Bitcoin Q&A: SegWit adoption

“Why has SegWit adoption stalled at about 12% of
transactions?” Well, there are a number of reasons. The wallets that were more ideologically committed
to implementing SegWit as soon as it came out did, whereas [a lot of] players who do
the largest volume of transactions — some exchanges, [custodial] wallets, and merchant
providers — have not yet finished [adopting it]. Perhaps some have not even started
the work on implementing SegWit. There is a strained set of incentives here. If you operate very large infrastructure companies like
an exchange, merchant service, or [custodial] wallet, if you gave your users the flexibility to adjust fees
and implement [good fee estimation algorithms], then if there is a problem with the fees, complaints
will spill over into your customer service department. [They will need to deal with] stuck transactions. That has a very high cost to business; responding
to the customer service requests is very expensive. Instead, if you simply pass on the cost of fees and
give your users no options but to pay high fees, then they will take their complaints to the developers
and miners, more so than your customer service. You just [shrug it off and claim], “Eh…
Bitcoin is broken. We must pay high fees,” even though you don’t really need to pay high fees. That is the cynical answer, though I want to be
cautious because [that is happening to a degree], but I also think the reason big players have
not yet implemented SegWit is rather simple. The bigger the infrastructure, the harder it is to introduce
the new features, capabilities, and software changes, in a way that doesn’t cause massive disruption or loss. The problem is, many of them have centralized control
over moving millions of dollars of bitcoin around, while the benefits of implementing SegWit are great, if fees are paid by their users, it is not so great for the
provider [based on] the cost of the number of hours.. they would need to implement it well, to test it
from a user interface and experience perspective, to train the customer service people to respond to
questions, [even for] a simple change [like SegWit]. [Their users and staff will be asking], “How do I move
the coins that I already have into SegWit addresses? They must create some kind of migration process,
which will bring up other questions, such as… “Why must I pay a fee [for the migration transaction]?
I thought SegWit would save us money.” “Why do all of my addresses start with ‘3’?
I don’t understand. I thought they started with a ‘1’.” “Do I have multi-sig? No? What is this?” All of these questions will just pour
into the customer service department; it will take quite a bit [of time] to move
these large infrastructure players to change. It is fairly complicated and will require some
educating of their users and support staff. It takes time. This is not something
that can be implemented overnight. I saw a tweet the other day where someone said,
“It took the three members of my team about… a day and a half to implement SegWit.
What is up [with the delay], Coinbase?” Well, that is junior league. If you have twelve million customers, [changes
require] a bit more quality assurance and testing, in documentation and training,
to manage the migration of customers. [Coinbase has] massive infrastructure with a very
high security burden, and you should be glad that… large companies with such an enormous responsibility, who could create a reputation hit for Bitcoin
if they screw up, are taking their time [with this]. [They cannot] do, “three people, two days, done”
approach to implementing SegWit. We will see it. [Coinbase implementing SegWit] will probably
increase the number of SegWit transactions. Just one of these large players —,
BitPay, Coinbase, or any of the large exchanges — implementing SegWit will increase the number
of SegWit transactions by double-digit percentages, and [allow us to] bring a whole
new set of users into the fold. But it will take time. “Why do you think companies like Coinbase, BitPay, and
other big players in the [space] pushed for SegWit2x, but are now not implementing
SegWit in their own systems?” Because SegWit2x was a [bigger] increase in the
block size, which externalizes the cost of dealing… with the problem [of fees] on to other players. They would need to do absolutely nothing to their
own infrastructure in order to get relief from fees, but they do that at the expense of putting a lot of
pressure on independent and small node operators, by making it more expensive to download,
validate, and store the Bitcoin blockchain. If you are a business person who is presented with
two choices, where one choice takes all the pressure… off of you and has zero cost to implement, but has
personal costs on others and the principles of Bitcoin, whereas the other choice six months or more of
engineering, teaching your users and support staff. [Both will] bring you more or less the same reduction in
fees, but [one choice] will take the pressure off of you. What will you [choose]? You try [the first one]. But when it doesn’t work because the rest of the
[network] says, “No,” you will reluctantly and belatedly.. start implementing the [other choice],
and that is exactly what we are seeing today. It is just rational business decision-making
when responsibility of a CEO to respond… to the needs of their investors first,
to the needs of their customers second, and the needs of the broader ecosystem or
principles of Bitcoin as a long distant third. If you are expecting companies to act against their own
self-interest to protect Bitcoin, you are in for a surprise. Don’t expect that.

46 thoughts on “Bitcoin Q&A: SegWit adoption”

  1. How are the percentages calculated? Is this based on native addresses or outputs? I ask because a lot of wallets don't support native P2WPKH but rather nested P2SH-P2WPKH TX's which don't show themselves as SegWit until spent.

  2. great video andreas. but you should upload more! your videos are a real oasis in all of this "bitcoin tulip mania" BS.

  3. And plz tell ur thought on flaucts
    since i m a crypto newbie
    and cannot invest in my country with such high fee…..

  4. That does not explain why Bitstamp, Kraken, etc. have implemented Segwit but Coinbase not. I'd like to remind you that Coinbase in particular has presented itsels as a bad actor again and again.

  5. Can minners use tor or i2p and other anonymous network offucation to secure and anonymise themself in worse case senero……
    Btc 33V1bRY9RWRpMRCdgge5cdRz3vga5ZPxHu

  6. Ah Andreas, swooping in to bitcoins rescue. They should add you to the Marvel universe with the super power of reason and logic, overcoming all evil and ignorance.

  7. IMO there are so many cryptos now that keeping up with changes and new coins is getting out of control. So when non segwit "still works" it makes it less of a priority.

  8. yes but coinbase did not even want to implement segwit at all, from what i gather Brian Armstrong is anti BTC and Bcash fanboys

  9. I'm perfectly fine with coinbase taking their time but it wasn't but last week that they were talking about not even worrying about it… that was the unprofessional part that disappointed everyone for someone who's such a big player in this space

  10. "if you expect companies to act angainst their own self-interest to protect the ideology of Bitcoin, you're in for a surprise!"

    The hard truth hurts.

  11. I agree with all your points, except for the part where you believe that the large players will simply adopt Segwit because the bitcoin ecosystem forces them to. If Bitcoin still had a relative monopoly (like in 2010-13), they could very well roll out something like Segwit which economically disincentivizes businesses, and still expect them to adopt it. But in a world with bitcoin cash, litecoin and other options that are widely available to the crypto ecosystem, it's much less likely that a disincentivizing measure would still be implemented by a purely profit-seeking entity. Unless core goes down another path, market forces will eventually destroy BTC.

  12. Insight from this that I needed to be reminded of:. Big (more centralized) = Slow change, and Small (less centralized) nimble. Thanks!

  13. Would it be better to keep your legacy non-segwit bitcoin where it's at until you want to spend it or send it to a segwit address?

  14. I personally don't like off chain solutions. However they are best we've got in crypto land and it's better than the current financial system. We need to build a faster network before we can remove off chain solutions so we need to support this if u want blockchain to succeed. Signed, the anonymous coward. Haha.

  15. Dear Andreas, I was pleasantly surprised this morning when I popped on to Bitcoin Live Trading on youtube (where there is a great community of traders watching Rick's TA charts). And there your voice was! So loud & clear educating us all once again on Rick's channel. This is fantastic that the trader's community is sharing your no nonsense, fact stating points. Where you continue to crush our fears. Reaching this new audiences is great. Keep up the great work!

  16. Except that protecting the ideology of Bitcoin is acting in accordance with their own self-interest. Putting Bitcoin at "a very distant third" is like saying that these businesses focus on whom they are distributing golden eggs to first, secondly on how they distribute them, and then on whether or not the golden goose is even alive as a very distant third. I'm not saying businesses don't do this (they absolutely do!), I'm just saying that this is mindblowingly short-sighted. It's giving up billions — possibly trillions — to be made over multiple generations, just so they can make a couple extra bucks now and be forgotten tomorrow. I understand the risk associated with implementing something like SegWit; all I'm asking is for Coinbase and other Bitcoin businesses to prioritize their golden goose first. Otherwise, it's guaranteed that Bitcoin will disrupt them into oblivion, the way it has already been disrupting the rest of the financial industry.

  17. Question:
    What will happen to bitcoin mining after the last bitcoin is minted (2140?)
    Seeing to the fact that no more bitcoins will be produced – what will incentivize the miners?
    Why will they continue to mine if they are not earning any bitcoins?
    Thanks for your time.

  18. developers need to cap the fees and make transfers faster more transparent another fork perhaps with a bigger bank bring on ULTRASEG

  19. Thanks for the up!
    Off topic, the audio sounds like its being recorded on the other end of a phone call, I'm not complaining, I want to know if its the reverb or simply the hardware?

  20. Then tell me this… why is Nick Szabo against Segwit2x ? For sure he is not a businessman with the self-interest you mentioned. Charlie is also against Segwit2x but lets focus on Szabo. I wanna hear you out

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