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SegWit and SegWit2x

17:14 18/12/2017

As any other technology, Bitcoin has always had flaws and disadvantages. Many proposals were made to fix them. One of the proposals is called SegWit, which means Segregated Witness. It was created by a team of enthusiasts that intends to implement this update to Bitcoin Core, so far the most popular Bitcoin operational software.

 

There are several issues SegWit is aimed to solve. The first one is a so-called transaction malleability. Even though it does not do so much harm to the community members, it precludes some relevant changes to be provided. Also, several exploit cases showed this flaw has to be fixed as soon as possible.

 

Another important problem is the Bitcoin network scalability. SegWit might increase bitcoin’s block size, thus making the transaction processing capacity much higher. After all, additional on-chain projects cannot be started without the block structure got fixed.

 

Let’s examine scalability in more details. As it comes from the name, blockchain technology is based on the sequence of blocks which form a chain. This chain is limited in size, and this is a crucial problem for the distributed ledger. The more transactions are performed, the higher the requirements for the network capacity.

 

What makes things worse is that the limit of the block size cannot be changed. The users who try to send their funds have to wait for several days or even more, not to mention that the network is constantly growing.

 

SegWit was designed to resolve these issues in the following ways:

 

  • The basic limit of the block size is changed up to 4000 Kb. However, according to some experts, this full value will rarely be used.
  • Moving transaction data outside blockchain allows SegWit-based technologies to carry more protocols saving blockchain space. Namely, we are talking about the Lightning Network.

 

Of course, new technologies always cause a negative reaction. Many people are sure that SegWit is not a good solution because it is unable to solve the core of the issue. The number of transactions increases along with the community, so the very same problem may arise again at some point.

 

Others claim that the development team might have personal interest in implementing SegWit, as some of its members are employed in the Blockstream company that creates sidechain solutions (such as the Lightning Network). However, there are no evidence on this point.

 

Another argument concerns a fundamental blockchain property - decentralization. Scaling the network with multiple levels of top protocols requires trust. Third parties are what Bitcoin tries to avoid at all costs. The main problem here is a sidechain working principle. No sidechain is possible without delegating responsibility. Most of sidechain solutions are proposed by third parties, and time saving here comes at the cost of trust.

 

SegWit2x as another solution

 

SegWit2x is the second stage of the New York Agreement that was reached on May 23, 2017. The main idea of this update was a block size expansion up to 2Mb.

 

Even though SegWit has managed to fix some mistakes, the problem of the small block size has not been resolved. On the dawn of Bitcoin, 1Mb was more than enough to support the network, but things changed. The size of blocks defines a fee amount and the time needed to validate a transaction. This is absolutely inconvenient in some cases.

 

SegWit2x supporting community

 

Some time after the New York Agreement a lot of the network users changed their points of view. Half of year earlier participants agreed on hard fork, but today this number is significantly smaller. The main reason for such a turnover is the fear of a replay attack and an undefined status of both blockchains after the fork.

 

Today SegWit2x is not considered as an option anymore. Since many questions about security, splitting, replay protection and other issues have arisen, the development team decided to recall their plans. Yet, all the mentioned problems are present and seek appropriate solutions. There is a chance that SegWit2x will be implemented later, but no one knows it for sure.

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