On August 9, the highly-anticipated Segregated Witness (SegWit) protocol upgrade to the Bitcoin blockchain was officially locked inwards on block 479,707. While at that topographic point is all the same a two-week waiting stream earlier SegWit volition travel fully activated, the lock-in way that all bitcoin mining operations direct keep to implement this update right away or else they volition direct keep to plough over upwards their bitcoin mining income going forward. The two-week waiting stream gives Bitcoin participants the fourth dimension to upgrade their systems to the novel software together with volition travel finished to a greater extent than or less August 22.
The motion of the Bitcoin community to implement SegWit, which likewise led to the difficult fork that created the novel altcoin bitcoin cash was welcome past times the bulk of the community every bit good every bit investors who witnessed the cost of bitcoin rally to novel all-time highs.
What Does the SegWit Implementation Mean for the Bitcoin Network?
SegWit's most prominent characteristic together with the fundamental argue why it was implemented to tackle Bitcoin's scalability challenges is that it increases the effective block size but does thence without increasing the block size limit. SegWit does that past times removing signature information inwards each block to increment the amount of transactions that tin travel processed. That way that the Bitcoin blockchain tin procedure to a greater extent than transactions per minute than it was able to before. Jimmy Song provides a useful analogy of signing checks together with putting them into boxes to illustrate the mechanics of SegWit:
"Remember how the signature is nigh fifty percentage of the transaction? SegWit cuts the checks inwards one-half together with sends everything but the signature to everyone that's accepting the old, smaller box. We post the larger boxes to everyone that's accepting the new, larger box. Given that the checks are one-half the size for the smaller boxes, nosotros tin gibe nigh double the number of checks inwards the smaller boxes, increasing throughput."
The SegWit protocol upgrade likewise provides several other improvements to the Bitcoin network.
Firstly, it eliminates the number of transaction malleability, which was the master argue why SegWit was genuinely commencement proposed dorsum inwards 2015. Transaction malleability refers to when a user changes the ID of a signed transaction earlier it is confirmed past times the network at which quest he or she could thence claim a transaction was made that never occurred. This is something that has been an number for bitcoin exchanges, including for the now defunct Mt.Gox exchange.
Secondly, SegWit allows for script versioning, which refers to the mightiness to brand additions together with updates to the code that are non-contentious. It does this past times adding a version number to futurity network adaptations. This volition let Bitcoin network participants to opt-in or opt-out of novel upgrades such every bit sidechains, the Lightning Network or Schnorr signatures without the direct chances of a difficult fork.
Thirdly, the Bitcoin blockchain likewise receives a safety boost inwards the degree of the pay-to-script-hash (P2SH), which increases the safety of multi-signature transactions through an upgrade of the cryptography used inwards Bitcoin's blockchain.
Additionally, linear scaling of sighash operations is existence introduced, which augments the trend inwards which transactions signatures are computed thence that each byte simply needs to travel hashed twice instead of 4 times. This allows for ameliorate scaling opportunities without jeopardizing security.
Once SegWit activates, the Bitcoin evolution community volition motion onto privacy-enhancing upgrades such every bit MAST. Litecoin, which has already implemented the SegWit upgrade, is currently pursuing MAST, which stands for 'Merkelized Abstract Syntax Trees,' together with volition improve privacy, scalability together with transaction speeds.
The Next Hurdle Comes inwards November
While the bulk of the Bitcoin community is rejoicing at the (so far) successful implementation of SegWit together with a fresh all-time high inwards the price of bitcoin, the cryptocurrency is non alone out of the woods yet.
As business office of the so-called New York Agreement (also known every bit SegWit2x), which was signed past times a large number of bitcoin startups together with mining operations, a contentious proposed difficult fork that would increment the block size of the Bitcoin network from i megabyte to 2 megabytes is scheduled for piece of cake November.
However, for this implementation to occur, the vast bulk of miners would direct keep to concur to this together with mine the larger blocks. So far, it seems that this proposed difficult fork looks rather unlikely every bit it is non gaining plenty back upwards from network participants.
What Does This Mean for Bitcoin Users?
For now, an activation of SegWit volition probable hateful faster together with cheaper bitcoin transactions inwards the close future. However, farther scaling solutions volition travel needed if the Bitcoin network continues to grow at the measurement it has inwards 2017.
SegWit volition likewise most probable hateful novel payment channels such every bit the Lightning Network together with sidechains, which could improve the "translation friendliness" of bitcoin. In the distant future, i time SegWit is activated, nosotros volition run into interoperability betwixt cryptocurrencies alongside SegWit through so-called 'atomic swaps.'
In terms of the day-to-day purpose of bitcoin for online payments, remittances together with every bit an investment, zilch notable volition modify inwards the close future.
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