SegWit2X: What you need to know
If you’ve been sailing the seas of cryptocurrencies for long enough, you probably know that in Bitcoin every single transaction is registered on an immutable and transparent ledger, the blockchain. To put it shortly, transactions are comprised of data that is added to what is called a block, hence the name “blockchain”. At the time, the maximum capacity of each block is 1MB which means that the number of transactions that can fit in a single block is limited.
A large percentage of users claim that an increase in block size would result in the centralization of Bitcoin mining, since the hardware requirements would escalate with a block size limit increase. Others advocate that an increase is the only way to challenge the dominant payment processors, arguing that this limit should be increased. These different perspectives caused a debate that divided the Bitcoin community into two different factions, those who are for and those who are against the block size limit increase.
Bitcoin’s recent growth in popularity led to an increased number of transactions which has caused the network to reach its capacity. Consequently, a “Fee Market” arose where users compete for space in the block, causing periods of delayed confirmation times and/or higher transaction fees.
The Bitcoin Core team presented a scaling proposal that needed a 95% approval rate from the miner community, called SegWit, short for segregated witnesses. This proposal would occur as a soft fork update that allows more transactions to be incorporated in a block without the need to increment the block size limit. SegWit also brings other advantages like the transaction malleability fix, which allows for second layer networks like the Lightning Network (LN), and other in-development advances.
Nevertheless, SegWit did not get the necessary support from miners which led to an urgent discussion, with several parties trying to work out a solution. From that discussion was born what is known as the “User-Activated Soft Fork” or UASF, a fork that aimed to compel miners into signaling approval for SegWit, by rejecting blocks that did not contain this signal.
Following the failed Hong Kong Agreement in 2016, where all parties agreed to run Bitcoin Core compatible consensus systems, and worked with Bitcoin developers to create a safe hard fork based on SegWit improvements, came the New York Agreement in May, 2017.
This New York Agreement is also known as SegWit2x and embodies a sort of arrangement between the two initial options, the 2mb hard fork and SegWit. It was conceived between leading companies in the crypto industry, including mining pools which accounted for 83% of the global hash rate at the time.
Signaling for the Segwit2x proposal (BIP91) started earlier than expected as a means to prevent the UASF (BIP 148) from taking place on August first. The required threshold for the lock-in of the Segwit2x was achieved before the UASF took place.
Segwit2x was officially locked in August 8 but because of its two-week “grace period,” the change won’t activate until block 481,824, which is currently projected to happen on August 21 at 20:08:05 GMT. Later this year, the block size will be increased to 2mb. In combination with the SegWit activation, this hard fork will allow the Bitcoin transaction throughput to increase fourfold.