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SegWit Allowing for Bitcoin Blocks That Are Over 100% Bigger

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SegWit Allowing for Bitcoin Blocks That Are Over 100% Bigger

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BitMEX Research has found that the Bitcoin block size limit has increased by over 100% since the implementation of segregated witness (SegWit) in August 2017. Formerly there was a hard cap of 1 MB on block size, but since the launch of SegWit there are numerous blocks up to 1.5 MB in size and even some blocks in excess of 2 MB. This is positive for the Bitcoin network since it allows more transactions per block and decreases congestion in the mempool, leading to lower transaction fees. Lower Bitcoin transaction fees have a positive effect on the entire crypto economy.

SegWit was extremely controversial and resulted in a tiny portion of the Bitcoin network splitting off tin support of the hard fork that became Bitcoin Cash. However, the recent data indicates that SegWit is definitely worth it. SegWit changed the definition of the block size from 1 million bytes to 1 million units. Signature data, also known as witness data, is separated from the Merkle tree and only counts as 1/4 of a unit.

Bitcoin transaction fees have dropped to record lows, after being at record highs in excess of USD 50 before the implementation of SegWit. It is now fairly typical to see Bitcoin transaction fees of only 1 satoshi per byte, which is the lowest possible fee. This allows for Bitcoin transactions to cost less than USD 10 cents even when sending large amounts of money, like a USD 300 million Bitcoin transaction on 27 June 2018 that only paid USD 0.04 in transaction fees.

Lower transaction fees make Bitcoin cheaper than any centralized bank-backed payment system for sending large amounts of money, and Bitcoin comes with the added benefit that it can be sent anywhere in the world instantly. Bank transactions for such large amounts of money take a significant amount of time.

The bottom line is SegWit is working as a scalability solution for now and the foreseeable future. Perhaps scalability will become a problem again at some point in time when the Bitcoin community can decide on the best solution.

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