As Bitcoin garners adoption as both a means of payment and a store of value, users are growing increasingly keen on reducing the fees they have to pay to get their transactions confirmed.
Segregated Witness (SegWit) and transaction batching, two technologies that help reduce Bitcoin transaction fees, are starting to gain traction amongst users.
A new report shines a light on just how much money these two technologies could have saved users had they been adopted earlier and more widely: transaction batching could potentially have saved users 21,131 bitcoin since January of 2012, while Native SegWit (Bech32) could have saved users 36,685 bitcoin since August of 2017.
With Bitcoin’s price trading at $11,800 USD at the time of writing, the value of the fees users could have saved totals at just over $682 million USD.
Critics have long pointed to Bitcoin’s high transaction fees as a reason why it may struggle to garner widespread adoption, but the activation of SegWit in 2017 has since lessened the validity of these criticisms.
Essentially, [SegWit] is an architectural change to Bitcoin transactions that aims to move the witness data from the scriptSig field into a separate witness data structure that accompanies a transaction.
Using the Bech32 address format, SegWit transactions can save users up to 58% on fees, depending on the number of inputs a transaction has.
Transaction batching is another fee-saving method that entails having several outputs in a single Bitcoin transaction in order to make payments to multiple parties.
In essence, while using this method, multiple transactions intended for different parties are bundled into one single transaction, reducing network strain and lessening fees.
Transaction batching can be highly effective for entities like exchanges or custodial services that need to output transactions to multiple parties at once. Earlier this year, Coinbase announced that it is now leveraging transaction batching to reduce fees. The company claims to have realized 75.2% savings on transaction fees since implementing batching.
Per Veriphi’s recent report, users could have saved a total of roughly $700 million USD had both SegWit and transaction batching been used for the majority of Bitcoin transactions.
The report notes that during the time between August of 2017 and June 2020, users could have saved a total of 36,685.72 bitcoin.
The report also found that transaction batching alone could have saved users a total of 21,131.39 bitcoin worth of fees since January of 2012.
Despite not being heavily relied upon in the past due to their opt-in nature, a mounting focus on reducing fees and network strain could direct more attention to both SegWit and transaction batching.