Coinbase Inc., the largest U.S. cryptocurrency exchange, is planning to roll out a long-awaited software update in an effort to reduce transaction fees customers pay when sending Bitcoin. They are joined by one of the worlds biggest crypto exchange Bitfinex. Coinbase and Bitfinex, both announced that they were adopting support for Segregated Witness (SegWit) protocols for bitcoin (BTC) traded on their exchanges.
Bitfinex stated in its announcement:
“The SegWit implementation means Bitfinex users can benefit from lower BTC withdrawal fees (approximately 15 percent) and improved processing times on transactions across the Bitcoin network.”
Coinbase tweeted that it had finished testing for SegWit for Bitcoin. It will phase in the launch, with the goal of “targeting a 100% launch to all customers by mid next week.” Coinbase affirmed its plan for a 2018 SegWit implementation on December 15, 2017 and seemingly delivered on the SegWit statements it made on February 13, 2018.
Our engineering team has finished testing of SegWit for Bitcoin on Coinbase.
We will be starting a phased launch to customers over the next few days and are targeting a 100% launch to all customers by mid next week.
— Coinbase (@coinbase) February 20, 2018
Reasons for the support of using SegWit addresses are clear. Prior to the activation of the Segregated Witness soft fork in August 2017, there were concerns about the scalability and malleability of Bitcoin due to the size limit of the blocks and a potential manipulation of the transaction ID. These concerns had been a source of debate for years until the “soft fork” allowed for protocol upgrades to the software.
While many hard and soft wallets already adopted support for SegWit protocols, the move by both companies is huge given the volume of bitcoin traded on each platform. Bitfinex and Coinbase’s exchange, GDAX, account for nearly one tenth of global bitcoin trades over the previous 24 hours. This number underestimates the impact on BTC trading volume as it does not include Coinbase’s wallet platform. Both Bitfinex and GDAX are ranked as top 10 exchanges in the world by trading volume, at 5th and 8th, respectively.
The positive news for both exchanges comes at a time of mounting pressure from the public. Coinbase has faced community backlash on higher Bitcoin transaction fees, customers’ inability to withdraw funds to PayPal accounts and credit cards being disabled as a payment method for U.S. customers.
With the announcements of SegWit adoption for Bitcoin, it seems that Coinbase has addressed a major issue for its consumer base, and Bitfinex has been able to release some much-needed positive news for its customers amidst its recent controversies