Coinbase, the biggest virtual currency exchange in the United States has announced that it will be rolling out a software update aimed at cutting the transaction fees customers incur when sending Bitcoin (BTC). Known as SegWit (short for Segregated Witness), the update was initially released by developers last year in August when the growing popularity of Bitcoin resulted in network congestion.
As a Bitcoin blockchain update it increases the sizes of the blocks which form the chain thus allowing for improved security, lower transaction fees and faster transaction speeds. SegWit achieves this by keeping signature data and transaction data separate.
In a tweet which was sent out on Tuesday Coinbase indicated that the rollout of the upgrade will be in phases. All its customers will however have received the update by mid next week. The crypto exchange which is based in San Francisco, California, has received numerous complaints in the recent past regarding high transaction charges as well as general inefficiency. Last year in December the crypto exchange told its clients that changes to the infrastructure would not be immediate.
The upgrade will however come at a cost. According to Coinbase once the update has gone live customers face the risk of losing the ability of recovering funds in the event that Bitcoin Cash is sent to an address belonging to the Bitcoin virtual currency. Bitcoin Cash is the breakaway crypto of Bitcoin which split off from the mother coin last year in August after disputes over how the network could be made more efficient.
Fees reduced by 20%
Another virtual currency exchange that is rolling out the SegWit update is the Hong Kong-based Bitfinex.
“We are delighted that through this implementation we can provide our customers with bitcoin withdrawal fees that are up to 20 percent lower, as well as faster-than-ever transaction speeds,” said the chief technology officer of Bitfinex, Paolo Ardoino.
Activated last year in August the SegWit upgrade has not been widely adopted and now only around 12% of transactions involving Bitcoin are making use of it. However with Coinbase and Bitfinex handling more than 50% of the Bitcoin trading volume in the world, once the update goes live to all their users, the adoption rate will rise significantly.