The Race Between Segwit and Bitcoin Cash Is Heating Up
The introduction of Segwit and the launch of bitcoin cash (BCH) were two attempts at solving the bitcoin’s scaling problem. Both movements took a different approach, with Segwit seeking to reduce transaction size and BCH seeking to increase the block size. A new report compares the transaction volume on each chain, BTC (Segwit) and BCH, since last summer’s hard fork, and the numbers are remarkably close.
Segwit and BCH Show There’s More Than One Way to Scale a Blockchain
Blockchain scaling is one part technical, one part ideological. There was a number of reasons that led to the fork of bitcoin core in August to form bitcoin cash, but at its heart it came down to increasing transaction capacity. Segwit sought to compress the amount of data in each transaction, thereby freeing up block space, while bitcoin cash made the size of each block bigger, up to a maximum of 8MB. New data published by Bitmex Research shows how each chain has fared since bitcoin core and bitcoin cash went their separate ways.
The cumulative transaction volume between BCH and Segwit is remarkably close, showing that each scaling solution has found their levels of support. Bitmex Research explains: “Since the launch of Bitcoin Cash, 6.1 million Segwit transactions have taken place, only 20.1% more than the cumulative number of Bitcoin Cash transactions…Adjusting for the one-month head start [BCH had], SegWit has 31.5% more cumulative transaction volume than Bitcoin Cash, larger than 20.1% but still reasonably close.”
Segwit Had a Slow Start
Segwit adoption was low from the outset, and remained that way for several months, allowing bitcoin cash to get a head start. By late December, the total transaction volume of BCH and Segwit was neck and neck at around 4 million transactions apiece. It is only in the last month, when Coinbase belatedly introduced Segwit, pushing its adoption rate over 30% for the first time, that its total transaction volume has been able to compete with bitcoin cash.
Proponents of each chain have reasons to be content with these figures, and of how the future is shaping up for their preferred scaling solution. As Bitmex Research notes:
Although the data suggests that Segwit transaction have been adopted slightly faster than Bitcoin Cash, resulting in more transaction volume, Bitcoin Cash advocates could argue that the Bitcoin Cash token is more about a philosophy of larger capacity in the long term, rather than the speed of the actual increase in transaction volume in the short term. Therefore Bitcoin Cash supporters can still claim that Bitcoin Cash will eventually have more transaction volume than Bitcoin, once adoption of the coin increases.
Bitcoin Core Block Sizes Fall to Their Smallest in Two Years
Last week, the average block size for bitcoin core (BCT) fell to just over 0.5MB, its smallest since January 2016. Around 22% of block space is taken up by Segwit transactions, showing that the scaling technology is still under-utilized. The dramatic reduction in BTC block space owes less to Segwit and more to improved batching coupled with reduced transaction volume. It is no coincidence that the average number of daily BTC transactions is also at its lowest level in two years.
The average number of daily BTC to BCH transactions for the moment maintains an average ratio of 10:1, which also mirrors each asset’s respective price. However, total transaction fees for sending BTC in the last 24 hours are 200x greater than BCH. Even if the transaction volume on each chain was equal, in other words, BTC would still cost 20x more to send.
Why do you think BTC transaction volume is so low right now? Let us know in the comments section below.
Images courtesy of Shutterstock, Bitmex Research and Blockchain.info.
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