The implementation of SegWit by major Bitcoin exchanges has been slow: Glassnode

According to a Glassnode investigation, despite being large users of Bitcoin block space, some major cryptocurrency exchanges are still holding on to their holdings.

During the blocksize war of 2015–2017, SegWit made its first appearance. Bitcoin exchanges like Binance and Gemini, in spite of the success of SegWit as a Bitcoin update, have yet to commit to using SegWit addresses for transmitting Bitcoin (BTC).

Soft fork upgrade Segregated Witness (SegWit) was implemented in 2017 and isolates “witness” data from the main transaction. By making Bitcoin more secure and faster, SegWit makes it easier to scale the network, which you can explain like you’re five.

Most exchanges and individuals were fast to implement SegWit and reach the 50% mark for Bitcoin transactions in 2019, but Binance has been slow to respond.

According to Glassnode’s analysis, “Binance had insignificant SegWit adoption rates of only 10% up till the end of 2021. “, As a result of this endeavour, SegWit adoption is expected to take place “almost at the end of 2021.” Compared to Coinbase and FTX, which both have 100% adoption rates, just 50% of users have signed up for it.

Around 40% of the Bitcoin block space is taken up by crypto exchanges. To be clear, the majority of block space was consumed by Coinbase and Binance in the previous month, accounting for 25 percent of all spent block space. In order for Bitcoin to fulfil its full potential, leaders such as Binance and significant businesses such as Gemini must fully adopt SegWit.

Swan Bitcoin’s editor-in-chief, Tomer Strolight, explains the point:
“Because SegWit (and batching and Taproot) saves money on fees, their widespread adoption is inevitable. These have already reduced congestion and lowered fees significantly. As a result of their success thus far, we may have to wait until fees become a problem again before we can get those who haven’t yet made the transition to totally switch.”

Additionally, SegWit utilisation, a more precise gauge of SegWit adoption, is included in Glassnode’s analysis. For instance, when applied to a single exchange, the data is more precise.

One-third of the 18 main exchanges studied by Glassnode support SegWit at over 90% adoption levels. Between 50 and 80 percent of the second-tier exchanges are implementing SegWit, including Binance, while the remaining six continue to use Bitcoin addresses that begin with 1 rather than 3, as required by SegWit.

The laggard exchanges are not going to update to Taproot, the most recent Bitcoin soft fork, anytime soon… According to Strolight, we may have to wait till fees rise before they come out of their shells.

 

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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