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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A few days ago, the mining pool ran into an unexpected error. A block larger than 1mb in size was generated due to a bug in the latest Bitcoin Unlimited client code. The situation was rectified quickly, yet sparked a lot of questions. The BU unlimited took the time to write up an official explanation of this event, although it should not repeat itself moving forward. It is good to see developers take this problem seriously, even though no major damage has been done.

Two days ago, the Bitcoin community was in a state of panic. Allegations were circulating on Reddit regarding how Bitcoin Unlimited attempted to hard fork the blockchain. It turns out that was not the case, even though it could have been a possible outcome. Due to a bug in the latest Bitcoin Unlimited client, a block larger than 1mb in size hit the network. Such an event could have catastrophic events, yet the damage was contained. Unfortunately, the mining pool lost over 10 bitcoin in the process.

An Explanation of the Bitcoin Unlimited Incident

As it turns out, a bug was found in the Bitcoin Unlimited GitHub repository. This bug is the exact same that caused a bitcoin fork back in 2013. The bug changed the amount of space reserved in the coinbase transaction when a block is created. Considering how BU is all about scalability, it is important to ensure this feature behaves as expected. That was not the case, unfortunately, as blocks could be generated and exceed the node’s specific Maximum Generate size.

As a result, the mining pool stumbles upon a block that was too big in size. With a size of 1,000,023 byte, so it was rejected by the Bitcoin Core nodes on the network. Unlimited nodes marked it as an excessive block. Interestingly enough, the miners proceeded to generate new blocks, but not based on this “erroneous” block. Instead, they used the one that came before, as that was a valid one.

Unfortunately, some Bitcoin Unlimited nodes did accept this block, due to their larger Excessive block settings. Some of these nodes received a 24-hour ban by the Bitcoin Core nodes. The issue has been resolved by now, and all affected nodes are whitelisted once again. This has been a valuable lesson for the BU developers, and the latest client update prevent history from repeating itself.

For now, the BU developers plan to conduct an incident review. Once that is completed, they will publish additional details about changes to the development and testing process. Safely upgrading to larger blocks remains the number one priority, which means issues like these need to be avoided. Luckily, no real damage was done, and it is once again “safe’ to mine on the mining pool.

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Ever since the ZCash project launched, developers have been making various changes to the code base. Improvements are always a welcome development, as well as keeping an eye on new features. A new proposal on GitHub indicates the project may switch to Ethereum-style block timestamps shortly. Some cryptocurrency enthusiasts see this as a lack of innovation.

The launch of ZCash has been greeted with a lot of anticipation. Ever since that time, the price per ZEC has fallen, which is anything but surprising. Prices were heavily inflated during the first week, and now that mining rewards are ramping up, there is a larger supply of coins to sell. For miners, earning back an original investment is important, and they will sell coins as fast as they come in.

But it appears some developmental changes are on the horizon for ZCash as well. The current block timestamping process leaves something to be desired, and change has been proposed. It is likely ZCash will switch to Ethereum-style block timestamps. This should speed up the ZEC block generation, as timestamps are less than 15 minutes apart from another.

Just One of Many Possible Changes For ZCash

Implementing this change will not be overly difficult, as most blocks submitted by miners already adhere to these rules. However, developing the required code to make the changes officials will take up a lot of time. Research, development, and testing can take anywhere from weeks to months.

Some ZCash community members have expressed their concern over this proposal. Switching to a new block timestamping protocol can cause new technical issues over time. Moreover, copying Ethereum’s model seems to cause disappointment among ZCash enthusiasts for some unknown reason. Alternative solutions are also available, and this proposal is just a means to collect community feedback.

If this change were to implemented, a hard fork might not be necessary. Since the majority of network blocks are already using these requirements, a soft fork can be used. However, the ZCash team is considering other forking upgrades already. They may as well include this change in one of those upgrades if they want to.

Similarly to other cryptocurrencies, ZCash has to keep evolving over time. Software revisions play an integral part in the process, as outlined on the project blog in October. Changes are coming to the mining system over time, including a potential switch to proof-of-take. Multiple hard forks are not out of the question right now, which draws more similarities to Ethereum.

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The Halving just happened, We’re all still alive, and so is Bitcoin! The first 12.5 BTC block was mined by F2Pool (the largest mining operation in the world) at 17:46 (GMT). Bitcoin price and hashrate seem to be stable after a 5% price drop just half an hour before the Halving.

Bitcoin Price Halving

The speculation is over and any dramatic changes regarding the value of Bitcoin will probably happen within the coming months if they occur at all.
Bitcoin saw some volatility in the last few months, which was overall positive considering BTC rose from $420 to $630 in a period of 3 months, reaching the $789.78 (Data via Bitfinex) mark on the 16th of June.

So what does the future hold for the 12,5 block reward Bitcoin? Some worry the block reward reduction will cause a big portion of miners to abandon the industry, thus slowing the Bitcoin blockchain, which would in turn cause the price to drop and drive even more miners out of the business, in a downward avalanche that could end Bitcoin (a Death Spiral).

This would be the worst case scenario for Bitcoin, which is unlikely to happen to the first cryptocurrency with a market capitalization of $10.07 billion.

Innovation and development of mining hardware like the new Antminer S9 or the S7.

Many believe that new ASICs should balance the supply and demand scale, allowing the Bitcoin blockchain to remain healthy shaking the Death Spiral predictions the ground.

The new Antminer S9 has 14.5 TH/s hashing power. Supply is limited, however, and we should still see some volatility in the coming months, affecting all users and bitcoin-related companies.

Vlad Cealicu, CTO and co-founder of CryptoCompare said:

With the halving out of the way, we are expecting a lot of volatility in the Bitcoin price in the following week. Another interesting area to watch is bitcoin mining contracts and how the operators will cope with the reduced block reward.

One thing is sure, the halving already happened and nothing broke. We still don’t know who Satoshi Nakamoto is, but whoever he, she or they might be, they can rejoice in the fact that Bitcoin survived another halving and continues to prove itself over again.


Bitcoin Difficulty 13 JAN 14

Bitcoin block difficulty has jumped yet again. This time, we’re looking at a 26% increase to 1,789,546,951, according to this chart at Bitcoin Wisdom.

What is bitcoin mining difficulty? In simple terms, it’s how difficult it is for a miner to discover a block. By design, the bitcoin protocol calls for an increase in bitcoin difficulty every 2016 blocks. As more and more powerful bitcoin miners come online, it is necessary to slow the rate at which new bitcoin is mined to prevent all 21 million units from being discovered prematurely.

If you take a look at the chart above, you’ll see the red line represents block difficulty, and grows with hashing power on the bitcoin network.

If you’d like to see more information on this, check out this page.