SegWit vs Bitcoin Unlimited
Probably you’ve heard about the debate that split the Bitcoin community into two major parts: SegWit and Bitcoin Unlimited. What does this mean for cryptocurrency and especially for Bitcoin?
Well, the block debate has started in 2010 (Satoshi referred to it on the Bitcointalk forum), but it gained attention today because we have reached a boiling point. The block size limit (1MB) is not enough to assure speed transactions with lower fees. Transaction capacity on the Bitcoin's blockchain is between 3-7 transactions/sec, meanwhile on Visa or MasterCard network can support 50000 transactions/sec. If the scalability problem is not solved, Bitcoin can’t become mainstream.
For a regular user, a temporary solution is to pay a higher fee, but is not a final one. This solution is basically used by individuals who have money to spare and businesses. But if you pay for a coffee in Bitcoin, it is not normal to pay a higher fee than the coffee.
Because Bitcoin is decentralized, you can’t convince all the Bitcoin users to agree with a decision. It is more likely a fork will happen. Technically a fork will divide Bitcoin in two separate ways: the original blockchain will be cloned and it will be developed independently.
And here were the major parts have split. Two solutions have been proposed: SegWit (Segregated Witness) and Bitcoin Unlimited. SegWit requires a soft fork meanwhile Bitcoin Unlimited requires a hard fork.
SegWit - soft fork
- Optimizing the code in order to shrink the transactions just like having a 3MB block size (3x more transaction/sec) and it keeps the 1MB size limit
- Fixing malleability problems (it was initially developed for this issue)
- For activation needs 95% majority of miners
- Improves P2SH security to 256 bits
- Not everyone has to upgrade
- Fast deployment
Bitcoin Unlimited - hard fork (irreversible)
- Removing completely the block-size limit
- Increasing capacity - making it a long term solution
- For activation needs 51% majority of miners
- Everyone has to upgrade
- Slow Deployment
In simple words, the difference is simple: SegWit wants to change how blocks are stored and Bitcoin Unlimited wants to change how blocks are created.
What can happen?
Three things can happen to your Bitcoins. First scenario is that all of your Bitcoin will be BTC, second scenario is that all of your Bitcoins will be BTU (Bitcoin Unlimited) or you’ll double your coins and get an equal amount of BTU and BTC (exactly what happened to ETH and ETC).
It is very important where you store your coins in order to be in the desired scenario. If your private keys are are stored in a 3rd party wallet, basically they can decide what can happen to your Bitcoins.
Assuming a hard fork will happen, then it is possible the price of Bitcoin will drop. So a solution might be investing in altcoins.
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