Coinbase Announces SegWit Implementation
Coinbase, one of the world’s largest Bitcoin wallet and exchange platform, announced a software update with SegWit to help with its notorious delays for costumer transactions. SegWit (Segregated Witness) is a transaction protocol for Bitcoin that expands the number of transactions that can be carried out in its Blockchain distributed ledger. This update will maximize transaction fees, or lower them, by allowing more transactions volumes or current volumes at faster speeds. Coinbase tweeted it’s goal of implementation by “mid next week.” Their February 13th blog update recognized consumer demand for a faster or cheaper transaction update, “A common piece of feedback from customers is transaction fees for sending Bitcoin on Coinbase are too high.”
Coinbase is the largest cryptocurrency exchange in the U.S operating in every state willing to grant them a money transmitter license. The $1.6 billion company provides Bitcoin brokerage, wallet, and transaction services to over 10 million people hosting billions worth of cryptocurrency. They are the best known brand to buy, sell, and trade the most popular cryptocurrencies. The company also operates Global Digital Asset Exchange, GDAX, which sees some of the largest volume of Bitcoin and cryptocurrency exchanged. In December the company updated its customers demanding less delays,
“We store billions of dollars worth of bitcoin on behalf of customers and any change to our infrastructure is done with significant planning and consideration for the security and stability of our platform.”
At the end of Last year Coinbase made it public they would implement SegWit in their platform in 2018. In their blog update Coinbase stated that the company prioritizes security and performance before new features, “Our next priority is to ensure that our platform remains performance during periods of peak volume.” SegWit capabilities would promise increase in performance during high volume hours. The protocol allows more transactions by splitting data (separating transaction signatures) from Bitcoin transactions, increasing the Blockchain capacity for volume. It is in-par with the Coinbase company mission of prioritizing security as the SegWit protocol not only segregates the data to increase the block size, form 1 MB to just under 4 MB, but is also a “witness” to unadulterated Bitcoin transactions.
Bitfinex Announces SegWit February 20th
Another gargantuan cryptocurrency exchange, Bitfinex, announced SegWit adoption this week. SegWit identifies itself as the world’s largest cryptocurrency exchange. As a premier Bitcoin Exchange to meet the goal of market leadership, announced “approximately 15%” lower withdrawal fees by Implementing SegWit,
“By supporting SegWit addresses, Bitfinex is tackling three of the biggest crypto-enthusiast concerns: transaction fees, transaction speed, and total network capacity. We are delighted that through this implementation we can provide our customers with bitcoin withdrawal fees that are up to 20 percent lower, as well as faster-than-ever transaction speeds.”
Hong Kong based Bitfinex has had plenty of activity recently, from an Enforcement Action by the CFTC, getting shut down in other countries, to conflicts with Tether. This move places Bitfinex on the right path, especially with its costumers who pay $10,000 to use their trading platform.
Both Coinbase and Bitfinex are arguably doing something for the future of Bitocin by adopting SegWit. The Bitcoin network has been so congested that it had to “fork” into Bitcoin cash for faster transactions. Cryptocurrency enthusiasts are always addressing the issue of “scalability” for the growth of bitcoin and SegWit addresses its biggest obstacle. As Bitfinex explains, “SegWit also lays the foundation for future Bitcoin development efforts, including the implementation of Lightning Network, which will allow the network to process millions of transactions per second.” This is a huge promise for the future of Bitcoin and its goal to be a global, decentralized currency.
Both exchanges warned their users that once SegWit protocol is implemented, it will only work for Bitcoin transactions and not Bitcoin Cash. Bitcoin Cash sent to a SegWit address cannot be recovered.
Felix Shipkevich is a principal of Shipkevich PLLC. His practice focuses on providing counsel to FinTech and financial services firms, including financial technology, payments and emerging digital currency space. He has spoken at national panels in the money transmitter space and payments industry. Mr. Shipkevich’s payments practice has brought him into contact with money transmitter registration requirements in all fifty U.S. States.
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