Throughout the past week, Coinbase, the global cryptocurrency market’s largest brokerage and wallet platform valued at $1.6 billion, has been heavily criticized for the absence of Segregated Witness (SegWit) and transaction batching on its platform.
Jameson Lopp, the lead engineer and architect at multi-signature blockchain security service provider BitGo, stated:
“Low hanging fruit for Coinbase: offers users high, medium, and low priority fee choice when sending. Batch transactions together every X minutes.
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.”
Lopp added that several major cryptocurrency exchanges are currently using batching IIRC and SegWit to reduce transaction fees and relieve the Bitcoin blockchain network from congestion. “Bitstamp, HitBTC, Kraken, LocalBitcoins, and QuadrigaCX all use both SegWit and batching IIRC,” Lopp noted.
According to the bitcoin and market data provided by Blockchain, the second most popular wallet platform in the cryptocurrency market, the size of the bitcoin mempool remains above 121 million bytes, with blocks averaging at 1.05MB. But, the daily transaction volume of bitcoin is actually down from over 450,000 transactions to 225,800 transactions.
The Bitcoin blockchain network is demonstrating a similar level of congestion as a few weeks ago, when the network processed nearly twice as much as the current daily transaction volume.
On the Bitcoin network, the mempool operates as the holding area for unconfirmed transactions. Miners have to pick up transactions from the mempool to verify and confirm payments, and send the transactions to the main Bitcoin blockchain.
If the Bitcoin blockchain network’s mempool is congested, it is difficult for the miners to process transactions in a speedy manner, decreasing the usability, efficiency, and accessibility of bitcoin as a digital currency and a medium of exchange.
Lopp and other renowned experts in the cryptocurrency sector have criticized major businesses like Coinbase and Blockchain for not implementing dynamic fee systems, SegWit, and batching to reduce fees for their customers and for the entire Bitcoin network. Large-scale platforms like Coinbase process more transactions than 70 percent of the businesses in the industry combined. As such, the impact Coinbase has on the ecosystem of bitcoin is truly immense.
In response to the criticism, Brian Armstrong, the CEO at Coinbase, announced that the company will add SegWit, batching transactions, and other innovative solutions to improve the backlog of transactions on the Bitcoin network. He stated:
“Coinbase is working on batching transactions, SegWit, and a number of other strategies to improve transaction backlog. Thanks for bearing with us.”
Whether the integration of SegWit and batching transactions can drastically improve the scalability of bitcoin and reduce congestion on the Bitcoin network by large margins remain unclear. But, the overall stance of the bitcoin community as of now is to have SegWit and batching completed first, and discuss on-chain scaling and block size increase after, if SegWit and batching are not sufficient.
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Last modified: May 20, 2020 9:10 PM UTC