With Coinbase preparing its roll-out of Segregated Witness support, SegWit has once again come into focus. It announced in December of last year that it would fully support SegWit in 2018. Although Coinbase did not announce a finite date, they pledged to “prioritize security and performance over new features.” In Coinbase-speak, that means you can expect SegWit closure before you should expect your favorite coin to land on their platform.
Coinbase represents a significant portion of global Bitcoin volume — 15.58% to be exact, second only to Bitfinex. Bringing all of those transactions in line with the SegWit standard is sure to have a game-changing impact. Already we are seeing Bitcoin trend upwards with force. Multiple factors are in play, but anticipated SegWit adoption is at the core. Ultimately, it will deliver short-term scalability, cheaper transactions, and more transactions per second.
SegWit technology is essentially a two-part upgrade to the Bitcoin network. The first part involves separating the witness portion of each transaction from the remainder. The second part involves a genius redesign of Bitcoin’s existing block parameters. Instead of limiting each block to 1,000,000 bytes (1 MB), now each block consists of 4,000,000 weighted units. The witness weighs 1/4 of the non-witness portion. In other words, the witness weighs 1 unit while the non-witness portion weighs 4 units. The result: more compact blocks containing more transactions and ‘lighter’ signatures.
Transaction sizes remain unchanged, but they are restructured and weighted differently.
The Bitcoin Network has been plagued by network backlog for months until very recently. Throughout November and December, it maintained a 100,000+ unconfirmed transactions backlog, pushing network fees to record levels. This occurrence directly correlated with both the rise of Bitcoin to its all-time-high of $20,000 and its mainstream media attention climax. Initially released on August 24th 2017, SegWit was designed to prevent this from happening. Unfortunately, it has been met with less-than-ecstatic adoption, and the desired effect has yet to be achieved.
Segregated Witness is the Key Lightning Enabler
SegWit was the final protocol update required to deploy the Lightning Network. For the time being, it serves as a temporary measure to propel Bitcoin forward while we await final Lightning evaluation. Lightning Mainnet transactions have already been completed with excellent results. One user reported instant, fee-less transactions. Yes, you heard that right. The time it will take to make transactions will be limited only by the speed at which data can travel. Other key features of the Lightning network include the following:
Restoration of Privacy
Onion-style routing can be used to encrypt transactions so that no user data needs to be exchanged with intermediary nodes. Both the originator and the receiver will be protected.
Payments can be made across any blockchain that supports the same hash lock hashing function.
Payments can be made conditional upon the outcome of a random event, allowing probabilistic payments. For example, Alice can pay Bob 0.1 satoshi by creating a 1-satoshi payment with 10-to-1 odds so that 9 times out of 10 she pays him 0 satoshis, and 10% of the time she pays him 1 satoshi for an average payment of 0.1 satoshis.
Users may make uncommitted transactions peer-to-peer without any 3rd party being involved. Transactions need only be made on the actual Lightning Network to open or close a channel or fraud-check a transaction.
The Future is Near
Bitcoin may still be considerably off its lows, but it sounds like a delightful 2018 lies ahead. With Lightning already undergoing Mainnet use, it should only be a short matter of time before we see broader adoption. At the moment users are using the netowork “at their own risk,” but TorGuard has promised to reimburse users in the event an error was to cause a loss of funds. Slowly but surely Lightning will see more use as user confidence increases. At a minimum you should ensure you have a SegWit enabled (and therefore Lightning enabled) wallet to ease into the transition.
When do you expect Coinbase to deploy SegWit support? Let us know in the comments below!
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