Segregated Witness or SegWit, a proposed upgrade to the Bitcoin protocol, could become the new iteration of the Bitcoin code if 95 percent of the hash power adopts the solution. Miner-adoption sits just shy of 25 percent currently, though, as users mull other options, like Bitcoin Unlimited or Bitcoin Classic, in Bitcoin’s “Civil War,” as it’s been called.
Privacy-enhancing features of the SegWit code, if adopted, could be a boon for Bitcoin prices in 2017, suggest proponents of the ‘block size’ solution.
Bitcoin investor and serial entrepreneur Trace Mayer stresses how SegWit’s code could help Bitcoin achieve what many participants viewed as the project’s earliest goals: financial privacy.
“Segwit is extremely important for many technical reasons including fixing transaction malleability which will pave the way for increased privacy by enabling Bitcoin to go dark with transactions off-chain and encrypted,” the longtime crypto-entrepreneur notes.
Mr. Mayer believes increased privacy in Bitcoin could fuel the first cryptocurrency prices in 2017. There’s some precedent for the notion. The cryptocurrency Monero gained momentum and market capitalization in 2016 based on its privacy-features; namely, it’s proof of work anonymous consensus method.
“Being able to do more things than less is desirable because having more options makes one more wealthy than having fewer options,” Mr. Mayer submits. “Consequently, having the ability, but not the requirement, to go dark with Bitcoin makes it more valuable because it is one additional property that enables more use cases which can stimulate additional demand.”
Since SegWit is open source, other altcoins are already adopting the soft fork, such as Litecoin, which was long considered the “digital silver” to Bitcoin’s “digital gold” in the nascent days of cryptocurrency technology. Litecoin since fallen out of favor in terms of overall use with the historically low sentiment.
Litecoin could soon find renewed interest as it will implement SegWit via a soft fork. SegWit is likely to activate on Litecoin because there is less contention among its smaller user-base.
Proponents argue the SegWit soft fork solves many technical problems facing the Bitcoin ecosystem, such as transaction malleability, off-chain transactions, encryption, and privacy.
They suggest that a soft fork is a more diplomatic approach to making changes to the Bitcoin protocol than the more radical hard fork, which they view as riskier despite all the same benefits.
A long list of recognized Bitcoin companies have pledged support for SegWit adoption, including Airbitz, BitGo,Blockchain.info, BTCC, Mycelium, and others.
Mr. Mayer, whose early investments into the bitcoin space include BitPay, Armory, Kraken and others, sees SegWit as a monumental innovation important for the future of Bitcoin.
“The most pressing needs in Bitcoin today are scalability, fungibility and anonymity,” Mr. Mayer said. “Segwit is a highly tested tremendous technological innovation and development that addresses and improves on all three of these core issues. Therefore, we can see who wants Bitcoin to be successful and the price to rise by who is helping Segwit to activate.”
Charlie Lee, Litecoin founder/developer and Coinbase Director of Engineering, has adopted the technology for Litecoin. Mr. Mayer believes this signals that the experts believe Segwit to be the right choice to put an end to the Bitcoin block size debate.
“Segwit is being rolled out in Litecoin and other networks enabling cross-blockchain atomic swaps,” Mr. Mayer explains. “This greatly increases privacy and fungibility by helping the cryptocurrency markets and economies to go dark to observers.”
Atomic swaps, also known as atomic cross-chain trading, is an old idea in cryptocurrency and aligns with the use-patterns of the numerous participants who currently speculate on a portfolio of cryptocurrency, sometimes merely arbitraging price movements between the different chains.
Atomic trading could also involve to cryptocurrency users wanting to simply swap for different currencies – say Bitcoin for Litecoin.
Despite the fact that “atomic swaps” might sound a bit complex, SegWit’s code is elegant, according to proponents.
“Segwit is very easy to understand and extremely concise,” said Mr. Mayer, one of the earliest investors and proponents of Bitcoin. “This makes it a very clean soft fork upgrade.”
Correction: The previous version stated Litecoin would hard fork to SegWit. This has been corrected to reflect Litecoin will implement a soft fork. Further, Charlie Lee’s position with Coinbase is the Director of Engineering.
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Last modified: March 4, 2021 4:53 PM