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Segwit Implication for Bitcoin, Its Current Status, and Impact

Segwit Implication for Bitcoin, Its Current Status, and Impact

SegWit refers to Segregated Witness, and it was made possible by the core developers of Bitcoin. The adoption of SegWit comes with implications that will have a noticeable impact on bitcoin transactions. The team of Eric Lombrozo, Pieter Wuille and Johnson Lau is credited with the innovation.

SegWit is an innovation that expedites blockchain transactions by eliminating the block size limit. In this wise, signature data are removed from each transaction so that capacity is provided for more transactions to be added to the chain.

The working methodology of blockchain will be altered with the introduction of SegWit such that witness data or transaction signatures are removed as transaction ids get generated.

The Timeline for Upgrade

The deadline for the upgrade has been fixed for August 2017 and it is expected that at least 95% of the blockchain will be enhanced to include a bit 1 data.

The bit 1 data is the icon that indicates that an individual miner is upgrade-optimized and ready for SegWit. Following this prompt, it will be possible for SegWit to be activated on a Blockchain-wide basis.

As at mid-July 2017, 88 percent or 22 out of 25 blocks were ready for the change as shown by Twitter users. Resistance to change is normal with people and systems but change is inevitable.

SegWit2x has been proposed to go live after 80% adoption by miners as against 95% for SegWit. Now, there are really no differences between SegWit and segWit2x, as both contain the same commands and commas. The only difference is that both are using different deadlines.

Early Concerns and Change to the Status Quo

The debates on adopting the SegWit has been on since 2015 and the proposals on how to scale bitcoin started pouring in ever since. In the midst of political and technical apprehensions, miners had every reason to foot drag on the innovation.

The agreement that broke the ice was to test the proposition on Litecoin, which has emerged as the fourth largest Bitcoin platform by value. Litecoin has witnessed a triple-fold increase in its value since SegWit was unfolded for its operations.

Miners had the chance to test their concerns using this platform but the value addition they encountered gave rise to excitement and acceptance.

A Leap to Efficiency

Apart from serving as a malleability fix, SegWit also has given blockchain a configuration makeover.

The pre-image generation for the hash algorithm has also been modified to follow a linear scale that results in faster transaction processing. The midstates for each hash will take on a more efficient pace and outlook.

How Did SegWit Originate?

The idea that gave rise to SegWit in its original form was to eliminate the possibility of hacking or compromising transactions. This will shut the window to inexistent or falsified transactions.

The vulnerability in the old blockchain methodology was that using sophisticated hacks, signature data could be altered to produce a valid transaction id. This meant that from the original transaction, clones could be made, and they will appear valid and pass system authentication.

As the malleability bug gets blocked with the new track that eliminates transaction signatures, SegWit makes it impossible for transaction ids to be altered by an impostor.

Impact on Existing Systems

Going forward, the old software for bitcoin will not become obsolete immediately. The configuration of the new platform was done to run seamlessly with the old.

 In other words, compatibility will be maintained on a soft fork basis. Running on as a soft fork means that users on the old software will not be locked out of the bitcoin platform.

In the Long Run

It is expected that users of the old Blockchain software will be able to complete their upgrade conveniently over a period of time.

Setting a time frame to avoid miner lockout does not appear in the works for now since compatibility with SegWit has been enabled.

The Bitcoin Price Run

Earlier in July 2017, there were apprehensions that the SegWit era could force a split in the Blockchain governance.

The concerns led to wave of selling, and the price crashed to below the $2000 mark over the weekend of 14th July 2017.  As at 18th July 2017, the early trades show a spike beyond the $2200 mark.

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