ARE SEGWIT2X AND BITCOIN CASH THE ANSWER TO BITCOIN'S PROBLEMS? - Crypto Nights Episode #12

@antonburton and I welcome you to our first instalment of our mid-week Crypto Nights show! Today we decided to provide you all with a recap of the news surrounding bitcoin.

But before we discuss this week’s show, if you’re a fan, please make sure to keep up-to date with our latest updates by following us on:

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Scalability of Bitcoin

It’s clear to see the numerous benefits Bitcoin provides. However, it would be naive to not consider the the downfalls that arise. The key concern that surrounds Bitcoin is it’s of scalability– in fact, we could go as far as to say that issues surrounding its scalability is the main reason why so many alt-coins have emerged over the last 12 months.

While uploading this post, the Bitcoin network is currently facing a backlog of over 33,355 unconfirmed transactions and fees have soared. This is a matter of weeks after it was announced the SegWit2x scaling solutions was not going ahead with the doubling of Bitcoin’s block size.

This is where the first issue takes place. Bitcoin’s blocks are limited to 1MB in size and the transaction volume on the Bitcoin network is rapidly increasing. The current block size is not sufficient to manage the number of transactions taking place on the Bitcoin network. As large amounts of Bitcoin transaction data enter into the wide mouth of the funnel, the current amount of block space restricts the amount of transactions that the Bitcoin network can effectively process.

The second issue that is faced is the number of transactions that the bitcoin can process per second – a measly 7. Whilst initially this seems relatively quick, when we put this into perspective, your typical credit card companies process around 2,000 transactions per second! ** Unless these transaction speeds are improved, as more people join the Bitcoin network things are only going to get slower!

**Anton had mentioned 20,000 transactions per second. 2,000 transactions per second is the accurate number. We’re only human after all!

For Bitcoin to reach mainstream use, there are questions that still surround the technology of Bitcoin. Considering new coins are regularly emerging, that claim to be able to scale effectively by means of processing far more data, Bitcoin certainly faces a number of challenges.

Solutions

There are two ways in which these issues can be solved.

1.   Make the blocks smaller – reducing transaction times and costs;
   

2.   Make the blocks bigger – more information can be processed at one time.
   

Segwit2x

SegWit2x would effectively increase transaction speeds and reduce costs by making the data that needs to be processed in each block smaller whilst making the blocks themselves larger. This would specifically involve removing signature data which account for almost 2/3 of the data in each block – you can imagine that this would make quite the difference!

However SegWit2x has now been cancelled after initially being suspended. This was due to a lack of consensus amongst miners and the Bitcoin community. But why should a hard fork, intended on increasing transaction speeds be me with such disapproval?

There are various reasons for this, the main one seems to be security. In simple terms, increasing the size of the block leaves the system more vulnerable to attacks. The vision underlying Bitcoin by Satoshi was that security was key, and this should not be undermined.

Also the closed-doors nature of the decision to implement SegWit2x in the first place went against the ethos of Bitcoin. It centralizes the decision making of the bitcoin protocol to a few influential individuals in the business community.

Bitcoin Cash

Last August (August 2017), Bitcoin miners and developers were concerned about issues surrounding Bitcoin's scalability. They instead support a certain method for increasing the number of transactions that can be processed on the network at any given time that is generally known as “big blocks” through a hard fork, creating Bitcoin Cash. Bitcoin Cash is a fork of Bitcoin that removed SegWit and increased the block size to 8MB. It currently has a market capitalization of $20 billion compared to Bitcoin’s $137 billion.

There have been high levels of volatility in the price of Bitcoin Cash as it has come under criticism from the Bitcoin community for its small developer community, calling into question just how decentralized the Cryptocurrency actually is, whilst others believe it to be the true Bitcoin achieving fast transactions across the blockchain.

Scaling crisis not yet solved

It is becoming clear that the scaling issue is still haunting the Bitcoin network. The price of Bitcoin had dropped slightly while Bitcoin Cash increased dramatically. Many in the Bitcoin community who supported larger blocks as a scaling solution have likely moved to Bitcoin Cash.

Other altcoins are working on scalability solutions as well; indeed, the ability to scale may well determine the top cryptocurrency a few years from now. If Bitcoin can’t, then others likely will.

Shout outs

The first shoutout on our midweek show goes to; @davidpakman for his great blog covering all the larger, and not so large topics of the day. F

The second goes too @louisthomas for his fantastic blog and YouTube channel covering important crypto topics.

You can find us on Steemit @antonburton & @alexmavor