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Coinbase, GDAX, Bitfinex Implement SegWit
Biggest cryptocurrency exchanges and wallet service providers have announced that they have implemented Segregated Witness (SegWit) protocols. This is a very crucial development for SegWit because Coinbase and Golden Digital Asset Exchange (GDAX) is Coinbase’s professional trading platform has more than $1.6 billion crypto exchange and has the largest base in terms of number of users. On questioning the slow or delayed adoption of SegWit, ‘Dan Romero’ GM at Coinbase mentioned said,
“We store billions of dollars worth of bitcoin on behalf of customers and any change to our infrastructure is done with significant planning and consideration for the security and stability of our platform.”
Joining the SegWit bandwagon is Bitfinex, during its press release Bitfinex said,
“Today Bitfinex is delighted to announce support for bitcoin deposit and withdrawals using P2SH Segregated Witness (SegWit) addresses. The SegWit implementation means Bitfinex users can benefit from lower BTC withdrawal fees (approximately 15%) and improved processing times on transactions across the Bitcoin network.”
Bitfinex noted in the announcement that SegWit is now implemented for Bitcoin only, and not for Bitcoin Cash. This is an important distinction, as any Bitcoin Cash sent to a Bitfinex SegWit address will be lost. The Bitfinex platform processes more than $1 billion in daily trading volume, and is one of the largest exchanges by volume online.
What is SegWit and why is it crucial?
Updating Bitcoin has been a major concern for people in the community as popularity of the cryptocurrency has outpaced its design. The original Bitcoin Blockchain can only handle between two and seven transactions per second. With bitcoin's meteoric rise, there is a big spike in the number of purchases around the world. As a result the system became severely strained. SegWit is the solution to the Bitcoin’s scalability issue. Block sizes on the Bitcoin Blockchain are limited to 1 MB, which has caused significant issues over last few months as user adoption rates continues to increase, with transaction fees inflating to over $35 and transactions taking days to process.
Blockchain forks are when one chain diverges to become two. A hard fork is a change that is so radical that it makes the new chain incompatible with the old chain. Soft forks change the code on the Blockchain but remain compatible with the old chain. SegWit on the other hand is a soft fork. The SegWit update was released by the Bitcoin Core team in August 1, 2017 and was designed to solve the scalability problem by increasing the block size to 8 MB, thereby speeding up transaction processing rates and lowering fees from $35 to $1.
It has slowly gained traction with cryptocurrency advocates looking to increase transaction times and decrease the fees associated with buying and selling bitcoin. It's optional for exchanges to use the update. At present, only around 14% of all bitcoin transactions use the SegWit update. But once 95% of all transactions on the Bitcoin network use SegWit, it will become the only edition of Bitcoin available. Until then though, Bitcoin is being exchanged using two different but compatible sets of code.
Bitfinex and Coinbase, together with Coinbase’s GDAX exchange, account for almost 10% of all international Bitcoin trades, with both platforms ranked in the top 10 exchanges worldwide. Although many wallet solutions already support SegWit, the integration of the solution by two of the biggest industry players is likely to spark increased adoption of the workaround. Their support could make SegWit the default bitcoin code Coinbase's participation is a big deal for the SegWit community, which has struggled to gain the industry support necessary to implement updates to bitcoin across the network. By adopting SegWit, exchanges are addressing three of the biggest crypto-enthusiast concerns - transaction fees, transaction speed, and total network capacity.