SegWit adoption is lagging behind on key exchanges
According to a Glass node analysis, despite being large users of Bitcoin block space, some prominent cryptocurrency exchanges are still holding.
SegWit has advanced significantly since its inception during the 2015–2017 blocksize battle. Despite its relative success as a Bitcoin update, cryptocurrency exchanges such as Binance and Gemini have yet to commit to adopting SegWit addresses for Bitcoin transactions (BTC).
Segregated Witness (SegWit), which was implemented in 2017, is a soft fork update that isolates “witness” data from the underlying transaction. In a “explain as if I’m five” kind of approach, SegWit enables a more secure and speedier Bitcoin, while also simplifying network scalability.
While the majority of exchanges and people have been fast to adapt their infrastructure to support SegWit, with Bitcoin transactions exceeding 50% in 2019, the biggest exchange, Binance, has been dragging its feet.
According to Glassnode’s analysis, Binance “had minuscule SegWit adoption rates of just 10% through the end of 2021.” However, it has “made a concerted effort to accelerate SegWit implementation by the end of 2021.” Its acceptance rate is presently 50%, which pales in compared to Coinbase and FTX, which both have 100% adoption rates.
Crypto exchanges together utilise around 40% of Bitcoin’s block space. However, and perhaps most significantly, Coinbase and Binance account for the lion’s share of block space, accounting for “25% of used block space” last month. If market leaders such as Binance and significant companies like as Gemini do not fully embrace SegWit, Bitcoin will struggle to achieve its full scaling potential.
Tomer Strolight, editor-in-chief of Swan Bitcoin, makes the following case: “The fee reductions associated with SegWit (as well as batching and Taproot) will unavoidably result in its near-universal adoption. These have already resulted in significant reductions in congestion and fee reductions. Ironically, their performance to far suggests that we may have to wait until fees become an issue again in order to convince late adopters to completely convert.”
Additionally, Glassnode’s analysis includes a more precise metric for determining SegWit adoption: SegWit usage. When applied to individual businesses, such as exchanges, it paints a more complete picture.
Of the 18 largest exchanges examined by Glassnode, one-third are genuine SegWit advocates with over 90% adoption. The second third — including Binance — are making their best efforts to embrace SegWit, with adoption rates ranging from 50% to 80%, while the remaining six continue to use Bitcoin addresses starting with the number 1, rather than the number 3 in SegWit.