As of early 24th August UTC, Bitcoin is now a Segregated Witness (SegWit) cryptocurrency. The major change occurred with a soft fork at block #481824 — eight years and almost eight months since Bitcoin’s birth. But what difference will it make?
SegWit “locked in” on the Bitcoin network on 8th August as miners signaled support, but actual activation only happened a few hours ago. Since it’s a soft fork, no-one is forced to update their software and non-SegWit transactions will still go through as normal.
How Does SegWit Improve Bitcoin?
First formally proposed in Hong Kong in 2015 by developer Peter Wuille, SegWit aims to solve a number of Bitcoin’s problematic issues.
— Pieter Wuille (@pwuille) August 24, 2017
The first is scaling: SegWit separates cryptographic signatures from transaction data and changes the way block size is calculated. This allows for more transactions per block, and a theoretical 2-4 MB of total transaction data. However the official transaction block size remains 1 MB, allowing backward-compatibility.
It also addresses Bitcoin’s “transaction malleability” issue, which allowed some transaction data elements to be altered after sending. Removing this ability means developers can build “second layer” services such as Lightning Network, which processes faster and smaller transactions and settles on the main blockchain at a later time.
Both these solutions hope to take Bitcoin to a much wider audience, allowing fast everyday consumer transactions and micropayments. Both these use-cases have stalled in recent times as blocks became full, slowing confirmations and pushing fees to $2 USD and higher.
Segregated Witness proponents also say it’ll enable further innovation, like Bitcoin-based smart contracts and decentralized exchanges between various cryptocurrencies.
— Max Keiser (@maxkeiser) August 24, 2017
Do I Have to Do Anything?
For now, nothing much will change for Bitcoin users on the front end. However software developers and service providers will need to upgrade to make the most of SegWit’s offerings.
Wallets and exchanges will need to update their software to accept the new transaction format. Coins saved at old-format, pre-SegWit addresses will still be spendable, even if left idle for years.
From there on, users will depend on these providers to build stable and secure platforms. Some have cautioned that separated signatures and second-layers all increase Bitcoin’s complexity, which could present security risks. There’s also the question of who may control those second layers, and users’ access to them.
Since most SegWit benefits are still at the proof-of-concept stage, it could be a while before we know for sure.
What’s your take on the activation? Let us know in the comments.
Images via Jon Southurst, SegWit.org