Three years ago today, the Bitfury pool mined the first Bitcoin block that measured over one megabyte - 1,032.119 KB, to be exact - exceeding the previous Bitcoin block size limit for the first time. It contained 2,164 bitcoin transactions with a total volume of 22,264.83 bitcoin, worth over $262 million USD at the time of writing.
This was made possible through the activation of Segregated Witness (SegWit), Bitcoin’s possibly largest protocol upgrade to date.
The proposal originally sought to fix an anomaly in the Bitcoin protocol that, while mostly harmless to the network itself, prevented the straightforward deployment of second layer solutions such as the Lightning Network.
SegWit further increased Bitcoin’s theoretical block size to four megabytes (although more realistically to around two megabytes), introducing block weight as a new measuring method as opposed to block size. This would enable fee savings for users.
The upgrades were especially notable as SegWit did not require a hard fork for its implementation. Instead, a backward-compatible soft fork protocol upgrade was used to activate SegWit.
Its potential to directly and indirectly aid Bitcoin’s scalability easily caught the attention of Bitcoin’s technical community, and in December 2015, SegWit was added to the Bitcoin scaling roadmap. But the proposal turned out to spark rejection from several Bitcoin companies, igniting a year-long dispute between a number of Bitcoin companies and Bitcoin users.
After large mining companies attempted blocking SegWit to instead push forward a block size increase through a hard fork, a grassroots movement within the Bitcoin community led to the birth of the User Activated Soft Fork (UASF), presenting a forcing function to miners that eventually led to the activation of SegWit on August 23rd of 2017.
Following its activation, SegWit critics were quick to point out that its adoption seemed sluggish - too quick in the eyes of SegWit supporters who noted that adoption was a gradual process and would take time. In its first months, SegWit adoption hovered around the tenth percentile, with SegWit supporters positive about its growth trajectory.
In February of 2018, adoption more than doubled in a matter of two days, jumping to over 30%. This was thanks to a new Bitcoin Core release that made SegWit features more accessible to Bitcoin users, opening the floodgates for wider usage.
Three years after the first SegWit block was mined, SegWit adoption sits at around 50%, the average block size having seen an increase to 1.2 megabytes since 2017.
Today’s criticisms of slow adoption may boil down to the fact that a number of large Bitcoin companies have been slow to add SegWit support. While their individual reasons are unclear, it may have to do with the technical effort needed to implement the upgrade, which requires more time and overhead for large companies and may not be every firm’s top priority.
Some companies are further speculated to be putting off SegWit migration for political reasons, as they may have preferred to see a different scaling solution.
Regardless of SegWit’s adoption rate, everyone who does use SegWit addresses enjoys the benefits of fee savings. In fact, according to recent research by Veriphi, had SegWit been adopted earlier and more widely, up to 36,000 bitcoin could have been saved.
Speaking about three years of SegWit blocks, Blockstream CEO Dr. Adam Back commented:
SegWit fixing 3rd party malleability is great, and has enabled a range of layer2 multi-clause scripts such as lightning, plus opt-in scaling for users who select wallets and service providers who use it.
By fixing Bitcoin’s transaction malleability, SegWit made it significantly easier to develop second layer protocols on top of Bitcoin. With that, the Lightning Network was released in March of 2018.
Since then, Lightning has grown to over 1,000 bitcoin in capacity (approximately $12 million USD at the time of writing) and is viewed by the wider Bitcoin community as one of the most promising scaling solutions for Bitcoin.
And Lightning continues down its path of growth: developing company Lightning Labs, which is backed by Twitter CEO Jack Dorsey and Litecoin creator Charlie Lee among others, recently announced it had lifted the channel size limit for its Lightning implementation LND, paving the way for larger volumes on the Lightning Network.