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Segregated Witness (SegWit) just recently hit a milestone in adoption with 48.1% ofpayments taking advantage of the upgrade. However, still, the majority of transactions have failed to implement the upgrade.
SegWit was intended to make Bitcoin’s future If you've been paying any attention to Bitcoin in the last few years, you have undoubtedly heard the term "Lightning... More more efficient. It also brought with it a slight block size limit increase which has allowed the network to process more transactions. Yet, it seems that many Bitcoin wallets have not opted for upgrading to SegWit despite being released in August of 2017.
As of now, around 48.1% of Bitcoin payments use SegWit. That is the highest it’s ever been, but it’s still quite low. Wallets have been especially slow to implement SegWit, as have most exchanges.
There is some reason to believe that an increase in transaction fees causes more SegWit adoption. Because for much of 2018 and 2019 fees were low, SegWit adoption was likewise stalled. An example of this occurred in May of 2019 when Bitcoin transaction fees rose from $0.54 to $2.36. Parallel to this, SegWit payments increased from 40.41% on May 1st to 45.71% on May 18th. Around this same time, the number of SegWit Bitcoin transactions, in general, rose from 35% to around 41%.
So, could it be that the low transaction fees as of late are causing exchanges and wallets to deprioritize SegWit adoption? The next fee spike could thus push SegWit implementation to over 70% if we are lucky.
SegWit is usually mentioned alongside batching as a possible short-term solution to high transaction fees. For example, cryptocurrency exchange Binance, Kraken, and Shapeshift have all adopted batching as a means to reduce fees.
So far, due to these efforts, the cost-per-transaction has dropped by 60% in the past twelve months or so despite transactional output reaching levels seen in December 2017.
Although SegWit adoption still does not make up the majority of Bitcoin transactions, it seems that it is steadily improving. Hopefully, by 2020, we will see SegWit adoption hit over 70%.
Do you believe SegWit is necessary for Bitcoin to properly scale? Let us know your thoughts below.