An event that might change Bitcoin forever and greatly increase or lower its value, is scheduled for this summer. The event is Segregated Witness, or SegWit, and it has been generating a lot of media attention.
SegWit is what financial journalists are writing about when they issue warnings about the “Bitcoin civil war.” Unfortunately, a lot of this reporting is sensational, simplistic and inaccurate.
To understand what is happening and plan your investments accordingly, you will need to understand what SegWit is and how it will affect Bitcoin. Such an understanding might help you avoid losses and provide clues to bitcoin’s future.
SegWit is actually a series of changes to the Bitcoin’s operating system, or blockchain, designed to overcome two limitations in the cryptocurrency.
The first of these is Bitcoin’s limited capacity; only a specific number of bitcoins can be generated and they are limited to one megabyte in size. That greatly limits what you can do with Bitcoin. Persons can only buy and sell; they cannot add “smart contracts” and store other kinds of information as with Ethereum.
[pullquote]This limits the amount of bitcoin that can be created and traded, which is a problem because Bitcoin commerce is exploding.[/pullquote] More and more Bitcoin ATMs are appearing and many online and brick and mortar merchants accept the cryptocurrency.
It also makes Bitcoin less competitive with Ethereum which has seen an explosion in value over the past year. Between July 19, 2016, and July 19, 2017, the value of an ether (Ethereum cryptocoin) increased by 1,760.43%, rising from $7 to $218.60 in value.
Ethereum is potentially more valuable and versatile because it can be used to create smart contracts and securities. For example, a person can create an Ethereum bond that will be paid in the cryptocurrency. Both the contract verifying ownership and the cryptocurrency will be stored in the Ethereum blockchain. This has attracted attention from large corporations and some financial institutions such as JPM Chase, America’s largest bank.
SegWit is supposed to resolve these problems by freeing up more space; or scalability, inside the Bitcoin blockchain. The space would be freed up by separating the signature; which verifies Bitcoin’s authenticity, from the coin.
The signature will be removed by adding to the SegWit protocol; or BIP 91, to the bitcoin blockchain. Not surprisingly a lot of cryptocurrency geeks object to this because they fear it will make Bitcoin less secure. One major concern is that it would be easier to counterfeit or embezzle bitcoins if there is no signature.
[pullquote]Those supporting SegWit believe this will make it easier to expand bitcoin by making the currency easier to mine and trade.[/pullquote] Currently, it takes around 10 minutes to mine a block of Bitcoin which can limit the transaction processing time. That might reduce Bitcoin’s anonymity by making it easier to track and trace the coins online, which is why some investors are refusing to adopt SegWit.
Removing the signature would make it easier to add data; such as contracts to Bitcoin, by increasing the size of a coin from one megabyte (MB) to 2 MB. That might make Bitcoin more attractive to stock and commodities exchanges and large financial institutions which would increase its value.
Around 85% of bitcoin miners have agreed to implement a variation of the protocol called SegWit2X which is scheduled for release on July 21, Bloomberg Technology reported.
The miners were afraid that SegWit would reduce their potential business by increasing transaction volumes, but they think Wit2X will protect them. Keeping volumes low increases processing fees and transaction times which meant miners made more money. It also made Bitcoin slower and less efficient.
That would make it easier to process Bitcoin payments making the currency more attractive to retailers and banks. Another advantage would be that SegWit would make it easier to integrate Bitcoin with next generation payment solutions such as the Lightning Network and digital wallets. Currently, CEX.IO is exploring options how to help wallets on the market and facilitate digital purchases and payments for their users.
All this might increase Bitcoin’s value because more people would be using it. Bitcoin is already a popular payment solution in countries like China, Venezuela, and Argentina; where inflation is destroying currency values. Making it faster might get more people in the real world to start using bitcoin for everyday transactions; like buying groceries, or getting money from the ATM.
This might result in a split or “soft fork” of Bitcoin with versions of the currency with; and without SegWit, in operation. The effects of that are likely to be increased volatility lead to massive price fluctuations.
[pullquote]News reports indicate that UASF or BIP91, the SegWit activation protocol, is scheduled to “go live” on August 1.[/pullquote] Unfortunately, nobody knows what will be then especially with SegWit2X already in operation. That means both investors and traders need to take steps to protect their bitcoin.
The best protection is to have an account with a good exchange; such as the UK-based CEX.IO. CEX.IO has been preparing for SegWit activation for months and it has a plan of action. CEX.IO will split coins automatically and correctly if a hard fork occurs.
Cex.io is not going to hold up its operations or limit bitcoin withdrawals and deposits in the coming weeks unless unpredictable conditions in particular hard fork activation happen. The customers are safe to use all available services to the full.
All the publicity has gotten much more people interested in Bitcoin trading: because increased market volatility often leads to new money-making opportunities, but a lot of them are wondering where they can trade safely. CEX.IO operates a high-volume Bitcoin exchange; based in the United Kingdom that is regulated by the UK government.
Unlike some of the exchanges and mining companies, CEX.IO is a consumer-friendly solution. That makes it ideal for both everyday people looking to move money and speculators interested in high-volume trading.
Here are some advantages of CEX.IO over other exchanges:
SegWit makes it an interesting time to start trading or investing in Bitcoin. CEX.IO makes it easier than ever for almost anyone to begin trading or investing in Bitcoin.
For more Bitcoin-related news and articles here on Bit Rebels, click here!
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