Bitcoin’s ‘Coin Selection’ Technology Gets First Major Integration
BitGo is going to be the first major crypto company that will adopt the coin selection technology from Bitcoin. This scaling tech has been touted as a way to ease the obsession with lowering fees since they hit over $20. Although the fees have since dropped to below $1, the incident had a major psychological impact on Bitcoin users. It jolted the crypto into action to find solutions to the high fees.
About Coin Selection Technology
The coin selection tech selects more efficiently, which coins will go to a given transaction. As a result, they will have a major impact if the fees ever spike again. The idea has been around for years but its only now that it has begun to gain attention. BitGo is the first company that wants to open up the tech to a large section of the crypto world.
All the BitGo clients running the latest version of their software will have access to this tech. As a result, their fees will drop by 30 percent. According to a BitGo engineer, the company is trying to solve issues for high traffic wallets. This is because some of their clients make many deposits to exchanges. He added that if the fees ever spike again, their customer would save a lot on fees.
However, the engineer did not reveal how many had upgraded to the latest BitGo software. He only said it was most of them. BitGO has clients such as Bitstamp, which is one of the largest Bitcoin exchanges. Thus, there is an expectation that this tech will reach a huge number of Bitcoin users.
The Tech Explained
The tech that BitGo has created has not been used anywhere else. Every transaction fee depends on how much data is in the transaction rather than the value. It might sound funny but this is because Bitcoin transaction space is limited. Charging extra for more data ensures that users take up as little space as they can. The result is that a small transaction of $0.10 could cost more than a transaction of $1000.
A few years back, Erhardt, the BitGo engineer in charge of this new tech, invented a new algorithm that could pick which coins go into a transaction. It was such a revolutionary move that Bitcoin Core moved to adopt it. However, when Erhardt was adding it to BitGo, he came to a realization. Spending transactions with many data when fees are low is not expensive. Thus, he discovered it was useful to look through a wallet and consolidate coins. This would be similar to trading a hundred pennies for $1 note.
Preparing for the Future
Erhardt believes that the algorithm will be quite useful when fees rise. This is especially so for the high traffic wallets. He said that the company was assuming that the Bitcoin fees would fluctuate again in future. However, he admitted that it was hard for anyone to know what was going to happen in future. The last time it happened, there was an influx of traders, which pushed the price to $20,000.