Coinbase adopts SegWit upgrade — lower fees and faster processing times for all

Coinbase has announced that they will be adding support for SegWit transactions into their software. This is very exciting news for the millions of people who use Coinbase as their point of access to the crypto markets, but also for Bitcoin and cryptocurrency technology as a whole: it shows a push to embrace new technologies that aim to solve the problem of scalability inherent in many blockchain based currency structures today.

The problem of scalability has long been considered one of the major challenges that cryptocurrencies will need to overcome if they are going to be viable on a large scale in the modern economy. As more and more people join the Bitcoin network and attempt to utilize currency to store value and conduct transactions, the whole network becomes bogged down by the sheer volume of activity, and the cost of validating new transactions rises to undesirable levels.

Some of you may recall the cost of transacting Bitcoin reaching over $50 per transaction back when it was skyrocketing up towards $20,000 per coin.

SegWit is one of many proposed solutions to the problem of scalability for Bitcoin, but was initially met with some skepticism by the Bitcoin community at large — although it has been around for some time now, many core users refused to update their clients to support it which greatly limited its reach and impact in the early days.

Hopefully, with such a huge player in the industry coming out in support of SegWit, it will help spur the remaining skeptics into action so that the Bitcoin network can become faster, more efficient, and more useful for everyone involved.

But how does SegWit work?

The short story is that it separates some of the verification data of each transaction — data that doesn’t need to be stored on the blockchain once it’s used to verify the validity of the transaction — into a “sub-block” structure, which is not recorded in the final storage of each transaction in the blocks. This compromise allows the effective size of each block to expand considerably, without having to entirely re-work the foundation of the Bitcoin system.

SegWit Diagram
Image Source: SlideShare

While SegWit is a welcome improvement to Coinbase, and the Bitcoin network at large, it’s not the only idea being floated around aimed at improving the efficiency of cryptocurrency networks. One other important player, which is currently in stages of final development, is the Lightning Network. For more information about this development, you can read some of the pieces I’ve written on it before, or just throw it into Google and have a look around! :slight_smile:

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