Coinbase, arguably the sole largest cryptocurrency exchange platform, has just made an enormous Twitter announcement that has created a feeling of excitement amongst its users. The exchange’s engineering department had just finished testing a SegWit upgrade for Bitcoin when they decided to break the news to its millions of users.
Many bitcoin enthusiasts are oftentimes left frustrated for the length of time transactions take amid the network becoming jammed. This is primarily the reason transactions take a lot of time and network fees rise almost arbitrarily. Bitcoin transaction fees hit an unprecedented high of $55 in January!
SegWit which has been around since August is a prototype of the great layered scaling solutions, including the Lightning Network. It was made available back then, but thanks to Bitcoin’s skyrocketing value, there was congestion in the network.
The upgrade will, thus, make it faster to transact as it will relieve some weight off the primary network and thus help the San Francisco-based exchange reduce the complaints about inefficiency and high transaction charges it currently handles.
When the news reached the vast bitcoin community, a sudden feeling of celebration started. But amidst the rejoicing, Bitfinex made a similar statement, announcing a similar SegWit support upgrade slated for Monday. The benefits are practically identical though the SegWit implementation will mean lower BTC withdrawal fees by about 15% while improving the processing times.
Why Launch SegWit Upgrade For Bitcoin
Though the upgrades are virtually identical, Bitfinex says theirs will only support bitcoin deposits and withdrawals that use Pay-To-Script-Hash SegWit addresses and thus not applicable to BCH. Coinbase had promised this towards the end of the year 2017, and the announcement isn’t a new thing.
Reasons for the upgrades are crystal clear. Scalability and malleability have remained a huge concern for Bitcoin because of the size limit and the risk of manipulating the transaction ID. The “soft fork” will, however, allow SegWit protocols upgrades.
Many hard and soft wallets have already adopted SegWit protocols, and this highly publicized move will serve as a start to a norm that will hopefully set the pace for the future. Coinbase, Bitfinex, and GDAX amass a sizeable portion of the bitcoin transactions.
However, the news arrives at a time when Coinbase has been facing serious backlash from its users due to the high fees, limits on withdrawing funds to PayPal and disuse of credit cards. Bitfinex, on the other hand, will hope to use this as leverage and water down the controversies it has recently found itself in.