Coinbase has been experiencing community backlash over reported mismanagement of its transaction infrastructure — which could be causing network congestion and may be expensive to fix. The company is responding by implementing a few (oft-requested) features like SegWit that could reduce operational overhead, and alleviate a bit of the backlog on the wider Bitcoin network.
CEO Brian Armstrong tweeted yesterday that Coinbase, the largest compliant U.S.-based cryptocurrency exchange, would be pursuing segregated witness (SegWit) transactions and transaction batching, among other optimizations, in order to make exchange operations more efficient.
This announcement came on the heels of reports that Coinbase was running unsustainably inefficient backend infrastructure, hoarding UXTOs in a multitude of addresses, and assertions from the company that their users had not requested SegWit support.
Critics of the company have asserted negligence, claiming that implementing these established features would greatly reduce Coinbase’s impact on the bitcoin network. Developer Jameson Lopp suggested Coinbase and other popular services were congesting the network with sloppy programming:
It's not a new revelation that a significant cause of bitcoin network congestion is from popular services such as @blockchain, @coinbase, and @gemini who are using block space inefficiently. If you don't want to contribute to the problem, don't use them. https://t.co/f1AO2ePRMw
— Jameson Lopp (@lopp) January 12, 2018
With transaction fees and volume reaching record highs in past months, these assertions seem to have struck a chord with the bitcoin community. However, Armstrong’s tweet assured Coinbase users that steps are being taken.
How Is SegWit Supposed to Help?
For those that aren’t aware, SegWit is an addition to the Bitcoin protocol that reduces the data size of each transaction, thereby increasing the total amount of transactions that can be put into one block.
“Batching” is a method of reducing both the number of extant UXTOs and the amount of transactions done on high traffic wallets, by aggregating many small transactions into one larger, more complex transaction.
These measures will reduce Coinbase’s footprint somewhat, but may also prove to be ineffective over time. In order to sustain the ever-increasing volume of bitcoin adoption, implementing channels and second layer solutions may prove necessary for Coinbase to remain viable, sooner rather than later.
What should Coinbase do to improve their transaction handling? Let us know in the comments.
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