SegWit doesn’t solve the most urgent capacity issue

Network capacity is now the most urgent issue for Bitcoin. Bitcoin network has been running with FULL blocks for over 1 year, forcing away more and more users and applications. As a payment network, inability to expand will severely damage the value of Bitcoin. If we leave the problem where it were, Bitcoin — whose market value is very likely to be surpassed by competing coins, will soon lose its dominance in cryptocurrency.

SegWit, which is a soft fork solution for malleability, cannot solve the capacity problem. From Core members’ public statements, they didn’t attach necessary importance on this issue. Even if SegWit after activation can slightly scale up block size with new transaction formats, it’s still far behind the demand for the development of Bitcoin network.

Second-tier networks such as Lightning Network (which relies on SegWit) cannot be considered as a block scaling solution. LN transactions are NOT equal to Bitcoin’s peer-to-peer on-chain transactions and most Bitcoin use scenarios are not applicable with Lightning Network. LN will also lead to big payment “centers”, and this is against Bitcoin’s initial design as a peer-to-peer payment system. It can be a good method though for frequent and small Bitcoin transactions in certain cases. But we cannot rely on it as a cure for Bitcoin scaling.

SegWit makes it harder for future block scaling

On technical terms, SegWit uses a transaction format that can be spent by those who don’t upgrade their nodes, with segregation of transaction data and signature data. This means SegWit is irrevocable once it’s activated, or all unspent transactions in SegWit formats will face the risk of being stolen.

SegWit lifts the block size limit to 4MB with 1MB base and 3MB witness block. However, from the current transaction data, the average effective block size will be less than 2MB even if all transactions upgrade to SegWit. This is a tremendous waste. If we want to double the capacity of Bitcoin, we’ll need to make sure the internet bandwidth to run full nodes can support at least 8MB blocks, instead of 2MB. This will make it even tougher to increase block size in the future.

What’s worse, some of SegWit’s parameter settings indicate a “parent-like” style. With increasing application and complexity of Bitcoin transactions, average inputs and output for a single transaction keeps growing, hence the bigger transaction size. This is a reasonable trend driven by economic activities. But Core put a blame on the way people are using Bitcoin. They tried some strange parameter settings to force users to cut down complexity of Bitcoin transactions. But it’s a wrong way to fix a not even existing problem.

SegWit will deepen Core’s impact on the community

As an implementation reference for Bitcoin, Bitcoin Core was of significant influence in the community. However, their influence has long been overrated by their actions. By abusing their previous influence, they’ve obstructed Bitcoin block size increase from happening, against the will of the community. Core team has in some cases explicitly, supported censorship of Bitcoin’s mainstream forums, along with banning of many prominent developers, businesses, and community members who have different opinions with Core’s current roadmap. Today, Bitcoin is in urgent need of diversified dev teams and implementations to achieve decentralization in Bitcoin development.

Should SegWit be activated, Bitcoin will have no choice but to proceed with Core’s current roadmap in the coming years, which will further intensify the impacts of an incompetent dev team on Bitcoin community and rule out the possibilities for Bitcoin to grow in multiple directions.