Low SegWit Adoption Fear as Bitcoin Transactions Rise Again
Bitcoin transactions per second is rising again. According to Blockchain.com, the highest transactions on Bitcoin network has ever reached 4.7 txs p/s in Dec. 2017. However, this week, it recorded 3.87 txs p/s (Feb.20), a far cry from the 2.2 txs p/s it had in Feb. 2018 since when the crypto winter started. The increase seems to be edging towards the all-time-high record hence there may soon be more frantic calls for the community to consider using exchanges that implement SegWit or use native SegWit addresses because of the likely impact the rising transactions could have on the network.
SegWit adoption has slowed down since October 2018 -to about 40% currently. Meanwhile, transactions per day continue to grow (~350,000/day) similar to the Oct/Nov 2017 period before the bull run. What’s different now is the transaction fees remain low and that’s where the question lies.
Though it’s unclear what this unfolding scenario will mean for the network should there be a rise in daily transactions to over 400,000/day as it was the case in Dec. 2017, the community may want to avoid Bitcoin losing one of its selling point which is its low transfer fees.
Though rising, the Lightning Network (LN) as a layer 2 protocol could help allay this fear while still adopting millions of users to Bitcoin thus growing its userbase rapidly. However, LN is deemed not ready to handle huge level of transactions for now due to yet-to-be-resolved technical issues especially with its base layer transaction capacity. Yet, going by a chart comparison (Dec. 2017/ Feb. 2019), there seems to be a correlation between the Bitcoin market price reaction to the rise in transactions per second. If that premise is right, an increase in users would definitely reflect on growing Bitcoin price, increase transactions and, possibly, transaction fees.
Alternative to blocksize increase
More exchanges like Gemini and Coinbase, services and wallets would need to implement SegWit to keep txs fees low and to avoid a repeat of last year’s rise in fees and mounting unconfirmed transactions.
With the Schnorr signature scheme expected to be introduced later to combine several signatures in the same transaction into one, it should contribute to cost reduction too to avoid a rise in txs fees. Schnorr will bring about Taproot and MAST which are other optimization possibilities as alternative to increasing blocksize or compromising decentralisation in any form.
If none of these options work out, and sooner, the most other probable way to go is to have higher fees while users get used to it. That is, settlement for small purchases would not be suitable on the Bitcoin blockchain but with LN.