The Bitcoin scaling crisis in the preceding few months caused fees to surpass $100 per transaction creating worry that the currency would never be able to scale to become a useful medium of exchange. However fees have started dropping and are now well below $1 dollar this is partly due to the drop in price as well as the slow but steady implementation of SegWit.
Two of the biggest exchanges, Coinbase and Bitfinex have both announced the implementation of Segwit to offer cheaper and faster transactions for its customers.The Bitcoin exchange platforms rolled out a bitcoin network update called SegWit, which means faster transaction times and lower fees; about 15%, according to the announcement.
The announcement was made by both cryptocurrency platforms on Twitter and with a blog post. Coinbase wrote:
“Our engineering team has finished testing of SegWit for Bitcoin on Coinbase. We will be starting a phased launch to customers over the next few days and are targeting a 100% launch to all customers by mid next week.”
It seems that Coinbase was already working to add this improvement since December, when the vice president and general manager at Coinbase Dan Romero, informed the exchange was working to adopt the SegWit protocol in 2018.
Bitfinex has also announced the SegWit upgrade Bitfinex CTO Paolo Ardoino, commented:
“SegWit provides not only an immediate benefit for users but also a foundation for future Bitcoin development. By supporting SegWit addresses, Bitfinex is tackling three of the biggest crypto-enthusiast concerns: transaction fees, transaction speeds and total network capacity.”
What is Segregated Witness?
SegWit is a protocol improvement that facilitates scaling on chain. With SegWit, block size limits increase by separating the signature data from the transaction data. SegWit is also a prerequisite a to the second layer scaling solutions such as the Lightning Network. SegWit has been available since August; however, many exchanges took their time to implement the upgrade.
Since transactions are smaller, individual payments cost less. As more users start sending payments from SegWit addresses, we should start seeing an overall increase in the transaction capacity of the network. As soon as the overall capacity increases the congestion will go down leading to a decrease in the fees cost.