Opinion: Why this so-called solution doesn’t work to scale blockchain transactions

Disclosure: The author is not affiliated with any of the entities mentioned in the article.

When Bitcoin started to catch on, there was a need for faster transactions to scale the cryptocurrency network. A typical transaction goes through the blockchain, where the data is stored in a specific block that can contain as many transactions as its 1MB weight allows.

However, the data of each transaction is massive. This is mostly due to the script, which carries the signature and public key—elements that are needed to verify the transaction. With such data-heavy transactions, the blocks fill up, slowing down the entire network.

SegWit (or segregated witness) was introduced as a solution, an add-on that breaks up the data of a transaction and does away with the process of unlocking and storing signatures. Instead, the signature data will be moved to a separate extended block. This reduces the size of the data that’s stored in the main blocks, increasing the size of the entire blockchain.

As a result, these cryptocurrency transactions become faster and cheaper, and allows for a greater volume to be processed per day. All you have to do is migrate to a wallet that supports SegWit.

But does this really work?

Nathan Hourt, an expert blockchain architect and co-founder of Follow My Vote, doesn’t think so. He writes in an article, “SegWit breaks Bitcoin’s security by empowering miners and anyone who can coerce them to steal balances. [It] is breaking the Bitcoin ecosystem up, causing people to fork the blockchain just to avoid using it, and destroying the mind share, confidence, and name recognition in Bitcoin.”

The legal issues that come with implementing SegWit are clearly problematic. Without the signature data in the actual records, these virtual transactions are hard to authenticate. Any unsavory business would be near impossible to prosecute with the lack of evidence.

At the same time, while SegWit offers a new capacity of 4MB per block, the reality doesn’t quite match up. The uptake was slow when it first rolled out, and it’s conceivable that there will still be a mix of SegWit and non-SegWit transactions in the long run. This means the average block size may never see a 4MB capacity. Some developers believe it will probably hover at around 2MB even at full adoption. Another concern with SegWit is that it might lead to increased centralization.

What SegWit mainly does is to remove transaction malleability, an issue that it’s succeeded in resolving. However, there are a plethora of existing software and proposed solutions that are able to do the same without making as many complex alterations as SegWit does.

As for the other benefits it offers, there are alternative products in the market that get the job done too.

Alternatives

Lightning Bitcoin, a non-SegWit supporting hard fork that delivers an improved blockchain system, was launched fairly recently in 2017. Behind it is a 10-strong team led by Jack Zhang (the founder of DAF and ChainFunder).

Lightning Bitcoin is perceived as a blockchain protocol that combines the best of Bitcoin and Ethereum. For one, it uses a delegated proof-of-stake (DPoS) consensus mechanism instead of the usual proof-of-work algorithm. Besides strengthening security (that is, reducing attacks and the malicious de-synchronization of nodes), it offers 2MB blocks, accelerates transactions, and promotes the use of smart contracts.

There’s also FlexTrans (or Flexible Transactions), which was created to get rid of transaction malleability like SegWit. Unlike its predecessor, however, it’s a much simpler and feasible solution that makes transactions smaller instead of enlarging the block size. It’s a cheaper option too.