Bitcoin Fees Significantly Decline as SegWit Adoption Reaches 14.5%

Within the past week, the percentage of Segregated Witness (SegWit)-enabled transactions in the Bitcoin network has increased from 9 percent to 14.45 percent, decreasing Bitcoin transaction fees, the size of the Bitcoin mempool, and blocks.

In June, prior to the integration of SegWit, the Bitcoin Core development team’s scaling and transaction malleability solution, the size of the Bitcoin mempool remained at over 150 million bytes. Such high level of blockchain congestion and large amount of unconfirmed transactions led to a significant increase in transaction fees.

Since then, as Bitcoin wallet platforms, exchanges, and users continued to adopt SegWit, the size of the Bitcoin mempool dropped from 150 million to 6 million bytes. The average Bitcoin block size also decreased from 1MB to 0.84.

SegWit is a scaling solution that provides more capacity to the Bitcoin network and blockchain by reducing the size of Bitcoin transactions. Unlike a hard Bitcoin block size cap, SegWit scales the Bitcoin blockchain network through user and business adoption. As the transaction percentage of SegWit-enabled payments increase beyond 50 percent, SegWit will allow the average Bitcoin block size to decrease even further, creating a more flexible and scalable Bitcoin ecosystem.

In the past few days, leading Bitcoin wallet platforms such as Blockchain have been recommending an average fee of $0.06 for median transactions, ot 10 satoshis per byte. In June, Blockchain recommended users to attach 400 satoshis per byte fees. Through that metric alone, it is evident that SegWit has had a significant impact on Bitcoin’s short and mid-term scalability.

In the long-term, SegWit will not be sufficient to completely scale the Bitcoin network. Hence, Bitcoin developers and the open-source development community are exploring innovative solutions, both on-chain and second-layer infrastructures, to provide an efficient network for transaction settlement. Ethereum is also taking a similar approach, developing solutions like Plasma that technically function like SegWit; removing unnecessary information and providing more privacy.

The recent surge in the adoption rate of SegWit can be attributed to the integration of SegWit by ShapeShift, one of the most widely utilized cryptocurrency exchanges that accounts for around 3 percent of Bitcoin transactions. As more platforms such as Blockchain and Coinbase integrate SegWit, the size of Bitcoin transactions will decline and eventually, lead to less fees for users to handle.

In August, leading Bitcoin hardware wallet manufacturer Ledger revealed that SegWit will result in around 35 percent reduction in fees for Bitcoin users, due to its mechanism that enables service providers like Ledger to reduce the transaction signature verification period.

“Segwit introduces the concept of block weight which changes the way the transaction size is computed by splitting the signatures in a different area — you can typically save 35% of the fee paid when sending a transaction immediately. When computing a Segwit signature, the previous transactions do not need to be processed by the device, and each input is only processed once during the signature process, leading up to a 60% time optimization in the signature process.”

It is entirely possible that SegWit could reduce Bitcoin fees above the 35 percent mark, if the adoption rate surpasses 50 percent.

Image Credit: Jonathan Pincas, For commercial use

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The future of Bitcoin development has taken an interesting turn in the past 24, as the Bitcoin Core developers and close to 80% of the network mining power – read: pool operators – have agreed on hard forking Bitcoin. Such a magnanimous event is a world’s first for the bitcoin ecosystem; a shard forking has been out of the question up until now. But what will this agreement do for Bitcoin Classic? Such an agreement would prevent this alternative solution from reaching its activation point.

Also read: Bitcoin Price Surpasses US$455; Moving Towards US$500

Bitcoin Core Devs And Chinese Mining Pools Agree

While a solution to the seemingly infinite Bitcoin block size debate is very positive for the future of bitcoin, there are are always two sides to a story. In this case, it looks like the Bitcoin Core developers have managed to sway the minds of Chinese mining pools, which represent close to 80% of the total Bitcoin mining power.

Up until this point, a hard fork in the future of Bitcoin development would have been out of the question. Neither the Chinese mining pool operators nor the Bitcoin Core developers were too keen on going down this road, as hard forking Bitcoin proves to be quite the challenge, and brings a lot of risks to the table.

But for some reason, Bitcoin Core developers have changed their mind and taken a similar approach to the solution presented by the Bitcoin Classic team. There is one major difference between the two, though, as Bitcoin Classic wanted to fork hard Bitcoin sooner rather than later. It is impossible to say whether or not their solution will effectively work out properly, but it certainly has sparked the efforts by Bitcoin Core.

Some people might even argue how Bitcoin Classic is indirectly responsible for the Bitcoin Core developers to get their act together. There will be people who will refute such a statement, but the similarities between both ideas can not be denied so easily. Regardless of how things will play out eventually, Bitcoin is in line for a hard fork at some stage.

Granted, various mining pools had outspoken a preference for hard forking Bitcoin over implementing Segregated Witness. But even that decision has changed, as the Chinese pools are now on board with implementing Segregated Witness before the hard fork is set to occur several months later. Something has changed the minds of a lot of people, and it seems unlikely a few presentations are the cause of this mind shift.

Deliberate Attempt To Disrupt Bitcoin Classic Activation Threshold?

With so much support for the new Bitcoin Core proposal – in theory, at least – Bitcoin Classic supporters might find themselves in a bit of a pickle very soon. One of the major interesting points about this development solution was how a certain amount of mining power needs to convert to Bitcoin Classic to activate the block size increase “threshold”.

If the Bitcoin Classic solution can not be adopted by the majority of the Bitcoin network, this solution will eventually die out as Bitcoin Core will soft fork the block size increase through Segregated Witness. On paper, it comes down to who can reach majority consensus first before April of 2016, heralding an exciting few weeks for Bitcoin as a whole.

In the end, Bitcoin Classic seems to have spurred a different breed of development into the minds of Bitcoin core developers. It is also the very first time Chinese mining pools and developers seem to agree on something as contentious as a hard fork solution. Whether these are signs of maturity or more politics, is unknown at this time, but this situation sets an interesting precedent for sure.

Source: NewsBTC

Bitcoin network may be eventually heading towards the hard fork even after the Bitcoin Roundtable community disagreed with the idea of creating a hard fork of blockchain. According to the community, there is a possibility of the hard fork creating two separate blockchains that do not communicate with each other. In such circumstances, the whole bitcoin network can be segmented into two versions, one that works and another that doesn’t.

The prolonged bitcoin debate has not paved the way for any concrete solutions towards increasing the block size. Many proposals so far have been shot down by one or more powerful members of the community. The latest proposal to be shot down was the Bitcoin Classic. Bitcoin Classic had proposed a hard fork to increase the block size from the existing 1 MB to 2 MB. Initially, it received support from various quarters until the Bitcoin Roundtable decided that it will not consent hard-forking bitcoin network due to potential risks involved. According to the Bitcoin Roundtable – a community of bitcoin miners, mining pools, wallet providers, exchanges and other bitcoin-based businesses, the hard fork can result in two different blockchain versions that are incompatible with each other. It may cause huge losses to bitcoin users on the network.

In the previous Bitcoin Roundtable meeting, a set of 5 key points for creating an effective bitcoin future roadmap was announced. Those key points called for an increased co-operation between Bitcoin developers and Bitcoin Roundtable, making subtle changes to the blockchain without creating a hard fork and any BIP requiring hard fork has to be introduced only after a consensus is reached between the developers and Bitcoin RoundTable.

Bitcoin Roundtable May Have the Answer

However, the social media today is flooded with updates from an ongoing Bitcoin Roundtable meeting which is turning out to be completely different from the previous one. According to real-time tweets and Reddit updates, the “Bitcoin Community” made of less than 1 percent to total bitcoin users in the world has decided to implement a hard fork after all. The updates state that this Bitcoin Roundtable meeting has few Bitcoin Core developers present as well and as of now, there is an unofficial consensus to implement SegWit – Segregated Witness soft fork followed by a hard fork in the coming months. The Segregated Witness soft-fork is considered to be an immediate solution to address the block size issue while fixing bitcoin malleability problems. The soft-fork also presents fewer risks compared to the alternative hard fork in the immediate future.

The present roadmap on the drawing board calls for a Bitcoin Classic like hard fork after three months, which will come into effect after a year. The current roadmap under construction aligns with few key points put forth by the Bitcoin Roundtable in its previous meeting. The community is paying attention towards the implementation of soft fork over earlier hard fork proposals and there is ample time before a hard fork is implemented, giving enough time for bitcoin miners to analyze, test and improve the codes before running them on production machines.

The broad Bitcoin community can’t help but feel that the Chinese bitcoin miners are holding Core developers at ransom and dictating their terms instead of letting developers take care of the technical end of the growing alternate global monetary system. But if this means, there will be a solution that can prevent the collapse of Bitcoin network, then it is welcome by all means. After all, people can have only so much patience and the block size debate has gone on for too long without consensus.

Ref: Bitcoin Core- Segregated Witness Benefits | Reddit Updates |@Excellion on Twitter 

A new announcement was made by the Bitcoin Core developers, detailing how they are progressing with the Segregated Witness implementation. Some fundamental issues need to be addressed with the current proposal, and Jeff Garzik wrote a lengthy post on how the team is planning to discuss these topics. But the bigger question is: how will the Bitcoin community move forward from here on out?

Addressing Segregated Witness Key Issues

Even though soft forking Bitcoin to implement Segregated Witness is the safer option compared to forcing a hard fork, there are still some unresolved issues regarding this proposal. Several changes would have to be made to Bitcoin’s source code at the core level, which could affect other features provided by the popular digital currency.

Keeping in mind how the transaction aspect of Bitcoin concerns companies, payment processors, miners, and exchanges, the development of Segregated Witness should not be rushed, but properly executed. Some people expect to see the Bitcoin Core upgrade completed by April of 2016, but that date may turn out to be very unrealistic.

Secondly, some people are worried about the lack of a roadmap once Segregated Witness is implemented. It is hard to predict the pace of production upgrades by various parties powering the Bitcoin ecosystem and renders any attempt at timelines completely moot. Future changes will be coming to Segregated Witness, but the solution will not act as a blocker for other network upgrades by any means.

While the differences between soft forking and hard forking Bitcoin are clear to most people, the primary goal is to make Bitcoin network upgrades as smooth as possible for all users. Human nature makes us favor a solution that is safe and easy to apply, neither of which would be provided by hard forking Bitcoin. However, it remains up to the community members to weigh in on this discussion.

One thing to keep in mind when a hard fork is released is how a rollback of the blockchain is possible, but not favorable. Rolling back the Bitcoin blockchain is a last-resort effort that should be avoided at all costs. Executing this option could result in coins getting lost, and cause unnecessary friction among the Bitcoin community members.

Moving Forward In 2016 And Beyond

With all of this information at our disposal, the question remains as to how we will move forward as a community. Jeff Garzik has listed several recommendations to stabilize the block size debate, and end all of the talking. After all, the time wasted on politics could be used to develop solutions, which is what we need right now.

While the community and developers of both proposals seem to be in agreement on increasing the Bitcoin block size to 2 MB, there is still no date for making this change happen. Pinning a time to get things moving along is key, and the news will have to be communicated properly.

Or to be more precise, several dates are needed, as the block size increase must be vetted on the testnet first. There are several implications due to this change, and users need to be aware of how they will be affected by a 2MB block size increase. Proper communication will be crucial in this regard, to avoid any further confusion.

As mentioned earlier, Segwit is not designed to be a roadblock for future Bitcoin network innovation. There is no need to make Segwit a priority even, as the Bitcoin Core developers are open to prioritizing other major network upgrades if the need arises. This will also prevent rushing the deployment of Segregated Witness, as this solution is a significant milestone for the Bitcoin ecosystem that needs to be tested thoroughly.

Regardless of how people want to look at things, Bitcoin is still a community project, and everyone should make their opinions be heard during these times. Working together on shared goals is a critical point of focus to make Bitcoin succeed in the years to come.

Source: Medium

Bitcoin Core has made significant progress over the past few weeks in creating a more viable atmosphere to communicate with the bitcoin community.

Core has successfully completed the launch of BitcoinCore.org to introduce updates of Bitcoin Core, the adoption rate of Bitcoin Improvement Proposals with a list of companies and their progress in integrating mechanisms such as Segregated Witness, which was proposed by Pieter Wuille at the Hong Kong Scaling Workshop in December, 2015. Core has also created a Twitter account to provide an official feed of Bitcoin Core and has set up a Slack chat group for bitcoin enthusiasts to arrange a variety of discussions.

To maintain the momentum of Core’s improvement on communicating with the community, Shapeshift CEO Erik Voorhees has suggested two proposals which could end the civil war between Bitcoin developers and the community.

Adam Back’s 2-4-8

Bitcoin Core developers and Onename co-founder Ryan Shea recently announced their plans to prepare for a hard fork which would put Adam Back’s 2-4-8 proposal into place alongside Segregated Witness.

“At the same time, it is important that we push for an increase that is as big as we can safely handle, and we believe that Adam Back’s 2–4–8 proposal that scales the block size to 4MB after 2 years and then to 8MB after 4 years is the plan of action that is the most ambitious while still being safe,” wrote Shea.

He further emphasized that by allowing non-fully-validating nodes to ignore half of the data, it would alleviate the pressure on nodes.

“In addition, it seems we can do even better in terms of performance by sticking with 2–4–8 but allowing non-fully-validating nodes to ignore approximately half of this data. This would be a big improvement that would alleviate the pressure that we’ll be putting on nodes by scaling the block size.”

Voorhees believes that Bitcoin Core developers should add Adam Back’s proposal to the roadmap and the estimated time to execute the hardfork. However, Core should establish firm dates of the implementation to help the network grow at a predictable rate.

“The time to add it to the roadmap is now, and the time to execute the HF should then, within reason, be up to Core’s stewardship. This needn’t interfere with, and is certainly not a replacement for, the much beloved SegWit.” he explained.

Censorship

Another major issue between which separated the bitcoin community was the censorship of neutral information on various Bitcoin Improvement proposals and block size debate. Although Bitcoin Core is not responsible for the censorship, Voorhees suggests the Core team to deliver a public apology for “allowing widespread mistrust to grow out of control.”

Over the past few months, the feud among bitcoin enthusiasts and developers in the community have reached its peak. However, Bitcoin Core attempts to relieve the tension of the community by engaging in various developments and initiatives to develop a friendlier environment for the network to scale. Bitcoin Core has already made significant improvements in their improvements and with Voorhees’ humble suggestions, Bitcoin Core could eliminate the civil war between the community and developers once and for all.

As if the Bitcoin community was not sick and tired of the ongoing block size debate just yet, it looks like the Chinese miners have come to a consensus of their own. The plan is to reject any forking of Bitcoin that does not gain 90% consensus or more while still favoring a 2 MB block size increase. During a recent meeting between mining pool operators, various security concerns associated with Segregated Witness were raised. It looks like Bitcoin Classic is winning this “race”.

Also read: Coinify And Bitcoin Vietnam Partner To Launch Payment Processing Services

Chinese Mining Pool Operators Unite

The dabbling about the Bitcoin block size debate has gone on for far too long, and the Chinese mining pool operators seem to agree with that sentiment. As more time progresses without a clear decision and plan for the future of Bitcoin, the popular digital currency is looking some of its legitimacy that took years to build up.

January 23rd was the date on which representations from nearly all Chinese Bitcoin mining pools came together and exchanged their thoughts. In the end, it comes down to two simple requirements: the block size must be increased to 2 MB, and the solution – or fork – needs to gain support equal to at least 90% of Bitcoin’s mining capacity.

Both Bitcoin Core and Bitcoin Classic have different proposals on the table to achieve the 2MB block size increase, and both options have their own merits. Getting to a consensus of 90% or more could be a struggle for either solution, though, as the mining camp seems to be divided on that front. However, it seems like the decision has already been made – albeit not officially – but more on that in a bit.

Regardless of how people want to look at the current Bitcoin block size debate, it has become clear this is more of a political issue, rather than a technical concern. The community cannot come to a consensus, as the camps are quite divided around the world. By enforcing a 90% of mining capacity consensus – or better – the Chinese mining pool operators have taken a step that will prevent the creation of a fractured Bitcoin ecosystem in the future.

As one would come to expect, reaching that 90% consensus will be a different hurdle to overcome in due time. Despite a general agreement on increasing the block size to 2MB, there are still a fair few people who feel the current 1MB blocks are more than sufficient to handle the transaction volume. Sometimes, it is better to take preventive action than fixing an issue when it arises.

Segregated Witness Security Concerns

Setting these goals was not the only objective of this Chinese mining pool operators meeting. The topic of Bitcoin Core was discussed at length, and more particularly, the Segregated Witness solution. Even though this solution would allow developers to soft fork Bitcoin -which holds less risk than hard forking – some security concerns need to be addressed.

First of all, there is the issue of how Segregated Witness would result in an effective “usable” block size of 1.6MB, rather than 2MB. The remainder of this data will be used to store the “all-in-one signature transaction”, which can amount to 0.4MB. But that is not all, as the effective block size could be reduced to 1.3MB if 50% or more of transactions use Segregated Witness over the next 12 months. Needless to say, this is not the solution people are looking for, and will only keep the block size as close to the current 1MB size as possible.

Secondly, there is a lot of risk associated with implementing Segregated Witness, although it is of a different nature than worrying about people upgrading their clients in time. At its core – no pun intended – Segregated Witness requires various changes to be made to essential Bitcoin Core components. With the developers already catching up on a massive development backlog, there is too much risk involved in delivering a rushed solution.

Despite Bitcoin being around for over seven years now, the popular digital currency has a bit of a colored past when it comes to development. Back in 2010, a massive ValueOverflow bug lead to the generation of billions of bitcoins in one block. As a result, the price went down by quite a margin, and a repeat of that scenario needs to be avoided at all costs.

For now, the Chinese mining pools seem to be rejecting the Segregated Witness proposal in its current immature form. If Bitcoin Core developers can come up with a more streamlined and refined version of this concept, things might change. If that is not the case, it appears as if all of these Chinese mining pools will support Bitcoin Classic.

Source: Bitmex Blog