SegWit Technology Dominates In The Bitcoin Transaction Market

SegWit Technology Dominates In The Bitcoin Transaction Market

  • SegWit or Segregated Witness technology in bitcoin transactions took a dominant two-thirds of the market share on 6th January 2020.
  • The technology initially developed as a resort to solving the network congestion problem due to the limited block size.
  • BitMain was reluctant to step on board with the SegWit fork since it would significantly reduce the miner’s income after hashing a transaction.

SegWit or Segregated Witness technology in bitcoin transactions took a dominant two-thirds of the market share on 6th January 2020. The adoption rate of the technology, as reported by foreign news media, crossed 66%.

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The percentage of applications for SegWit has also multiplied over the years from 10% in 2018 to about 50% in 2019 as more users and institutions begin to increase their acceptance of the software fork. 

SegWit is a soft fork modification that was made to the transaction format for bitcoin in July 2017. The mod is supposed to prevent unintentional transaction malleability of bitcoin, to allow optional data transmission, and to mitigate slower transaction speeds by bypassing certain protocol restrictions such as the block size limit. 

Beginning of SegWit

The technology initially developed as a resort to solving the network congestion problem due to the limited block size. In the bitcoin blockchain network, the size of a single block is 1M, and such limited capacity was proving to be unable to cope up with the increasing transaction volume. This resulted in slower transaction speed, that was slowly choking the network. 

SegWit developed to be a soft fork that would help circumvent some bitcoin protocol restrictions such as the block size limit without having to directly increase the size of the block, which would result in a hard fork (having to generate new coins). 

Implementation of SegWit required the computing power harnessed by the miners. At that time, the largest mining cluster, almost 50% of the entire bitcoin mining pool, was held by Bitmain, the word’s largest bitcoin mining rig manufacturer. Therefore Bitmain’s participation, along with the rest of the mining community, was crucial fo the implementation of SegWit.

BitMain was reluctant to step on board with the SegWit fork since it would significantly reduce the miner’s income after hashing a transaction, and BitMain had a large share in the mining pool of the bitcoin network.

Therefore Bitmain alternatively suggested increasing the block size from 1M to 8M. This would result in the digital ledger of the blockchain growing massively in size and smaller nodes being unable to store all the new data resulting in a storage monopoly controlled by Bitmain.

This went directly against the decentralized nature that was core to Bitcoin and the blockchain itself and was opposed by the community. 

Bitmain still went on and implemented its block size increase, directly resulting in a hard fork of the blockchain generating new coins called BCC. Segregated Increase was also grounded and performed slowly by the rest of the community. 

Major cryptocurrency wallets and exchanges such as Bitcoin Core, Bither, BRD, Coinbase, and Bitfinex soon began adopting the SegWit implementation by 2018, and it started its path onto becoming popular given the lower transaction times, increased block sizes, and reduced transaction costs that it provided.

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Steve Anderrsonhttp://www.thecoinrepublic.com
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

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