After Receiving the Cold Shoulder from Bitcoin Miners, SegWit could be Activated First on Litecoin

The signaling for SegWit by Bitcoin miners has stagnated since early December. Litecoin developer Charlie Lee wants to use the altcoin as another testnet. Meanwhile, in Bitcoin Land, the pro-SegWit marketing takes surreal forms, much to the frustration of a leading pirate.

The Bitcoin protocol upgrade SegWit has been long announced as the best thing since sliced bread, coming with an extensive list of improvements for Bitcoin. It solves long-lasting bugs like malleability, provides the urgently needed capacity increase and more. Since November 15, miners have been able to signal support for SegWit, and if 95 percent signal, it will get activated.

To the astonishment of the Core developers and many other people in Bitcoin space, the support has stagnated at around 25 percent.

The reasons why the miners refuse to vote for the upgrade are manifold. One reason might be that beside the many, often, clearly and loudly expressed advantages; there are some not so often expressed and mostly ignored disadvantages. Another – and maybe the most important – reason, however, might be the Hong Kong agreement in which a couple of Core developers agreed with Chinese miners that they would release the code for a block size increasing hard fork in exchange for miner’s support of SegWit. Despite it being very clear that the miners see a hard fork as a condition for SegWit, the involved Core devs did never really make an attempt to deliver their part of the agreement. Some of them even one-sidedly declared the whole argument as invalid.

For those reasons the signaling for SegWit stagnates. After it made a jumpstart to nearly 30 percent in early December with BitFury, BTCC, BitClub and Slush nearly immediately throwing support behind it, all other big pools, AntPool, F2Pool, HaoBTC, BW, ViaBTC, seem to be not interested in voting for SegWit.

The result is that not only SegWit but Bitcoin as a whole stagnates. There is no hard fork to increase the block size, nor is there the SegWit soft fork to increase the capacity. Bitcoin remains as it is, which is not only a bad thing, but after all it lacks the needed capacity to prevent regular traffic jams on the blockchain.

Litecoin as a Taster

To persuade miners to rethink their rejection, Litecoin developer Charlie Lee has implemented SegWit in the altcoin and initiated the miner’s ballot. The activation threshold was reduced to 75 percent, maybe with the intent to gather information for doing the same later with Bitcoin.

It is not that Litecoin urgently needs SegWit. Most of the features which come with the upgrade address issues of scalability, which Litecoin, with its very low transaction volume, does not need. But after all “the little brother of Bitcoin,” has not only the chance to become the taster of new features for Bitcoin but also to establish itself as the technologically advanced, more flexible version of Bitcoin.

After the voting started on February 2, the enthusiasm from miners seems to be not extraordinarily huge, which might reflect that there is a limited urgency for it. At the time of writing, less than 5 percent of the last blocks signal support. But to be fair, the voting just started which is why a quote of 20 to 30 percent might be more realistic.

Wang Chun, the operator of F2Pool, a mining pool that provides more than 40 percent of Litecoin’s hash rate and around 15 percent of Bitcoin’s, said that he plans to update to SegWit, but not in the coming weeks. With his support, SegWit has the best chances to be activated on Litecoin. For Bitcoin, Wang said, his pool does not intend to support SegWit for an undefined amount of time.

Surreal SegWit Marketing

As a reaction to the stagnating support for SegWit the marketing for the upgrade took surreal forms. During the industry event Construct 2017, organized by CoinDesk, many of the talks covered SegWit and created the impression that the whole future of Bitcoin and cryptocurrency depends completely on its activation.

Ferdinando M. Ametrano from Politecnico di Milano said, “From the technical point of view, SegWit is crucial for Bitcoin’s evolution.” Lightning developer Joseph Poon explained that Lightning could work without SegWit, “but it sucks.” And Core developer Cory Fields noted that “SegWit is such a clear and obvious win. I’ve yet to hear a downside argument to it.”

The opposition against SegWit, the developer explained, was wholly motivated by politics.

This kind of advertisement for the upgrade completely ignores that there are indeed reasons against SegWit. It might be that the advantages outweigh the disadvantages, but saying there are none is wrong. Also, this perspective mentions politics but ignores the reasons for political resistance. In the end, it appears, SegWit has not been activated because of stupidity and evil.

A similar sound seems to have dominated the Satoshi Roundtable. This meetup involves a lot of influential people in Bitcoin, with no journalists aboard, under the Chatham House Rules, which means that it is ok to tell what was said, but not to call names. Hence reports on the roundtable, which took place this year in Cancun, Mexico, are rare and vague.

But the rare reports available clearly indicate that scaling in general and SegWit in particularly have been an important topic and that most of the participants agreed on the story that SegWit is perfect and, again, not activated due to the stubbornness of miners.

For example, Brian Hoffman of OpenBazaar writes: “99 percent of the people in the room agreed that SegWit was a good thing and should be activated. It truly seems like it’s a people problem keeping consensus from evolving.” For the trader Tuur Demeester, the most likely explanation is “that Chinese miners feel unappreciated and possibly even insulted by how they’ve been treated by the western Bitcoin community.” A solution might be a rebranding of SegWit with more emphasis on Chinese culture and a “bona fide diplomatic mission to China.”

Frustrated Pirate

Solely Rick Falkvinge, founder of the Swedish Pirate Party, found that the problem is not exclusively with the miners. In an outcry of frustration he wrote: “There were many hours of discussion with (a non-identified subset of) people present calling for SegWit adoption and activation now’, plain and simple, with frustrated expressions that Chinese miners are ‘blocking progress’ by not signaling, deploying, and activating segfault, basically ‘because they should be doing so’.”

Falkvinge is frustrated and irritated with other actors than miners: “I find it really, really frustrating that you have a room full of otherwise hyper-intelligent people, who were told in very clear terms by the Chinese miners what those miners want about a year ago (a hard fork increasing the max block size limit for the present type of transactions to at least 2MB), and today, you have the same people asking in frustration why Chinese miners are not adopting SegWit when those miners said in bright blinking clear text a year ago what it is they want, and it is not SegWit.”

Considering all these reports, the whole situation seems genuinely stuck. There is neither an awareness on one side that the developers have to deliver something to get SegWit activated, neither is there the willingness of the miners to support SegWit without getting what they think has been promised. Maybe the activation of SegWit on Litecoin can solve this situation. At least a little.