Bitcoin and SegWit- the road ahead
For a while now the talk in the Bitcoin circle has been about SegWit. You will come across a lot of information about what SegWit is, on the internet. The following article is essentially ‘SegWit for dummies’. We suggest you pick one of those extremely technical pieces on ‘SegWit’, put this one next to it and you should be able to better understand what the noise is all about.
So, here goes.
Imagine a new road being laid out in your city. This road comes with a lot of promise- those that use the road to commute will get to travel across the city faster than on any other road while the ones that build restaurants and shops on either side of the road stand to get customers and hence, business.
The road is the Blockchain, the commuters are transactions/bitcoin holders and the business owners are the miners/startups.
As time passes this road gets way too popular and results in long traffic blockages. These traffic blockages now result in increased commute time for the commuters and also in increased fuel usage.
In other words as and when the Bitcoin popularity has increased, due to the limited nature of how many transactions can happen within a certain amount of time the time taken for transactions to go through has increased and so has the fee to make these transactions
To combat this growing issue, the business owners come up with possible solutions. Some of them propose that a flyover should be constructed over the road so that those vehicles that aren’t necessary for the businesses to run can be diverted to go over the flyover while only those that are needed for the businesses and those that need the businesses can use the road below the flyover.
This process is called ‘Segregated Witness’ or ‘SegWit’ in short. Since the size of individual blocks are limited to 1MB, there is only a certain number of transactions that can take place. Hence, one of the proposals is to separate some of the data from the transaction details and record it on a separate block while the information vital for the transaction to go through is recorded on the main block. The signatures that act as the witnesses to the transactions take up about 60% of the space and aren’t vital for recording the transactions. They use up space that could otherwise be used to include more number of transactions and hence, won’t be included in the mined block.
The business owners are divided over this proposal of a flyover. The ones that own shopping malls that have parking space and other amenities do not want the flyover because they believe that the community is not prepared to take such a step. There is yet another set that says they will open up the backdoor to their businesses and construct another road parallel to the one that exists now. The ones with smaller establishments are in a spot of bother as they are not sure which proposal to support and hence, there is a lot of uncertainty.
The fear now is that there maybe a situation where there is the original road, the flyover and the new road. This will result in the commuters getting split across the 3 ways and then, there might be some commuters that may completely avoid any of these 3 roads altogether. There are deadlines for each of these activities to start. With each of these groups capable of getting their say, unless a consensus is reached the division is inevitable.
BIP- 91/SegWit2x, BIP- 148, Bitcoin ABC are all the possible ways the bitcoin community could go. There is a lot of ambiguity and technical voodoo involved in understanding these proposals. Click on any of the above proposals to know more about them.
The best thing to do would be to avoid that road altogether till a consensus has been reached. Who knows, you might end up falling off of a half constructed flyover.
Do not do any kind of Bitcoin transactions between the 31st of July and 2nd of August, 2017. The issue may get resolved earlier than that, but it’s better to be safe than sorry. Also, if you hold any Bitcoin on any of the exchanges, please follow the directives of those exchanges regarding transactions.
Below is a slightly more technical explanation of ‘SegWit’. Read it. Personally, for me, it is a little too technical. You might be a weirdo that understands it.
July 29th: This happens to be vital date by which BIP-91, most popularly incorporated by SegWit2x, has to gain 80% support in at least 336 continuous blocks. If it does manage to do so, then SegWit will come into force and will be activated in the next 2 weeks
August 1st: BIP-148 will kick in, but will do nothing as BIP-91 has already been accepted
November 18th: 2MB hard fork is scheduled, needs to get 100% support, or else Bitcoin will split.
OR
July 29th: If BIP-91 fails to get 80% support by this date, then there will be a period of status quo till August 1st
August 1st: BIP 148 kicks in and needs to get 50% support. If it manages to get 50% support, then UASF/SegWit will kick in. If not Bitcoin will split. The possible parties on either side of the split are the ‘old’ Bitcoin and Bitcoin ‘ABC’.
August 4th: Bitcoin ABC kicks in
August 14th: New Proof of Work rules will render Bitcoin ABC incompatible with the ‘old’ Bitcoin protocol.
ThroughBit believes in continuous improvements and in robust systems. BIP-91 enabled SegWit is what we think is the best way forward for Bitcoin.
Some useful links
