Bitcoin has been the subject of much discussion in crypto circles and the mainstream media, for obvious reasons recently. While all the talk has been about the price, data analysts Coin Metrics have been looking at something more crucial to Bitcoin’s long-term plans – its block size. The world’s most valuable cryptocurrency recently hit an all-time record for average block size over 24-hours, reaching 1.2MB, the result of a gradual uptrend since late July.
What difference will SegWit adoption make, and will the results spell trouble for Bitcoin as an everyday currency?
SegWit (Segregated Witness) is the process by which the block size limit on a blockchain is increased by removing signature data from Bitcoin transactions. When certain parts of a transaction are removed, this frees up space or capacity to add more transactions to the chain.
Some 40% of Bitcoin transactions are now made with SegWit, showing a stabilization from the rapid adoption between September 2017 and June 2019. This statistic is important in calculating potential block size, as Coin Metrics say that answer comes from three variables – the fraction of overall transactions that use SegWit (our 40%), the prevalence of signature data within blocks and the adoption of native SegWit addresses (aka. bech32 addresses). Signature data in blocks is a known quantity, but bech32 is used in less than one percent of all transactions, so some extrapolation and guesswork is combined to give us the answer.
Assuming SegWit adoption grows to anticipated levels (95%) and bech32 addresses replace legacy addresses as the primary mode of SegWit usage, a realistic block size will be around 1.9MB, which fits with the “top requirement” of Bitcoin Core developers. This block size will be slightly lower if adoption is less, but there will probably be no situation where regular usage of Bitcoin would need to use the full 4MB allocated to it. Either way, impressively, Bitcoin seems to be on track to maintain the goals set for it back in 2008.