People who are hodling (nope, it is not a typo) Bitcoin will surely have noticed what volatility the market is experiencing and maybe it is due to the upcoming Segwit activation that will take place on August 1st.
Bitcoin, in fact, experienced an important drop in prices: something about 40% from its all-time high (almost 3000$) reached only two months ago. Many of you may have already heard about the so-called block size debate or a discussion within the bitcoin community on how to solve the most problematic issue of the Bitcoin blockchain: scalability.
Each Bitcoin block takes about 10 minutes to be mined and added to the blockchain, but at the moment transactions are taking way longer than 10 minutes to be confirmed because of the increasing number of transactions.
The reason for this slowness is the Bitcoin’s block size limited to 1MB. This means that each block can support only up to 2000 transactions.
SegWit, or Segregated Witness, might be the solution to this problem, as it would increase the number of transactions that can be handled by each block.
Also, Segwit2x will be able to add 1 MB to the block size, so doubling the block size, one block will be able to support twice transactions, while Segwit2x will allow fitting more than 8000 transactions.
SegWit will be implemented on August 1s, while it is not sure yet if Segwit2x will take place too.
But this upgrade will require requires a hard fork.
The hard fork will cause the creation of a new bitcoin blockchain, as it happened back in 2016 with the Ethereum split that created Ethereum Classic.
So you can now better understand why investors are so concerned about Segwit2x and are selling their digital currencies, causing a huge drop in prices.
SegWit2x activation pros
Even if the existence of two different chains might create confusion, there are a few reasons because we might don’t have to worry about.
- Segwit improves Bitcoin as more transactions can be handled in less time and with lower fees: Improving block size, the blockchain can support more transactions in less time and so the fees can be decreased;
- Ethereum survived the DAO fork, and that is the greatest example of why Bitcoin can do the same, increasing also its price: Back at the DAO time, Ethereum’s value was about $10 while now its price is about $200 and it reached an all-time high of $400 a few months ago.
- SegWit has already been tested on Litecoin with no issues: Litecoin activated SegWit back on May 10th, 2017 at block 1201536. The upgrade was proposed by the Bitcoin core development team and it was implemented through a soft fork.
Remained in Bitcoin’s shadow for years with a price of about $5, Litecoin’s rate surged thanks to SegWit, reaching almost $50 and is trading around $37 at press time.