Bitcoin’s Big Fix Is Officially Live
Here's what you need to know.
Image: Flickr/KatVitulano Photos
For months, the bitcoin community has been anxiously awaiting a code change that aims to fix how slow and expensive the cryptocurrency has become since it's gotten more popular. Early on Thursday morning, the code change—called Segregated Witness—finally kicked in.
Segregated Witness, or segwit, is the culmination of a long-running "civil war" within the bitcoin community over how to speed up the network. However, not everyone agrees it's the best path forward and one group has already split off from bitcoin proper with their own solution, called bitcoin cash.
For two years now, developers, users, and various companies have been sparring about how to prepare bitcoin for more users. In 2015, it became clear that the "blocks" of transaction data that get added to bitcoin's public ledger were filling up, meaning that during high-traffic periods, many transactions can go unconfirmed for hours or even days. If you wanted to have your transaction confirmed more quickly you were expected to pay a high "fee" (usually a few dollars) to incentivize someone to include your transaction in the next block.
The core tension was: Who can afford to use bitcoin? Increasingly, the answer seemed to be banks for financial services, not normal folks using it to buy things.
Eventually, the community glommed on to Segregated Witness as a solution. Segwit changes how bitcoin transaction data is stored, freeing up more space inside bitcoin blocks. Segwit was contentious at first, but most of the bitcoin community got together to force universal consensus with a plan that would see users adopt Segregated Witness while leaving the "miners" (they create bitcoin blocks) who oppose the plan behind. Support for segwit "locked in" last month, and became active on the network on Thursday morning. This change does not affect bitcoin cash, which does not support segwit.
So, what does this all mean? If Segregated Witness works as planned, then bitcoin transactions should be confirmed quickly and the "fees" that users attach to their transactions to incentivize faster confirmation should go down. Right now, bitcoiners can expect to pay a few dollars if they want their transactions to be confirmed in a timely manner, which isn't ideal for buying normal things like a coffee.
The change isn't instantaneous, however. And, as observers on social media have already noted, fees are still high and there are a shit-ton of unconfirmed bitcoin transactions languishing in digital limbo hours after Segregated Witness kicked in. Bitcoiners should take heart, however, since Segregated Witness was always going to take a few days or even weeks to take effect after going live.
Not many people are creating Segregated Witness transactions yet, even though the network now supports them. The group of developers who championed Segregated Witness, Bitcoin Core, encourages users to wait a few weeks before upgrading their bitcoin software to do so, for their own safety. If some major shit goes down and bitcoin splits (again) right after Segregated Witness goes live, and if not every node has upgraded to enforce the new rules yet, bitcoin would be thrown into chaos.
Segregated Witness going live on the blockchain is an important day for bitcoin. However, it's not the only solution to the problem of scaling the digital currency. Bitcoin cash was created earlier in August, when a group of companies and developers cloned bitcoin. It features eight megabyte blocks instead of bitcoin proper's one. In November, yet another split is expected to occur that would create a version of bitcoin that has Segregated Witness and two megabyte blocks.
With three versions of the world's most popular cryptocurrency all fighting to survive, and all trying out different ways to scale, things are about to get very interesting.
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