SegWit and What it Means for Your Bitcoin
SegWit, or Segregated Witness, is a potential solution to a problem that has caused much debate in the Bitcoin community for a while. The idea behind SegWit is that there was a scaling limit to Bitcoin that would always prevent it from having more than a certain amount of transactions per minute. Right now, only 1 megabyte worth of transactions can be executed every 10 minutes and this is creating a backlog. As more users show interest in Bitcoin, this popularity tends to work as a double-edged sword resulting in delays in the system. It also makes it entirely implausible to implement systems that use micro payments or anything of the sort.
Bitcoin Improvement Proposals
The only way to solve it is by increasing the size of the block or finding a way to speed up the transactions. SegWit was originally introduced as part of BIP (Bitcoin Improvement Proposal) 148 to speed up the transactions by making checking of signatures more efficient. There have been constant disagreements over how to handle these issues and that is what has brought us to this point.
Lots of people in the world are watching this play out, as this is seen as the big test of the viability of Bitcoin in the future. The whole point of Bitcoin is its decentralization and this is one of the first cases where decentralized decision-making will occur. If things do go well, this will be a strong signal for the survival of cryptocurrencies in general, and will likely lead to a massive rally in the price on CEX.IO.
BIP 141 was the original attempt to push SegWit through, but it hasn’t received the 95% of votes from miners that are required to properly engage the change. The miners can signal their support by setting a bit in the version field of the blocks they mine to signal their willingness to participate in the change.
BIP 148 was introduced in March of 2017 as a way to handle the speed problem. It was essentially a signal that because no decision had been made, then a fork was necessary to honor the wishes of all the owners of Bitcoin.
Later on, in May, the idea of BIP 91 was introduced. It avoided all the politics of the problem by offering to both increase the block size and speed up the rate of transactions. What’s more, it won’t require the same 95% vote of confidence that BIP 141 did, and is therefore much more likely to pass. The hope is that this will help Bitcoin stabilize by taking away any worries about the future of the cryptocurrency. It may well work, although we will have to wait until July 30th to see whether it will be implemented or not.
What the Future Holds for Bitcoin
The big worry with SegWit is that complications could occur in the midst of a user activated soft fork (UASF). A UASF would essentially split the coin into two separate coins since some coins would have SegWit and some wouldn’t. No matter how well prepared a system is, something can always go wrong. This is why Bitcoin prices have been going through rapid fluctuations in the last little while, as you’ve probably noticed on CEX.IO. You can easily compare the prices simultaneously on many exchanges over our Buy-Bitcoin-Tool!
There are a few things that could happen between now and August 1st.
- BIP 91 could be implemented first, and no user activated soft fork will occur. BIP 91 would push through Segregated Witness and increase the block size at the same time, and already 66% of the last 144 blocks have “voted” in favor of it.
- Another possibility is that the fork occurs and something goes wrong, causing a total system shutdown. Finally, BIP 148 could be executed and the soft fork will go through, thus creating two separate coins.
No matter what, fluctuations in the price of the currency will likely continue for a week or so after August 1st as the risk is factored into the system and traders digest the new market dynamics. Any users of CEX.IO should not be alarmed if they see huge price changes over the next few weeks because this sort of volatility was expected and is not a sign of any structural problems with the trading platform.
The Situation Is Under Control
When SegWit is implemented, CEX.IO will be ready. They have already worked to develop a solution that will bring all their customers through this tricky time without problems. The possibility of a soft fork creates the issue of there being two different blockchains for Bitcoin.
Cex.io has been preparing for this potential issue, and they have worked hard to make sure that their users are protected. Coin-splitting services will be offered to all users who don’t know how to split their own coins. As long as they are deposited on CEX.IO, they can handle this issue for you. The result would be two new private keys and wallets for the users that have done so.
As mentioned before, fluctuations in the currency should be expected. However, Cex.io ensures that all options for bitcoin trading will be available to the users at any time. Cex.io will operate in full. The withdrawals and deposits won’t be suspended or disabled.
As you can see, Cex.io has taken considerable steps to make sure that all users are protected in any case. The good news is that this tumultuous period should be resolved in just a few weeks. These changes are necessary to bring everyone into an agreement on what the coin should and shouldn’t do.