Charlie Lee, the creator of Litecoin, is against the execution of the Bitcoin SegWit2x hard fork in November due to three major areas he feels are lacking: urgent need, replay protection, and consensus.
Over the past two weeks, several experts including ShapeShift founder and CEO Erik Voorhees expressed their optimism regarding the November fork. Segwit2x is the scalability proposal introduced by a consortium of 58 companies led by Digital Currency Group to increase the Bitcoin block size to 2MB in return for activating the Bitcoin Core development team’s Bitcoin scaling and transaction malleability solution Segregated Witness (SegWit).
The idea behind SegWit2x when it was first introduced was that the activation of SegWit would likely not provide sufficient scaling in the mid-term. Thus, many influential companies and mining pool operators in the industry believed that an increase of the block size to 2MB would be necessary to efficiently scale the Bitcoin network.
At the time, the proposal from the Digital Currency Group-led consortium of companies was unstable because the potential effect of SegWit on the Bitcoin network was still unclear. However, in the past two weeks, SegWit has proven its ability to significantly reduce the size of Bitcoin transactions and fees.
Only around 10% of Bitcoin transactions are SegWit-enabled as of now, and in order for users to enjoy lower fees, they are required to deal with SegWit-enabled transactions. Users can gain access to SegWit transactions by either receiving SegWit transactions or utilizing SegWit-enabled wallets. An increasing number of Bitcoin wallets have begun to integrate SegWit already. Major Bitcoin hardware and non-custodial wallets including Trezor, Ledger, and GreenAddress have adopted SegWit.
Although only a small portion of transactions have been enabled with SegWit, the Bitcoin blockchain was able to relieve most of its congestion and drastically decrease the size of its mempool, the holding area for unconfirmed transactions. Prior to the activation of SegWit, the Bitcoin mempool reached 150 million bytes. Over the past week, the size of the mempool dropped to below 7 million bytes.
The theory that the number of Bitcoin transactions decreased and the fees dropped simply because users flocked to other alternative currencies is completely flawed because the number of transactions has stayed relatively stable at around 280,000 transactions per day.
Some wallet makers such as Ledger stated that SegWit will likely provide a 30 percent reduction in fees. However, the GreenAddress development team stated Wednesday that SegWit will be able to provide upwards of a 50 percent reduction in fees.
“Our testing shows that segwit fees are around half the cost of the equivalent non-segwit transaction. Lower fees kick in once you start spending segwit inputs, so for most users it will take a few transactions before you see the full effects. As the rest of the ecosystem updates we expect block pressure to reduce which may also lower fees further,” said the GreenAddress team.
Because of the likelihood that Bitcoin transaction fees will decrease by a rate beyond 50 percent in the upcoming weeks, as Lee emphasized, the execution of SegWit2x is not urgently necessary.
