BTC News 2017 - Segwit & lightning network locked in. What does this mean? Segwit explained David
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David Hay presents BTC News 2017 - Lightning network and Segwit are now locked in. Find out how this will effect you.
When Bitcoin was designed it used 1mb blocks which at time time seemed like more than enough as the network grew and more transactions were conducted the network started to get backed up. With the current 1mb block size it is only possible to process around 6 transactions per second. While services like visa and master card can handle 1000s. Bitcoin allows users to set their own fees so as the network became more and more overloaded more and more users bid up the cost of getting to the front of the line.
Now everyone agrees that bitcoin needs a better way to scale but not everyone agrees on the best method. Crypto currencies like dash use centralized masternodes that act a little bit like banks and a 400mb block chain. IOTA uses local mesh webs instead of chains and now it looks like everyone has agreed to use Segrigated witness on bitcoin
Digital signature accounts for 65% of the space in a given transaction. SegWit attempts to ignore the data attached to a signature by stripping off the signature from within the input and moving it to a structure towards the end of a transaction. This would increase the 1 MB limit for block sizes to a little under 4 MB. In addition to slightly increasing the capacity size of blocks, SegWit also solves the problem where a receiver could intercept and modify the sender's transaction ID in a bid to get more coins from the sender. Since the digital signature would be detached from the input, the unscrupulous party would have no way of changing the transaction ID without also nullifying the transaction
Miners are always slow to implement changes on the bitcoin network there job and financial interest in with security and stability so even though users are screaming for lower transaction fees and faster confirmation times the fear and uncertainty of the unknown has caused change to happen slowly. Now the miners have seen segwith being successfully used on the litecoin network it seems everyone is now in agreement on the best way to move forward. It is important to understand that once segwit is implemented there is no way to go back
Which is why there was talk of a hard fork if everyone couldn't agree on the best way to move forward.
Segwit makes it much easier to implement the lightning network and other payment channels
Lightning network will allow for microtransactions, a real time payment processing
Uses a multi sig to setup a payment channel.Only time you need to write to the block chain is when you are opening or closing a channel which is the only time you need to pay the miners to process the transactions. Great for microtransactions
It could be the scaling solution for bitcoin
Removes the need to immediately send the payments to the block chain. No need to wait for confirmation times
If there is a disagreement between the two parties the last transaction that the both parties agreed to is considered law. An individual party may withdraw their balance
Disavantages
Users have to be constantly online to sign the transactions.
Not useful for large single transactions
Nodes need to monitor blockchain to make sure lightning payment channel isn't closed
When Bitcoin was designed it used 1mb blocks which at time time seemed like more than enough as the network grew and more transactions were conducted the network started to get backed up. With the current 1mb block size it is only possible to process around 6 transactions per second. While services like visa and master card can handle 1000s. Bitcoin allows users to set their own fees so as the network became more and more overloaded more and more users bid up the cost of getting to the front of the line.
Now everyone agrees that bitcoin needs a better way to scale but not everyone agrees on the best method. Crypto currencies like dash use centralized masternodes that act a little bit like banks and a 400mb block chain. IOTA uses local mesh webs instead of chains and now it looks like everyone has agreed to use Segrigated witness on bitcoin
Digital signature accounts for 65% of the space in a given transaction. SegWit attempts to ignore the data attached to a signature by stripping off the signature from within the input and moving it to a structure towards the end of a transaction. This would increase the 1 MB limit for block sizes to a little under 4 MB. In addition to slightly increasing the capacity size of blocks, SegWit also solves the problem where a receiver could intercept and modify the sender's transaction ID in a bid to get more coins from the sender. Since the digital signature would be detached from the input, the unscrupulous party would have no way of changing the transaction ID without also nullifying the transaction
Miners are always slow to implement changes on the bitcoin network there job and financial interest in with security and stability so even though users are screaming for lower transaction fees and faster confirmation times the fear and uncertainty of the unknown has caused change to happen slowly. Now the miners have seen segwith being successfully used on the litecoin network it seems everyone is now in agreement on the best way to move forward. It is important to understand that once segwit is implemented there is no way to go back
Which is why there was talk of a hard fork if everyone couldn't agree on the best way to move forward.
Segwit makes it much easier to implement the lightning network and other payment channels
Lightning network will allow for microtransactions, a real time payment processing
Uses a multi sig to setup a payment channel.Only time you need to write to the block chain is when you are opening or closing a channel which is the only time you need to pay the miners to process the transactions. Great for microtransactions
It could be the scaling solution for bitcoin
Removes the need to immediately send the payments to the block chain. No need to wait for confirmation times
If there is a disagreement between the two parties the last transaction that the both parties agreed to is considered law. An individual party may withdraw their balance
Disavantages
Users have to be constantly online to sign the transactions.
Not useful for large single transactions
Nodes need to monitor blockchain to make sure lightning payment channel isn't closed
