SegWit2x: What It Was, How It Worked, Concerns

What Was SegWit2x?

SegWit2x was a proposed software upgrade designed to upgrade the block size limit and improve the overall transaction processing speed of Bitcoin. Although it was presented as a hard fork of the Bitcoin technology, it was never implemented.

Key Takeaways

• SegWit2x was a proposed software upgrade designed to upgrade the block size limit of the Bitcoin blockchain to improve the transaction processing speed.
• Although it was proposed as a hard fork from the Bitcoin blockchain, SegWit2x was never implemented due to disagreements and a lack of consensus.
• Segregated Witness (SegWit) was introduced before SegWit2x, and eventually succeeded in increasing block sizes.

Understanding SegWit2x

To understand SegWit2x, it’s first necessary to explore the distinction between hard and soft forks related to the blockchain. A hard fork refers to an overhaul of the rules governing the blockchain. It is a significant shift in the blockchain’s code, which makes the old blocks incompatible with the new chain that is created.

The result of a hard fork is that the affected blockchain splits into two. Hard forks can also split a cryptocurrency network in two if they are not entirely adopted. Additionally, if enough miners, nodes, validators, or other entities within a network adopt a proposed hard fork, they may force a blockchain division.

On the other hand, soft forks entail a shift in network rules and make the updated blockchain backward compatible. This means that the data from the old blocks are incorporated into the new blocks, and the blockchain continues.

Blockchain Concerns

Among the most concerning problems that faced Bitcoin at the time was scalability. Because the block size in the Bitcoin blockchain was capped at 1 MB (megabyte), there was a limit to the number of transactions the network could process per second.

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Block limits create a bottleneck in transaction approval speeds. As cryptocurrencies continue to increase in popularity, this bottleneck can slow the networks down.

Developers and cryptocurrency enthusiasts had been working to address this issue, but the debate over how to effectively scale the network was a difficult and contentious one. Segregated witness (SegWit) was proposed in late 2015 by developer Pieter Wuille. SegWit proposed moving witness signature information—which occupied most of the available space within a block—to the coinbase transaction. This transaction is the first transaction recorded in a new block.

Removing this information increased the amount of data that could be stored in a block; at the same time, a new method for determining block size was implemented—block weight units. Weight units (WU) allowed the Bitcoin blockchain to vary the size of the blocks based on a block weight limit of 4 million WU.

The goal of SegWit was to increase overall transaction capacity via a soft fork mechanism, which would not prompt a split. Segwit2x was an attempt to increase the block size limit in megabytes to increase transaction validation and network speeds.

Concerns About SegWit2x

SegWit was a soft fork suggestion—SegWit2x was a hard fork proposal. When SegWit was introduced to the network in 2016, it was the first of a two-stage process known as the “New York Agreement” by scalability experts and developers.

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Speeding up cryptocurrency transaction times remains a challenge. Projects like the Lightning Network seek to address these issues by moving smaller transactions off-chain into another layer.

The second phase was the SegWit2x protocol, which would increase the block size from 1 MB to 2 MB. By increasing the block size, the SegWit2x proponents hoped to improve speed and mitigate rising transaction fees.

SegWit2x Supporters

Leading up to the SegWit2x release date, miners and startups tended to be the most vocal supporters of the new protocol. They often argued that Bitcoin’s inaction was causing competing cryptocurrencies to overtake the leading digital currency and that the existing upgrades were not sufficient to mitigate the problem.

SegWit2x Opposition

Developers and node operators, on the other hand, often opposed the adoption. They suggested that Bitcoin should be a store of value as opposed to a payment system. Additionally, they felt the riskiness of the new protocol outweighed the potential benefits. Some also felt that miners and enterprises would benefit disproportionally from the protocol.

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It was also theorized that increasing the block size would have increased the burden on node operators, who would be required to store more data. More data meant they would be required to upgrade their systems, adding more costs.

SegWit2x Was Not Necessary

In reality, when SegWit was introduced, block sizes increased automatically depending on transaction sizes. For example, block number 724,493, mined on Feb. 22, 2022, was 1.25MB with 2,168 transactions (3.04 million WU).

In comparison, block 718,645, mined on Jan. 14, 2022, was 1.9MB in size (3.9 million WU) with only 1,173 transactions. Thus, Segwit2x was unnecessary because SegWit allowed the blocks to vary in size depending on the block’s weight units up to a limit of 4 WU.

SegWit2x was highly controversial (partly because of its status as a hard fork), and its developers were unable to reach a consensus on its adoption. The hard fork had initially been planned for Nov. 16, 2017. However, on Nov. 8, 2017, the leaders of the SegWit2x movement suspended the hard fork due to ongoing disagreements and a lack of broader consensus among participants.

What Is the Difference Between SegWit and SegWit2x?

SegWit removed the witness signatures from the transaction section and increased the size of blocks depending on a weighting system. SegWit2x also moved the signatures but proposed a hard fork to implement the move and a block size change.

Is SegWit a Hard Fork?

SegWit was a soft fork of the Bitcoin blockchain, which made the transition easier for the network.

What Is the Concept Behind SegWit2x?

SegWit2x was an idea to move signatures to the coinbase transaction in a block and increase Bitcoin block sizes to 2MB. It was not implemented.

The Bottom Line

SegWit2x, or segregated witness 2x, was a proposal for a hard fork that would have moved the witness signatures to the coinbase transaction and increased the size of blocks to 2MB. However, the SegWit soft fork occurred before SegWit2x and accomplished the same thing with larger block sizes, so SegWit2x was never implemented.

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