SegWit (Segregated Witness) has just been locked in to the Bitcoin blockchain with little or no fanfare. Thirty-somethings will likely remember the Y2K scare at the end of the 20th century. The world was terrified about the loss of all computer data, and the complete shut down of industries like banking and health. As the clock turned, the world watched and waited for the destruction of society. And then it was 12:01, and nothing happened. Often, hype about the fallout of some event is far more intense than the event itself. This is certainly true about the Bitcoin fork and the activation of SegWit that just occurred.
Expecting the Worst
Naysayers of Bitcoin and cryptocurrencies generally said that the fork could cause a complete disruption of the Bitcoin blockchain and a sudden loss of all value of Bitcoin. They believed that the fork, and the sudden change in activation, as well as the disagreement among miners and users, would create a perfect storm. Bitcoin could cease to exist and all the value that had been stored would be lost forever. Users frantically scrambled to shift their Bitcoin out of exchanges into paper wallets, and the crypto world watched as July 31st came to a close.
The Great Bitcoin Silence
And then it was August 1. And nothing happened. Bitcoin continued, the miners signaled activation of SegWit, and the blockchain continued producing blocks. Why all the chaos and hubbub for such a small event? In truth, the event could have spelled disaster, had the miners refused to cooperate, and it did in fact produce the creation of Bitcoin Cash (BCH) as a small number of miners forked the chain to create a new cryptocurrency built on the Bitcoin blockchain system.
But even after doomsday came and went, some argued that SegWit still needed to be activated with enough blocks and that some chaos could ensue should the miners refuse the follow protocol. And yet, again, the scare was, as Shakespeare said, ‘full of sound and fury, signifying nothing.’
SegWit Is Active
SegWit is a scaling solution for Bitcoin. The original version of Bitcoin allowed a limited number of transactions per ‘block’ on the blockchain, scaled to 1MB. The problem with a growing cryptocurrency like Bitcoin is that popularity increases transactions and transactions increase blocks, and blocks are too small to handle the additional transactions. SegWit effectively splits the transaction into two smaller pieces, allowing more small pieces to be added to the block and thereby increasing the number of transactions possible.
The solution increases the speed and number of transactions while keeping the Bitcoin structure intact. Miners overwhelmingly agreed to this solution, and, with the exception of the new chain of Bitcoin Cash, have unanimously approved and now activated SegWit. The result is a more stable and more investor and transaction friendly Bitcoin. Like the Y2K scare, something could have happened, but nothing really did.