Exchanges on the Road to SegWit Adoption: on Pioneers, Stragglers and Holdouts

Exchanges on the Road to SegWit Adoption: on Pioneers, Stragglers and Holdouts

We take the recent release of Taproot as opportunity to investigate ways to measure the adoption of SegWit-related Bitcoin improvements in a meaningful way; simultaneously, we put a spotlight on exchanges and their SegWit adoption.

 

A Glassnode report reveals that some major cryptocurrency exchanges are still holding despite being heavy consumers of Bitcoin block space.

 

"SegWit has come a long way since its first appearance during the 2015–2017 blocksize war. However, despite its relative success as a Bitcoin upgrade, Crypto Exchanges including Binance and Gemini are still not committed to using SegWit addresses for sending Bitcoin (BTC)." 

 

Also Read: Can My Bitcoin Be Stolen From Coinbase?

 

Scalability is a foundational factor to the success of Bitcoin: the higher the network's transaction rate, the more people can use the network and the lower the fees. It is not surprising then to find the motivation behind many of Bitcoin’s major technical improvements to be improvements to scalability. The effectiveness of such scalability improvements, however, crucially hinges on their adoption by actors in the Bitcoin ecosystem.

 

In this article, we research one of these improvements, SegWit. To this end, we propose another philosophy to precisely quantify SegWit reception of individual substances on the Bitcoin Organization. We apply this new system and complete a contextual analysis focus a light on the territory of SegWit reception by trades. Trades were picked on the grounds that, for single elements, they have lopsided on-chain impressions: today trades are answerable for around 40% of all consumed block space. This makes them high-esteem focuses for investigation as their position toward SegWit fundamentally affects Bitcoin's versatility. We see that a larger part of trades has not figured out how to completely embrace SegWit yet-including Binance, which is without any assistance liable for consuming around 15% of Bitcoin block space.

 

 Executed in 2017, Segregated Witness (SegWit) is a delicate fork overhaul that isolates "witness" information from the Base Exchange. In an "clarify like I'm five" sort of way, SegWit takes into account a more secure and quicker Bitcoin, making scaling the organization simpler.

 

 

While most trades and people rushed to update their framework to take on SegWit, arriving at the half imprint for Bitcoin exchanges in 2019, the biggest trade, Binance, has been dawdling.

 

Also Read: Building Big Empires: Biggest Crypto Exchanges Push for Global Presence

 

Glassnode's report expresses that Binance "had trifling SegWit reception paces of just 10% up until the finish of 2021." However, it has at last "put forth a sincere attempt to push SegWit reception close to the furthest limit of 2021." Its reception rate is as of now at half, failing to measure up to Coinbase and FTX at 100 percent.

 

Altogether, Crypto Exchanges consume roughly 40% of Bitcoin block space. Crucially, however, Coinbase and Binance make up the lion’s share of block space, responsible for “25% of consumed block space” last month. If leaders such as Binance, or large players such as Gemini fail to fully adopt SegWit, Bitcoin will struggle to reach its true scaling potential.

 

Tomer Strolight, editor-in-chief at Swan Bitcoin, illustrates the argument:

 

"The fees saving found given by SegWit (and furthermore clustering and Taproot) will definitely prompt their close widespread use. These have succeeded currently in immeasurably diminishing clog and bringing down charges. Unexpectedly, in any case, their prosperity to date implies that we might need to delay until charges become an issue again to give the late adopters the kick in pants they need to completely switch."

 

Glassnode's report additionally shares a more precise measure for perusing SegWit reception, SegWit usage. When applied to single elements, for example, trades, it gives a more detailed picture.

 

Of the 18 significant trades that Glassnode explored, 33% are true blue SegWit allies at more than 90% reception levels. The subsequent third - including Binance - are doing their worst at embracing SegWit, going from half to 80%, while the last six are as yet utilizing Bitcoin tends to starting with the number 1, rather than SegWit's 3.

 

Note: 88% of all BTC transfers are overpaying transaction fees.

 

It’s unlikely that the laggard exchanges will upgrade to Taproot, the most recent Bitcoin soft fork, any time soon. As Strolight points out, we might have to wait until fees rise before they wake up.