The world’s 2 major cryptocurrencies, Bitcoin and Ethereum, are facing growing problems. This could bring its impact on their character and play a decisive role in shaping their fundamental purpose in the upcoming years.
Bitcoin, the largest digital currency at a market capitalization of $42.6 billion remains an unstable investment. Meanwhile, its users are struggling with rising fees and its developers are struggling with a controversial plan aimed at busting the capacity of its underlying blockchain.
The plan has emerged recently. It’s called SegWit2x and has apparently been backed by a majority of Bitcoin’s so-called miners, the developers who generate new Bitcoin by solving difficult mathematical problems. Now, Bitcoin miners are showing their intent to support a new upgrade for the Bitcoin blockchain that may solve the digital currency’s long-running scaling issue.
According to the mentioned planned, the capacity of Bitcoin’s blocks could (by November) double, reaching 2 megabytes. The plan follows a scheme developed earlier based on which certain signature data from Bitcoin’s transaction messages are removed, leaving the block size alone.
Both plans, SegWit, which stands for Segregated Witness, and the more radical SegWit2x, are developed to relieve a capacity shortage on the network as transaction volume goes on increasing. As for merchants, Bitcoin acceptance can be characterized as uneven among them.
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According to Blockchain.info, a United Kingdom-based firm that tracks the digital currency, strained capacity has driven up network cost drastically since daily confirmed transaction volume overall has increased 139% in the last 2 years, reaching 259.737 from 108.876.
Several members of the community have gathered around a solution called BIP 148. The latter would involve a “user-activated soft fork”, where Bitcoin users would force the blockchain to split by rejecting any block of Bitcoins that didn’t signal support for SegWit.
When it comes to Ethereum, with a market cap of $28.7 billion, is wrestling with keeping up with transaction volume. The issue partially is the result of the increasing use of the Ethereum blockchain for a relatively new venture-funding model, known as the initial coin offering (ICO). Thanks to the ICO, startups can raise funding by issuing tokens to investors, who can then cash in the tokens for digital currency at a later date.
According to George Peabody, who follows cryptocurrency for Glenbrook Partners, a San Francisco-based payments consultancy, the urgency of Bitcoin’s and Ethereum’s growing problems is based on “where you sit,” contrasting those who buy cryptocurrency as a payment method and those who buy it as a store of value. As an investor, Peabody notes that you have to believe the system works, but you aren’t too concerned about payment processing.