After months of prevarication, Coinbase has announced that it will add Segwit support to its bitcoin wallets. In a tweet on Monday, Coinbase issued the news their customers have been waiting months to hear: “Our engineering team has begun the final testing phase of SegWit for Bitcoin on Coinbase. SegWit compatible Bitcoin sends/receives will be available for customers in the next few weeks.”
By any reckoning, Coinbase has taken its sweet time over introducing Segwit compatibility to its bitcoin wallets. The scaling technology helps to reduce the median size of each bitcoin transaction, thereby enabling more data to be squeezed into each block. With bitcoin transactions priced per byte, smaller transactions means lower fees. Despite Segwit being backwards compatible, and thus not the riskiest of code changes to implement, Coinbase has been dragging its heels for months.
In fairness to the exchange, which has custody over billions of dollars of institutional assets, it has a duty of care to its customers not to screw things up. But as Coinbase dragged its heels over Segwit while CEO Brian Armstrong waxed lyrical over pet ethereum projects, the bitcoin community accused the company of having its priorities all wrong. High fees have been a bugbear of bitcoiners in general, and have been of particular concern to users of r/Bitcoin. Stung by reminders of bitcoin’s formerly low fees, a luxury still enjoyed by bitcoin cash, they’ve been desperate for good news on the fee front.
Coinbase had first announced the decision to add the SegWit upgrade in early December 2017. The upgrade, introduced by the Bitcoin Core development team in August 2017, deals with the scalability problem of Bitcoin by reducing the size of transactions.
By moving the “witness” signature data to the end of every transaction, it solves Bitcoin’s malleability issue which is conducive to second-layer solutions like the Lightning Network.
Popular crypto wallets Trezor and Ledger had upgraded to SegWit shortly after its August release.
Slow transaction times and network congestion have plagued Bitcoin traders in the recent months, with some Blockchain-based businesses moving away from BTC due to increasingly high transaction fees.
Segwit isn’t a magic bullet that does away with high bitcoin fees, but it automatically shaves at least a third off the median fee, which is a start. Fees have been dropping in general lately, as bitcoin has been dropping, and today stand at around 130 satoshis per byte ($6) on average. Segwit adoption, meanwhile, while on the up, still stands at a pitiful 16%, despite the scaling technology having been available for six months.
According to data from hardware wallet manufacturer Trezor, only about 15 percent of Bitcoin transactions currently employ SegWit, down from a high of about 18 percent in late January. This recent reduction could be linked to users taking advantage of lower transaction fees to move funds from legacy addresses to SegWit-compatible ones, but in any case it is clear that the network is not experiencing the full benefits that the scaling upgrade offers, in part because Coinbase and a few other large firms have been slow to implement it.