a much more scalable blockchain to form. In essence, this will reduce the transaction size substantially, which in turn will allow more transactions to be added into each block. This will inherently reduce transaction fees as they are priced per byte of the transaction. There are optimistic outlooks that since Coinbase is such a dominant stake in the bitcoin blockchain, that this will help tip the industry to employ this upgrade as the default setting.
This upgrade will have low risk as if it isn’t adopted correctly or has issues it is backwards compatible. Although it is considered low risk, it still is yet to be adopted mainstream. To date it stands that only 16% of the network has adopted this upgrade, despite the fact it has been available for over 6 months.
It is definitely worth watching how the network will react to this upgrade and see what happens to both transaction speeds and fees as a whole.
Joshua has been investing and trading in fiat currencies since 2013. he has recently moved into the crypto world spreading his portfolio over long term coin investments, ICOs and day trading.