Why SegWit has been important for Litecoin

Segregated Witness – or SegWit as it is commonly known – caused much debate within the cryptocurrency industry during 2017. There were both proponents and detractors who vehemently disagreed on this technology.

This ultimately led to the split of Bitcoin and Bitcoin Cash, with the Bitcoin Cash side believing that increasing the block size was more important than implementing SegWit. Litecoin however led the way on implementing SegWit.

What is SegWit?

Segregated Witness is an upgrade to standard blockchain protocols. It was pitched as a solution to help Bitcoin’s scaling issue first highlighted by developer Pieter Wiulle. The need for SegWit was due to the 1MB size limit of blocks on the Bitcoin blockchain. As usage of the network increased, these blocks began to fill up quickly. In doing so, the network became slower and also more expensive for people to use.

Whilst SegWit does not directly increase the block size limit, it allows more transactions to be processed. SegWit also fixed the transaction malleability issue which prevented other updates being implemented on the Bitcoin blockchain.

The introduction of SegWit has allowed for further developments on Bitcoin including the Lightning Network and Schnorr Sigantures. These both hope to improve not only privacy, but the scalability of Bitcoin moving into the future.

Controversy over SegWit

It is fair to say that the dispute over SegWit was one of the largest in the history of the Bitcoin community. Many people felt that SegWit wasn’t a large enough solution to improve the scaling issues. In their view, the only way to initially help Bitcoin was to increase the block size.

A block size increase was also controversial, however. Those in the community feared that a block size increase would lead to further mining centralisation of the network and was a quick fix to a complicated issue. This all came to a head in 2017 when it was clear that something needed to be done about scaling Bitcoin due to the increase of usage during the bull run, which had caused transaction prices to rise dramatically and the transactions themselves to become slow.

A compromise was supposed to have been reached at the New York Consensus conference in 2017 when a group of business leaders, developers, and influential leaders of the Bitcoin community met behind closed doors to decide what was to be done. The New York Agreement as it became known proposed SegWit 2x – the implementation of SegWit coupled with the doubling of the block size from 1MB to 2MB.

However, this again was a controversial solution. Criticism was levelled at the agreement due to the fact that it was a small group of people behind closed doors who made the decision and not the community as a whole. The dispute led to the hard fork of Bitcoin and the creation of Bitcoin Cash, which chose to increase the block size while Bitcoin implemented SegWit.

Where does Litecoin fit in with all this?

SegWit was criticised by many “big blockers” as being a dangerous upgrade to the Bitcoin blockchain – one that might even bring Bitcoin crashing to a halt. With any upgrade to a blockchain, there is a risk. Code that has not been properly reviewed or tested could cause a huge error and break the network. This is one of the reasons why upgrades can feel so long in the making as security of the network is a top priority, and so peer review of code is essential.

Litecoin was the first cryptocurrency to implement SegWit onto its platform, and in doing so proved that the code works as intended. Not only did this put Litecoin back into the spotlight, it also highlighted an interesting use case for Litecoin as a test net for future Bitcoin developments. Whether the Litecoin community feels happy about being considered a test net for Bitcoin is another matter, however.

The proof that SegWit worked as expected meant that any fears from the Bitcoin community that this was a risky upgrade were minimised. Whether Litecoin will continue to serve as a testing bed for future Bitcoin upgrades is unknown as of yet. Much will depend on the consensus of the Bitcoin community for future upgrades.

Conclusion

The implementation of SegWit on Litecoin put the cryptocurrency back into the spotlight. SegWit has been one of the most controversial upgrades to the Bitcoin protocol in its ten-year history, causing a divide in the community that appears permanent.

With Litecoin leading the way, it provided a valuable assist to the Bitcoin community by showing that there was no need to fear SegWit and the upgrade worked exactly as planned. The damage from the fallout of the whole situation was an unfortunate side effect though.