by Joseph Young
Bitcoin Improvement Proposal 91, or BIP 91 for short, a miner-activated soft fork (MASF) developed by James Hilliard, passed its 80 percent activation threshold on July 16 and is set to be locked in within 24 hours. The compromise between developers and the mining community has coincided with buoyant markets, as BTC-USD recovers from a recent low at $1830 on July 16; bitcoin posted the highest ever daily gain in history on July 21, increasing by $609.52 on the Bitstamp exchange.
At the time of writing, over 90 percent of Bitcoin’s hash rate is signaling for the activation of the Bitcoin Core development team’s transaction malleability fix and scaling solution Segregated Witness (SegWit) via the BIP 91 activation mechanism and only ten blocks are left to fully lock in BIP 91. By July 23, BIP 91 will be activated and every block from then on will signal for SegWit.
Effect on Bitcoin Moving Forward
The activation of Segwit via BIP 91 is essentially confirmed and the Bitcoin blockchain is about to be optimized by 75 percent. Transactions will become cheaper as their size will decrease with Segwit-enabled bitcoin blocks. At the moment, major bitcoin wallet platforms including Blockchain are recommending a fee of less than 100 satoshis per byte. For a median size transaction, such a fee should range from $0.5 to $0.9.
With Segwit-enabled transactions, fees will likely decrease to around $0.1, where it was in late 2015. However, experts including Shapeshift CEO Erik Voorhees emphasized the necessity to consider the mining community’s support towards the compromise between miners and developers Segwit2x. Voorhees noted that Segwit by itself was not able to gather 50 percent of miner support and that the development community as well as businesses should not ignore the 2MB block size increase proposal by the mining community.
SegWit alone was unable to get even 50% miner support. SegWit2x (SegWit+ 2mb HF) has over 96% support today. Bitcoin is moving forward.
— Erik Voorhees (@ErikVoorhees) July 20, 2017
Another big factor that could scale the Bitcoin network with a unique solution is the Lightning Network, a two-layer solution that can be launched on top of the Bitcoin protocol upon the activation of Segwit. Already, Bitfury has tested Lightning on the main testnet of Bitcoin and is actively working towards launching a Lightning wallet which users can utilize to send and receive microtransactions with zero confirmations.
Why is Bitcoin Scaling Partially Resolved?
BIP 91 was a last minute solution the mining community decided to endorse in order to avoid a chain split. As a result, developers including popular bitcoin hardware wallet Trezor architect Marek “Slush” Palatinus stated that BIP 91 is rushed and developers are dealing with serious stability issues.
BIP91 is too rushed. Serious stability fixes at last moment. We're doing our best to deploy on time & responsibly to not endanger network.
— slush (@slushcz) July 20, 2017
The Bitcoin Core development team fundamentally believes in prioritizing security of the Bitcoin network. More to that, the Bitcoin Core development team is against Segwit2x and without the contribution from the development team and sufficient peer review process, the conflict between Digital Currency Group-led businesses, the mining community and the Bitcoin Core development team will likely continue on in the upcoming months.
Do you realize that Bitcoin Core is responsible for the Bitcoin network running reliably for 8+ years? They don't support Segwit2x. https://t.co/0K0sQknJvV
— Jack UASF Mallers (@JackMallers) July 3, 2017
Markets Display a Buying Frenzy
Still, in the short-term, SegWit will scale the Bitcoin network drastically. Already, the market has risen, perhaps spuriously, as the price of bitcoin skyrocketed from $1830 to above $2900 within a five-day period. The chart below shows BTC-USD’s largest ever daily gain, exceeding $600, where an almost perfect Bullish Marubozu formed for July 21. The key levels of support to buy in on the bullish breakout are displayed below, at $2265.51 and $2570.27 for the Bitstamp exchange.
As the chart below shows, the cryptocurrency came very close to the all-time high at $2980.00 and some downward momentum may see the market test the two important support levels highlighted below.
Contributions by Jamie Holmes