SegWit to be Activated Today, Impact on Bitcoin Price & Ecosystem
The Bitcoin Core development team’s transaction malleability fix and scaling solution Segregated Witness (SegWit) is set to be activated today, on August 8. Literally hours after initial reporting from Bitconnect, SegWit will be live and integrated into the bitcoin network.
Firstly, and perhaps most importantly, SegWit is expected to optimize bitcoin blocks and transactions by at least 75 percent. As of current, most bitcoin fee estimators including that of Blockchain, the second largest wallet platform within the bitcoin industry, are recommending a standard fee of around 50 cents, given that a transaction is median-sized. With SegWit in place, bitcoin transaction fee will likely decrease to around $0.1, allowing users to utilize bitcoin as a currency without having to handle high fees and slow transaction periods.
SegWit’s effect on the trend of the bitcoin price has been quite evident. Over the past week, the price of bitcoin increased from around $2,700 to over $3,400, triggered by the imminence of SegWit activation and the bitcoin community’s anticipation towards the integration of the solution.
The activation of SegWit presents a notable achievement for the bitcoin industry, developers and mining community. It is the first real milestone achieved by bitcoin communities in terms of scaling the bitcoin network with consensus and unified vision. As a result, the market, investors, and traders have gained increased confidence and trust in bitcoin and its ability to scale in the short-term.
In addition to decreasing transaction fees and optimizing bitcoin blocks, SegWit will also provide infrastructure for two-layer solutions such as the Lightning Network, which when activated will also provide additional scaling to the bitcoin network beneficial for businesses and users.
However, Rusty Russell, a developer and engineer at Blockstream, explained in analytical paper that bitcoin fees will continue to rise from now on, regardless of the activation of SegWit. Russell noted that businesses and users should get ready for such an increase in fees.
“Bitcoin fees are only going to rise from now on. Plan on it. The largest cause of non-spam transactions seems to be companies who designed their infrastructure assuming transactions are cheap. The big VC-backed ones know making their operations more efficient won’t increase their valuations, but expanding their business will. Their pain threshold is clearly higher than the recent fees. Even with segregated witness, demand can easily outpace the increase. There might be a short 50% drop in fees for early segregated witness adopters, but it won’t last,” said Russell.
He further emphasized that initial criticisms in bitcoin when it was pitched by Satoshi Nakamoto to cypherpunks was its struggle to scale proportionally. Russell and the rest of the Bitcoin Core development team will continue to work on solutions including SegWit and Lightning to further scale the bitcoin network.